Commercial law: new rules for consumer contracts from June
All businesses dealing with consumers are likely to need to update their terms and conditions and ordering processes in order to implement new Regulations by 13 June 2014.
The new law
The new Regulations – the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (SI 2013/3134) – apply to most sales or supplies of goods, services or digital content to consumers. Only specified categories of goods or services (amongst them gambling, package holidays and passenger transport) are exempt or partially exempt on the basis that they are regulated by other legislation.
The new Regulations mean new requirements in relation to
- pre-contract information;
- clarifying the point in the order process at which a consumer is legally bound to pay for the product or service;
- consent to additional payments related to the product or service;
- the extension of the “cooling-off period” to 14 days;
- model cancellation forms;
- entitlements to refunds;
- the time-frame for delivery; and
- charges for telephone lines for consumers with contract queries.
For all contracts, retailers will be required to bring certain “pre-contract information”, such as delivery charges and the complaints policy, to a consumer’s attention before a contract is entered into. For off-premises and distance contracts the consumer must also get a copy of the contract or confirmation in a “durable medium”, such as paper or email, within a reasonable time and not later than the goods are delivered or services commenced.
For distance contracts, it must be made clear to the consumer that an order confirmation will result in an obligation to pay. For online sales, this will mean that any button the consumer clicks to show that they wish to enter into a contract must be labelled unambiguously to the effect of “order with an obligation to pay” or “pay now” – “continue” or “confirm” is unlikely to be sufficient.
Consumers cannot be required to make payments in addition to the price agreed without “express consent”. Pre-ticked boxes which bolt-on costs during the online order process, such as for an extended warranty, will be prohibited. A pre-ticked box will still be allowed for free products and services, such as a newsletter.
For consumers entering into off-premises and distance contracts, their right to no-fault cancellation (the “cooling-off period”) will be extended from 7 to 14 days from the date they received the goods or, for contracts for services or digital content, from the date the contract is concluded. Cancelling the main contract will automatically terminate any supplemental agreements, such as insurance.
Under the Regulations, a seller can only start to provide services or digital content during the cooling-off period if a consumer makes an express request, and acknowledges that they will lose their right to cancel if the contract is fully performed, or once the supply of digital content has begun.
The Regulations include a model cancellation form which must be provided to consumers, and they also set out model instructions for cancellation, the insertion of which would ensure a contract complies with the cancellation provisions.
Failure to inform a consumer of their cancellation rights could result in the cooling-off period being extended by up to 12 months, during which time the consumer would not be obliged to pay for any services provided.
Where a consumer elects to withdraw from the contract during the cooling-off period, they are entitled to be reimbursed for all payments including the costs of delivery. The seller must also pay the costs of returning the goods unless otherwise specified in the contract. Once goods have been returned, or proof of return provided, the seller will have 14 days (rather than 30) to reimburse the consumer. Sellers are entitled to make a reduction for use beyond what is needed to check that goods are as the consumer expected.
Where a contract is silent as to the time for delivery, the Regulations imply that delivery must occur without undue delay, and in any event within 30 days. This is more stringent than the current requirement of delivery within a “reasonable time”.
Telephone helplines operated for use by consumers with contract queries must not be charged at more than basic rate.
The legislative framework
The Regulations will apply to consumer contracts concluded on or after 13 June 2014, revoking the current ‘distance selling’ and ‘doorstep selling’ regulations.
The Regulations will apply to, and distinguish between, “On-premises contracts” (concluded at the seller’s business premises e.g. in a shop), “Off-premises contracts” (concluded away from the seller’s business premises where both parties are present e.g. when visiting homes), and “Distance contracts” (concluded where the parties are not physically together e.g. online).
Further significant changes to consumer law are expected to come in either towards the end of this year or the beginning of next year when the Consumer Rights Bill becomes law.
For more information please contact:
T +44 (0)1892 506 147