Consumer Rights Act 2015
Bill McCaffrey, Partner Ash Saluja, Partner Background
− UK consumer law unnecessarily complex, fragmented and unclear
− Law developed piecemeal over time
2 Part 1 of CRA
Merges the rights and remedies of:
− Sale of Goods Act 1979 − Sale of Goods (Implied Terms) Act 1973 − Supply of Goods and Services Act 1982
Part 1: applies where agreement between trader and a consumer to supply goods, digital content or services
3 Trader: a person acting for purposes relating to the person’s trade, business, craft or profession….
Consumer: an individual acting for purposes that are wholly or mainly outside that individuals trade, business, craft or profession
A trader claiming that an individual was not acting for purposes wholly or mainly outside the individuals trade, businesses, craft or profession must prove it
4 Goods: any tangible moveable items – includes water, gas and electricity if and only if supplied in a limited volume or set quantity
Digital Content: data which are produced and supplied in digital form
Services: not defined
5 Contracts to supply goods
− Sales: transfer of ownership for payment – can be conditional
− Hire: consumer takes possession of goods with the right to use them
− Hire – purchase: goods are hired by the trader in return for periodical payment – but on the condition that ownership will transfer if terms complied with and (i) consumer exercises option to buy (ii) any party to contract does an act specified in it or (iii) or event specified if contract occurs
6 Goods
− To be of satisfactory quality
− To be fit for any particular purpose made known to the trader - or for hire purchase/conditional sale etc. to the credit broker
− To be as described/match sample
Installation as part of conformity – if installation forms part of contract, installed by trader (or trader responsible); installed incorrectly: then do not conform
7 Remedies
− Intended to keep parties out of court
− Additional to common law remedies – can still claim damages (though not recover twice)
8 Statutory right breached Remedies
− Goods not of satisfactory quality Short term right to reject − Goods not fit for particular Right to repair or replace purpose Right to a price reduction or final − Goods not as described rights to reject
9 Short term right to reject
− 30 day time limit − Can be extended by agreement, or if to be repaired/replaced by at least 7 days ‘waiting’ time − To reject by indicating – no need for writing. Can be something consumer say or does − Customer entitled to refund of sums paid − If customer transferred something for which same amount or thing cannot be substituted, entitled to receive back what transferred – if can’t no right to refund – but damages
10 Right to repair or replacement
− Consumer can require trader to repair or replace unless impossible or disproportionate
− Must do within reasonable time and bear necessary costs
− If repair fails, replacement defective, or both impossible, consumer has right to price reduction or final rejection
11 Price reduction or final right to reject
Consumer must choose one option: First 6 months onus is on trader to show conformity Price reduction - Reduction of price by appropriate amount and refund if paid over reduced amount Rejection − Refund may be reduced by a deduction for use − No deduction may be made in first 6 months unless goods consist of motor car
12 Digital Content
− “Data which are produced and supplied in digital form:
• software • “apps” • music • computer games
− Includes “cloud computing” stored and processed remotely
13 Contracts covered
− Trader agrees to supply digital content to a consumer that is:
• paid with money • “free” with something that is paid for • paid for with virtual money, token etc, paid for with money
14 Statutory Rights
− Digital content to be of satisfactory quality
− Digital content to be fit for purpose
− Digital content to be as described
− Trader can modify so long as continues to conform
15 Consumers rights to enforce terms
− No right to reject (except if included in goods)
− Right to repair or replacement
− Right to price reduction – only if can’t be repaired
− Consumer can also seek other remedies e.g. damages
16 Services
− Applies to contract for trader to supply service to a consumer
− Does not cover employment
− Services to be supplied with reasonable skill and care
− Services to be performed within reasonable time
17 Rights to enforce
If the service does not conform to the contract consumer may:
• require repeat performance • require price reduction – only if repeat impossible, or not carried out
− Does not prevent consumer seeking other remedies
Mixed contracts (goods and services): unless severable the customer may terminate whole and receive refund of price
18 Rights are heavily weighted in consumers’ favour
− 30 day short term right to reject
− If 30 days elapsed only 1 chance to repair/replace before final right to reject
− For first 6 months onus is on trader to prove that goods do conform
− No deduction for use during 6 months unless car
208118299.1 19 Consumer contract terms and consumer notices
20 Background
− CRA consolidates Unfair Terms in Consumer Contracts Regulations 1999 (UTICC) and the business to consumer provisions of the Unfair Contract Terms Act 1977 (UCTA) − UTICC is being repealed − Part 2 of CRA covers unfair terms and the assessment of fairness
21 Scope of fairness requirements
