What has the new Consumer Rights Act got in store for you? - | Hudson McKenzie


What has the new Consumer Rights Act got in store for you?

September 1, 2015 | Company/Commercial, Latest Thinking, News

The Consumer Rights Act 2015 (CRA) received Royal Assent on 26 March 2015 and will come into operation on 1 October 2015. It is a legislation that consolidates and makes changes to the current regime of consumer protection law in the UK, including but not limited to the Supply of Goods and Services Act 1982 and the Sale of Goods Act 1979. This piece of legislation has also provided a new requirement on the control of unfair terms in consumer contracts, in addition to the Unfair Contract Terms Act 1977 (UCTA) and the Unfair Terms in Consumer Contracts Regulation 1999 (UTCCR).

Key Changes to the Requirements of Consumer Contracts

Currently, consumer protection instruments imply various terms into consumer contract as to the standard of goods or services to be provided. Even though the CRA also covers all the aspects mentioned in previous legislations, these standards become statutory rights that consumers are entitled to instead of being merely implied terms. Besides, the CRA allows the incorporation of pre-contractual information other than the main characteristics of goods to be included as terms of consumer contracts.

Apart from goods and services, there is a new chapter that regulates the supply of digital content to respond to the significant increase of such transactions. It requires digital content sold to be of satisfactory quality, fit for purpose and so on, as if these contents are tangible goods.

Remedies for Breach of Statutory Standards

In the Supply of Goods and Services Act 1982, sections 11N and 11P provide a tiered remedy for repair and replacement, and refund. It works by allowing consumers to ask for a repair or replacement of goods if any of the implied terms are not met. Consumers can request for a reduction in price or a full refund only if the traders fail to repair or replace the goods, or such repair or replacement is impossible or disproportionate. As for the supply of services, no specific remedies were set out for the failure to meet the implied terms, and consumers could resort to the common law rules on breach of contract.

Under the CRA, the tiered remedy mentioned above was kept. However, a new remedy related to the supply of goods has been introduced. Under sections 20(1) and 22 of the CRA, consumers are now entitled to a short-term right to reject. If goods are found to fall below any of the statutory standards, consumers can reject the goods within 30 days after the transferal of goods and claim for a refund subject to conditions listed out in section 20. While the trader cannot impose any fee on the refund, the refund must be made within 14 days after the agreement to refund is made.

What’s more, the CRA has also provided for a right to repeat performance for supply of services falling under the statutory standards. Under section 55, consumers can require the trader to perform the service again to the extent that is necessary to complete its performance in conformity with the contract. Similarly, consumers can request for a reduction in price or a full refund only if the traders fail to perform the service again within reasonable timeframe, or such performance is impossible.

Unfair Contractual Terms

The second part of the CRA mainly covers the control over unfair contract terms in consumer contracts. It mainly reproduces the requirement provided in the UTCCR. However, the CRA takes a step further to require also notice to be fair instead of contractual terms only.

Besides, a new criterion has also been added for terms that can be excluded from the assessment of fairness. Originally, the UTCCR provides that a term, which specifies the main subject matter of the contract or the price, should be transparent for such exclusion. The CRA, in addition, requires such terms to be prominent, meaning that they must be brought to the consumer’s attention in a way that an average consumer would be aware of the term apart from being plain and intelligible.

The “reasonableness test” from the UCTA is not mentioned anywhere in the entire CRA, but the list of potential unfair contractual terms from the UTCCR has been reproduced and extended in Schedule 2. Moreover, the court should now take the initiative to consider whether a term is fair even if none of the parties has complained on that issue, which is different from the position stated in the original legislation.

Concluding Remarks

In general, the CRA provides better rights and clearer protection for consumers. By outlining definite timeframe for refund and the newly introduced short-term right to reject, consumers are now expected to have better expectation over any repair and replacement needed. As for unfair terms, consumers are also entitled to better protection because they need not raise any point of unfairness in order for the court to assess it.

As for traders, the CRA means more serious standards required of them. First of all, those standards are not incorporated as statutory standards instead of merely implied terms of the contracts. A failure to fulfill them may mean a breach of statutory rules, which may attract extra tortious liability on top of the contractual liability. Then, they are also subject to more vicissitudes in business because they are subject to more refund claims compared to the past. Consumers can now request for a refund right away without asking for any repair or replacement. This would mean a lot of administrative costs to traders because they have to spend money on rectifying the products, but at the same time, run the risk of not being able to sell them out again. Lastly, more manpower may be needed because consumers are not entitled to repeated performance of service. For such repeated performance, it does not only mean extra work done for each project, but also, more importantly, the loss in income the manpower would have produced had it been available. These are just some immediate foreseeable problems traders would face.

As for unfair contractual terms, all traders should now review their standard contracts against the list on Schedule 2 of the CRA in order to avoid potential disputes. Moreover, the reasonableness test, though not incorporated in the CRA, is expected to come into play through case law on interpretation of contractual terms.

For further information, please get in touch with Rahul Batra, Partner on +44 (0)20 3553 7711 or via email at rahul.batra@hudsonmckenzie.com.