The Consumer Rights Act 2015 (the “Act”) came in to force 1 October 2015 and has been described as the biggest overhaul to consumer law since the introduction of the Unfair Contract Terms Act 1977 and Sale of Goods Act 1979. UK consumers reportedly spend £90 billion a month on goods or services and the Act is likely to have a significant impact on your business and the advice you will need to provide.
The Act consolidates and expands on existing consumer rights and remedies in respect of goods, digital content, services and unfair terms in consumer contracts. This sparks a requirement for businesses to review their standard terms of business, marketing material and even sales policies to ensure full compliance and enforceability of their contract terms. Whilst the Act addresses business to consumer contracts (“B2C”), in-house lawyers must be aware that if your business supplies goods, digital content or services to a business that are ultimately supplied to a consumer then your business will be caught by the Act.
With this in mind, we explore the key changes introduced by the Act and what in-house lawyers should be aware of.
The Act will potentially capture all contracts for the supply of goods by a trader to consumers as ‘goods’ are described broadly under the Act as any tangible moveable items, including Digital Content (see below). Existing implied terms such as satisfactory quality, fitness for purpose and that goods need to match their description are consolidated under the Act but it introduces new protections for the consumer including:
- Goods must match a model seen or examined;
- Consumers will have the same rights as those for defective/non-confirming goods where goods have been installed but installed incorrectly;
- Tiered remedies for goods which breach the statutory implied terms such as:
1. ‘Short Term’ right to reject within 30 days (replacing the previous provision of ‘reasonable period’) and claim full refund;
2. After 30 days or if (1) is unsatisfactory then a Right to Repair or Replacement; and
3. After 30 days or if (2) is unsatisfactory then a Right to Price Reduction or a final Right to Reject (and claim refund).
2. Digital Content
Digital Content will be protected as the Act applies to all suppliers of digital content which will cover apps, music, e-books, games, movies, software, videos etc. Consumers are protected regardless of whether money was exchanged, goods are provided for free with other paid goods or purchased by way of vouchers. The Act also protects consumers where consumers acquire goods under a contract which causes damage to their device or other content may also be protected. For the first time, Digital Content falls under the definition of ‘goods’ as ‘data which is produced and supplied in digital format’ and consumers will have a clear right to refunds, repairs and replacement of faulty goods as outlined above.
Before the Act came into force, traders could limit or exclude implied terms for services being carried out with reasonable care and skill as long as the trader could demonstrate this was reasonable and fair for them to do. Traders mean anyone who is acting for the purposes relating to that person’s trade, business, profession or on their behalf. This is no longer possible under the Act which provides that:
- Traders must perform services with reasonable care and skill;
- The consumer must pay a ‘reasonable price’ for the services unless it is expressly stated or the method of fixing is set out in the contract;
- The trader must perform services within a ‘reasonable time’ unless expressly stated or the method of fixing is set out in the contract.
However it is worth noting that ‘reasonable price’ and ‘reasonable time’ is a question of fact.
4. Unfair Terms
The Act consolidates and combines the Unfair Terms in Consumer Contracts Regulations 1999 (“UTCRRs”) and Unfair Contract Terms Act 1977 (“UCTA”) in respect of consumer contracts. Whilst there are limited changes in respect of Unfair Terms as a whole, some of the key changes are highlighted below:
• The Act replaces the UCTA ‘reasonableness test’ with the UTCRRs ‘fairness test’. The fairness test includes consideration for how the term is used; capable of causing detriment; weight of the term in favour of a business; nature of goods; and other terms of the contract and circumstances when the contract was concluded etc.;
• The fairness test applies to both negotiated and non-negotiated (standard term) contracts, consumer contracts and notices;
• Unfair terms and notices are not binding on a consumer but consumers can choose to rely on them;
• All written terms of a consumer notice and contract must be transparent; and
• Price/subject matter contract terms are only exempt if transparent and prominent.
The law has therefore shifted from the ‘buyer beware’ attitude and in-house lawyers need only look in one place for the relevant provisions covering B2C contracts.
5. Reform of Enforcement Powers
A mosaic of more than 60 pieces of legislation have been consolidated under the Act and enforcement powers now fall under the responsibility of the Business, Innovation and Skills Department. Trading Standards also have the power to investigate and bring proceedings outside their own local authority area (excluding Scotland) and across local authority boundaries.
6. Enhanced Consumer Measures
Under the Act, Consumer Law Enforcers are given additional, direct, civil powers to achieve a remedy for breaches and fall under the following categories:
- Redress Measures: providing compensation or other redress to consumers as a result of the conduct. Measures include the right to terminate (but not vary) a contract, and where consumers cannot be identified, or can only be identified at a disproportionate cost, measures for the collective interest of consumers;
- Compliance Measures: measures to prevent or reduce the risk of repeat conduct; and
- Choice Measures: measures to enable consumers to choose effectively between traders/suppliers.
7. How does this Affect You?
Whilst contracts entered into prior to 1 October 2015 will still be governed under the previous legislation, all contracts entered on or after 1 October 2015 will be subject to the Act. Although it is still early days for the ‘new protections’ and there is no case law to assist in understanding how the Courts will interpret the Act, a ‘belt and braces’ approach should be adopted and in-house lawyers should consider:
- A review of customer contracts and consumer notices;
- A review of advertising, marketing and sales material for the sale of goods or supply or services (including social media);
- Training for all employees to ensure sales staff are briefed on the consumer rights, remedies and impact of voluntary statements; and
- Checking business to business contracts in light of the fact the ultimate user may be a consumer.