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