− Applies to: • all consumer contract terms, regardless of whether they are individually negotiated by the consumer; • a consumer notice to the extent it either relates to rights and obligations between a trader and consumer, or purports to exclude or restrict a trader’s liability to a consumer; and • secondary contracts even if the secondary contracts are NOT consumer contracts or have different parties − Consumer notices can include written and oral notices – must be reasonable to assume that a consumer notice is intended to be seen or heard by a consumer ‹ Think about wording for “whole agreement” or “entire agreement” type clauses
22 Fairness test
− Consumer contract or consumer notice term: “a term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer” − Whether a term in a consumer contract or a consumer notice is fair is determined by: • taking into account the nature of the subject matter of the notice; and • by reference to all the circumstances existing when the rights or obligations to which it relates arose and to the terms of any contract on which it depends
23 Implications
− Enforceability – as in UTICC, the CRA provides that a unfair term or consumer notice is not binding on the consumer, but the consumer can rely on a unfair term or consumer notice if they wish − The CRA states that a court must consider the fairness of terms in a consumer contract, even if the parties do not raise it as an issue (reflects decisions of the Court of Justice of the EU about the duties of national courts) − Enforcement action by regulators – fines, undertakings ‹ No transitional period – documents may need a review now ahead of 1 October
24 Exemption from the fairness test (1)
− The CRA includes an exemption from applying the fairness test − A term of a consumer contract may not be assessed for fairness to the extent that: • it specifies the main subject matter of the contract; or • the assessment is of the appropriateness of the price payable under the contract by comparison with the goods, digital content or services supplied under it
25 Exemption from the fairness test (2)
− The exemption does not apply to terms listed in the ‘Grey List’ or to consumer notices (NEW) − Terms can only benefit from the exemption is they are both transparent and prominent • Transparent: plain and intelligible language and, if written, legible • Prominent: if brought to the consumer’s attention in such a way that an average consumer (‘ a reasonably well-informed, observant and circumspect’ consumer ’) would be aware of the term (NEW) − Not every aspect of a term may be covered – for example, in relation to terms on payment, price should not be assessable (if transparent and prominent) but other aspects of the term are assessable for fairness such as the timing and method of payment
26 The ‘Blacklist’
− The CRA sets out certain terms in consumer contracts and consumer notices that are automatically unenforceable − Under s 65, a “ trader cannot by a term of a consumer contract or by a consumer notice exclude or restrict liability for death or personal injury resulting from negligence ” − Does not apply to contracts so far as they relate to the creation or transfer of interests in land or insurance contracts − Parts of the Act covering goods, digital content and services also ‘blacklist’ various terms which have the effect of excluding or restricting the trader’s liability − Some of these provisions are a consolidation of those found in UCTA
27 The ‘Grey List’ (1)
− The CRA illustrates the meaning of ‘unfairness’ by listing types of terms that ‘may be regarded as unfair’ in Part 1 of Schedule 2 − Referred to as a ‘grey’ list as the terms listed are not, in every situation, always unfair (it is not a blacklist) − It is an indicative and non-exhaustive list
28 The ‘Grey List’ (2)
− The CRA has added three new terms to the list provided in UTICC − These terms have the object and effect of: • giving the trader the discretion to decide the price payable under the contract after the consumer has become bound by it, where no price or method of determining the price is agreed when the consumer becomes bound (exclusions for contracts of indeterminate duration, securities/FX sale or with price indexation) • requiring that, where the consumer decides not to conclude or perform the contract, the consumer must pay the trader a disproportionately high sum in compensation or for services which have not been supplied • permitting the trader to determine the characteristics of the subject matter of the contract after the consumer has become bound by it
29 Typical problematic clauses
− Variation clauses − Terms not expressed in plain and intelligible language − Lock-in/nil refund clauses
30 What do you need to get things right?
− Proper processes − Clear, plain English drafting − Taking a holistic view of customer information requirements − CRA is not an island – remember BCOBs. MCOBS, FCA Principles, TCF outcomes and other requirements − The “print room operator” test
31 Any further questions?
32 Example 1
‘I confirm that I have received, read and understood ‘This is our standard client agreement upon which this agreement and agree to the terms set out we intend to rely. For your own benefit and within.’ protection you should read these terms carefully before signing them. If you do not understand any point please ask for further information.’
