Consumer Rights Act 2015
The Consumer Rights Act 2015 ("CRA") reforms and consolidates most law regarding consumer contracts and notices in the UK. It is the most extensive consumer law reform in the UK for a generation.
The Act is split into three parts: Part 1 deals with consumer contracts for goods, digital content and services; Part 2 covers unfair contract terms; and Part 3 contains miscellaneous and general provisions which relate to (amongst other things) duties on lettings agents to disclose fees. The CRA is expected, for the most part, to come into force by 1 October 2015 and only relates to business-to-consumer contracts.
What has changed?
There are 4 distinct sections of the CRA relating to goods, digital content, services and unfair terms, that will impact retailers and their dealings with consumers.
Pre-contractual Information: under the CRA all pre-contractual information about the main characteristics of the goods will form part of the contract.
Statutory Guarantees: the CRA incorporates the implied terms from the Sale of Goods Act 1979 (compliance with description, fitness for purpose and satisfactory quality) with statutory guarantees.
- the CRA proposes a new "early right to reject". Faulty goods can be rejected by the consumer within 30 days of purchase (save for perishable goods where the time period will be shorter).
- the onus will be on the consumer to prove that the goods do not conform to the contract if they are seeking to exercise their short term right to reject. Goods will be presumed to not conform to the contract if a consumer seeks to exercise their right to a repair or replacement, price reduction or "final right to reject" within 6 months of delivery subject to certain exceptions.
- consumers will have the right to request that faulty or goods which fail to meet their description are repaired or replaced
(even after the 30 day right to reject period has expired). Traders must do so within a reasonable period of time and without significant inconvenience to the consumer.
- consumers will have the right to a reduction in the price or to reject the goods after one unsuccessful attempt to repair or replace the goods. Traders may be entitled to make a deduction in respect of any use the consumer has had of the goods before they are rejected.
- if a trader installs the goods (or the installation is carried out under the trader's responsibility), the goods will be deemed to not conform to the contract if the installation is incorrect. Accordingly, the consumer remedies referred to above will apply, save as regards the short term right to reject.
- "Digital Content" means data which is produced and supplied in digital form. Therefore the CRA will apply to a digital content contract (i.e. a contract for a trader to supply digital content to a consumer if the digital content is supplied for a price paid by the consumer). The CRA also covers digital content that comes free with any other goods or services paid for by a consumer.
- New Digital Content Regime: the new statutory guarantees for goods will apply to all digital products, meaning they will be treated as goods, even if provided online. However, unlike with goods, trial versions of digital content will be irrelevant in terms of any guarantee relating to the compliance with description.
- Pre-contractual Information: as with goods, it will be necessary for certain pre-contractual information to be provided to consumers under the CRA, including information on the compatibility of digital products.
- Statutory Remedies: under the CRA a consumer will not be given the right to reject defective digital content. However, certain statutory remedies are proposed, including the right to have the digital content replaced or repaired, and the final remedy of a full or partial refund if a replacement or repair is ineffective. The CRA also introduces the right for consumers to receive compensation for any damage to devices or other content caused by the defective digital content provided.
- Pre-contractual Information: the CRA gives contractual force to any spoken or written representations and anything that is taken into account by the consumer when deciding to enter into the contract or when making any decision about the service after entering into the contract.
- Statutory Guarantees: every contract to supply a service is to be treated as including terms that the trader must perform the service with reasonable skill and care; that (if not agreed) the price will be reasonable and if the contract does not expressly fix a time for performance of the services, that they will be performed within a reasonable period of time. What is a reasonable period of time will be a question of fact. This largely replicates the wording in the Supply of Goods and Services Act 1982.
- Statutory Remedies: under the CRA, two tiers of statutory remedy in relation to services are proposed. The Tier 1 remedy provides that the retailer should either redo the element of the service which is inadequate, or perform the whole service again. The Tier 2 remedy allows the retailer to provide a reduction in the charge to cover the element of the service that has not been provided with reasonable care and skill.
Fairness Test: the existing fairness test would continue to apply to all terms of the contract other than the price or subject matter, both of which can be excluded from the application of the fairness test provided they are "transparent and prominent". The prominence test proposed by the CRA is whether the term has been brought to the consumer's attention in such a way that the average consumer would be aware of it.
Transparency Test: under the CRA, all written terms offered to a consumer must be "transparent" meaning plain, intelligible language and, if in writing, legible.
The "Grey" List: the CRA proposes to add 3 new terms to the current "Grey List" of terms presumed to be unfair. These include:
- disproportionately high charges in the event that a consumer decides not to conclude or perform the contract, or for services which have not been supplied;
- terms allowing the retailer to determine the characteristics of the subject matter after the contract has been formed; and
- terms which allow the retailer to determine the price after the contract has been formed.
New Enforcement of Competition Law
The CRA will also reform the enforcement of competition law through the courts in the UK. The reforms make it easier for consumers which have been victims of competition law infringement to bring a damages claim and obtain compensation. For example the CRA introduces voluntary redress schemes ("VRS's") and the reforms promote the use of collective proceedings on behalf of groups of claimants.
The new VRS's are a statutory compensation programme designed to provide sufferers of competition law violations with a means to seek compensation without having to go to court. The CRA empowers the Competition and Markets Authority ("CMA") to approve VRS's and the CMA has published draft guidelines on the procedures for the application, approval and enforcement of the VRS's here which is currently subject to further consultation.
Collective proceedings are a type of class action whereby a claim is brought by a representative on behalf of a category of claimants (e.g. the victims of a particular competition law infringement). These proceedings can be an efficient mechanism since a nominated representative, approved by the Competition Appeal Tribunal, will bring the claim on behalf of a group of claimants who will then share the award of compensation. Under the CRA, collective proceedings will be divided into two categories:
- Opt-in collective actions; claimants only join collective proceedings when they actively assert membership to a class.
- Opt-out collective actions; claimants automatically fall within a 'class' for the purposes of the proceedings unless they take the necessary prescribed steps to opt-out.
What do the reforms mean for businesses?
Businesses dealing with consumers will need to review their:
- sales lifecycle;
- sales contracts (including standard website and app terms);
- limitation of liability clauses to check compliance and references to legislation;
- pre-contractual information (including notices and announcements); and
- cancellation and returns policies.
For more information, contact Matthew Holman.