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The new Consumer Rights Act 2015
A brief run through some of the key points arising from the Consumer Rights Act 2015 (CRA), an important new piece of consumer protection legislation.
The CRA is the biggest shake-up of consumer law in decades. It consolidates eight pieces of consumer legislation into a single piece of legislation. The CRA also introduces new provisions which apply to contracts between consumers and traders, and specific provisions relating to digital purchases.
For the purposes of the CRA, a ‘consumer’ is “an individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession”. A trader is “a person acting for purposes relating to that person’s trade, business, craft or profession, whether acting personally or through another person acting in the trader’s name or on the trader’s behalf”.
The CRA introduces new statutory remedies for consumers of ‘repeat performance’ and price reduction if a service does not conform to the contract. The remedies available depend on the nature and extent of the breach of contract. For example, if the service is not performed within a reasonable time then the consumer is entitled only to a reduction in the price of the services. However if a trader fails in its duty to perform the services with reasonable care and skill, the consumer is entitled to request repeat performance at the trader’s cost and, if this is not done within a reasonable time without inconvenience, a reduction in the price of the services.
Although the consumer has a statutory right to these remedies in these circumstances, this does not exclude the consumer from pursuing other remedies, such as damages or specific performance, provided that they do not recover twice for the same loss.
Pre-contractual statements in contracts for services
Every services contract will include pre-contractual statements, or information about the services, as a contractual term if these are taken into account by the consumer when deciding to enter into the contract. This will also be the case if the pre-contractual statements are taken into account by the consumer when making any decision about the service after entering into the contract. However, such statements or information can be qualified by the trader or changed, subject to the agreement of the consumer. This has obvious implications for the way products and services are advertised: something said in an advert but not repeated in a contract can now specifically be sued upon.
Unfair Contract Terms
The test for ‘unfair terms’ in the Act is the same as that in the old Unfair Contract Terms Act 1977 (UCTA): it provides that a term is ‘unfair’ if “contrary to the requirements of good faith, it causes a significant imbalance in the parties’ rights and obligations to the detriment of the consumer”. However, there are some key changes in the application of the test:
- The UCTA ‘reasonableness’ test will be replaced by the ‘fairness assessment’ in the Unfair Terms in Consumer Contracts Regulations. These fairness rules will now apply to both negotiated and non-negotiated (i.e. standard term) contracts.
- The fairness assessment will now also apply to consumer notices, i.e. a notice that relates to rights or obligations between the trader and the consumer or restricts the trader’s liability. This includes announcements and other communications even where these are made orally. This potentially includes website terms and conditions.
- Terms specifying the main subject of the contract or setting the price are considered ‘relevant terms’ and are not subject to the ‘fairness’ test as long as:
- They are transparent; in plain and intelligible language and, if in writing, legible; and
- Prominent; brought to the consumer’s attention in such a way that the average consumer – who is well-informed, observant and circumspect
- would be aware of the term.
This means that the price and any terms relating to the main subject matter must not be hidden in small print, otherwise they will be subject to the ‘fairness’ test.
- Where a term in a consumer contract or notice has different meanings, the meaning most favourable to the consumer will prevail.
- Courts now have a duty to consider the fairness of terms in a consumer contract, whether or not a party has requested such consideration.
The CRA introduces three new terms to the ‘grey list’ – a non-exhaustive list of terms in consumer contracts which may be regarded as unfair. The new additions are terms which have the object or effect of:
- Requiring a consumer who decides not to conclude or perform a contract to pay a disproportionately high sum in compensation for services which have not been supplied;
- Allowing the trader discretion over the price after the consumer is bound, where no price or method of determining the price is agreed when the consumer becomes bound;
- Allowing a trader to decide the characteristics of the subject matter of the contract after the consumer is bound by the contract.
A term on the grey list can still be fair in certain circumstances, and unfair terms may not necessarily feature on the grey list.
All contracts for the supply of goods by a trader to a consumer are potentially caught by the CRA with certain limited exceptions. Consumers will have a sequence of remedies available for goods which breach the statutory implied terms as to quality, fitness for purpose and description. That sequence is:
- The right to reject the goods within 30 days (as opposed to the current ‘reasonable period’). Consumers may also claim a full refund;
- If not rejected, the consumer has the right to a repair or replacement;
- If the right to repair or replacement is not exercised, the consumer has the right to a price reduction or a final right to reject. For motor vehicles only, if the goods are rejected after 6 months, the trader may deduct an amount from the refund to reflect the use of the goods over the 6 month period.
Further new provisions include:
- where a contract is for the supply of goods by reference to a model seen or examined by a consumer before entering a contract, the goods must match the model, except to the extent that any differences are brought to the consumer’s attention before he enters into the contract;
- unless otherwise agreed, goods must be delivered to the consumer without undue delay and within 30 days, and in general the goods are at the trader’s risk until they come into the physical possession of the consumer or a person identified by the consumer to take possession of the goods.
As with the supply of goods, the supply of digital content (such as computer games and streaming or downloadable television programmes) must be of satisfactory quality, fit for purpose, and conform with the description provided by the trader. In addition, consumers who acquire digital content under a contract that causes damage to their device or other digital content will also potentially have the right to insist that the trader repair the damage or compensate the consumer. Although this right applies whether the digital content was paid for or was free, the existence of a contract is crucial in order for it to arise.
Remedies for the supply of faulty digital content include the right to a refund, the right to a repair or replacement or, if the repair or replacement are not possible or do not resolve the fault, a reduction in the price.
Next steps for businesses
In light of these legislative changes, it would be advisable for traders to review their current standard terms of business and check these are compliant with the new provisions on unfair terms. In addition, website content and advertising material should be reviewed as pre-contractual statements may form part of a binding contract with consumers. Providers of digital content should ensure that the new legislation is reflected in their terms of business, and businesses with sales staff who deal face to face with consumers should ensure staff are trained in the new 30 day period for refunds and replacements. It is important to keep in mind that, as its name suggests, the CRA does not affect contracts entered into between two businesses, in relation to which existing legislation continues to apply.
This introduction to the CRA is a short summary only and is not to be taken as giving specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.