33 Example 2
‘Remuneration ‘Remuneration We derive income from commission paid to us in respect of When we derive income from commission paid to us in transactions we arrange on your behalf. We shall tell you the respect of transactions carried out on your behalf we will amount and the frequency of commission payable to us on inform you of the amount and the frequency of any amounts any such transaction. payable to us. If we receive commission or other form of benefit from the Alternatively if you wish or we propose to operate on a fee issuer of a security or from another intermediary, we will basis we will agree its basis, frequency and method with you inform you but we will not tell you its amount unless you ask in writing before we carry out any chargeable work. Should we us to do so. We reserve the right to share any commission or receive commission from any third party in relation to a fees received by us with other introducing agents. transaction arranged for you we will offset the amount received against any fees due. Alternatively, if you or we propose to operate on a fee basis, we will agree its basis, frequency and method with you in If we arrange for you a transaction from which we receive writing before we carry out any chargeable work. Should we initial commission and subsequently you cease to pay sums receive commission from any third party in relation to due under that transaction which results in us refunding the transactions arranged for you, we will offset the amount commission which has been paid to us, we reserve the right to received against any fees due. recover from you an amount equal to the amount we have had to refund. The amount recoverable and the timeframe over If we arrange for you to effect a transaction from which we which it is recoverable are dependent on the product chosen. receive commission and subsequently you cease to pay sums Further details of the amount and timeframe will be notified to due under that transaction which results in us refunding the you prior to the conclusion of the contract in the confirmation commission which has been paid to us we reserve the right to letter we will send you.’ charge you a fee to recompense us for the time spent in advising you and arranging the transaction. We shall not charge any fee if you exercise your right to cancel the transaction in accordance with the cancellation notice sent to you by the relevant product provider.’
34 Example 3
‘12.1 You will pay us a fee for our services in ‘12.1 You will pay us a fee for our services in accordance with our published rate of Account accordance with our published rate of Account charges from time to time. Details of the rates of Charges from time to time. Details of the rates of Account Charges are available on request.’ Account Charges are available on request and may be amended at our sole discretion from time to ‘25 Whole Agreements and Amendments time.’ 25.1 Except where the Rules and Regulations and ‘25 Whole Agreements and Amendments the law states otherwise, the terms and conditions of this agreement shall be limited to those terms Except where the Rules and Regulations and the and conditions set out in the Agreement law states otherwise, the terms and conditions of Documents. No other terms and conditions shall this agreement shall be limited to those terms and apply. conditions set out in the Agreement Documents. No other terms and conditions shall apply. The terms 25.2 We may amend these terms and conditions of the Agreement Documents and, accordingly, this (including changes to applicable fees and agreement, may be varied by us by giving commissions) by giving you at least 30 days notice. reasonable written notice to you.’ We will only make changes for good reason including but not limited to: 25.2.1 Making them clearer and more favourable to you.’
35 Example 4
Open Market Option Application form Open Market Option Application form Discharge I confirm that the details in this form are true and complete. I agree that payment by Abbey Life I confirm that the details in this form are true and I Assurance Company Limited (“ALAC”) and Abbey agree that payment by Abbey Life Assurance Life Trustee Services Limited (“ALTS”) of benefits Company Limited or Abbey Life Trustee Services in respect of a [policy] arising from this form is in Limited of the benefits requested constitutes full full and final discharge of all my claims on the discharge of all my claims made in respect of those [policy]. benefits. I promise to indemnify Abbey Life Assurance Company Limited or Abbey Life Trustee I promise that I will be responsible for any losses Services Limited against all other claims in respect and/or expenses which are the result, and which a of the benefits being taken and against any losses reasonable person would consider to be the and expenses arising from such claims. probable result, of any untrue, misleading or inaccurate information carelessly given by me, or on my behalf, either in this form or with respect to benefits from the [policy]. I also promise that I will be responsible for any losses and/or expenses which are the result of any untrue, misleading, or inaccurate information deliberately given by me, or on my behalf, either in this form or with respect to the benefits from the [policy].
36 Any questions?
37