Impact of New Consumer Contract Regulations on Traders and Consumers

16 October 2014

Traders and Consumers obligations and rights under the new Consumer Contract (Information, Cancellation and Additional Charges) Regulations

The Consumer Contract (Information, Cancellation and Additional Charges) Regulations

The Consumer Contract (Information, Cancellation and Additional Charges) Regulations came into force on the 13th June 2014 and apply to contracts concluded on or after that date and replace the Distance Selling Regulations 2000 and the Off Premises (Doorstop Selling) Regulations 2008. The new Regulations apply to contracts entered into by traders, both businesses and individuals, who sell goods, services or digital content to consumers.

The changes introduced by the Regulations will apply to most contracts entered into between traders and consumers with the exception of residential lettings, certain financial services contracts and certain household goods delivered by roundsmen.

The Regulations will almost certainly require traders to amend both their Terms and Conditions and their sales processes in order to comply with the regulations. Traders will need to be aware of their obligations under the Regulations as a failure to comply with the relevant obligations may entitle the consumer to bring a claim for breach of contract and could lead to an action against the trader for non-compliance.

The key changes introduced by the Regulations are as follows:

Information Provision Requirements

The Regulations set out the information which a trader must now give to a consumer before and after entering into a contract and how that information should be given. Under existing legislation such as the Distance Selling Regulations and Doorstop Selling Regulations, traders are under an obligation to provide certain information; however, the Consumer Contracts Regulations now include additional obligations, for instance where a cancellation right exists for the consumer, then the trader must now provide a model cancellation form.

Where there is a right to cancel and the trader fails to provide the consumer with the correct information in respect of that right and procedures for exercising it, then the cancellation period could be extended up to 12 months (currently 3 months for distance contracts under the distance selling regulations). If the trader fails to obtain the consumers’ acknowledgement that the placing of the order implies the obligation to pay then the consumer will not be bound by the contract or the order. In the event that the trader does not comply with its obligations to provide relevant information then the consumer may bring a claim for breach of contract.

Cancellation Rights

The cancellation rights under the Regulations only apply to distance contracts e.g. a contract via a website or telephone and off premises contracts e.g. the contract concluded between a trader and a consumer in a place which is not the business premises of the trader. Although a consumer may already have a right to cancel a distance contract under the distance selling regulations and an off premises contract under the doorstop selling regulations, the Consumer Contract Regulations extend the cancellation period from the current 7 calendar days for off premises contracts and 7 working days for distance contracts to 14 calendar days for both.

However, the cancellation period may be extended up to a period of 12 months in the event that the trader has not complied with their information provision obligations. The last day of the cancellation period will depend on whether the contract is a sales contract, a service contract, or a contract to supply digital content.

Exemptions

The regulations set out certain types of contract under which the consumer will not have any cancellation rights eg contracts for the supply of goods that are made to the consumers specifications.

Refunds

Any refund must be made within 14 calendar days of receipt of the goods or the day on which the trader is informed of the consumer’s decision to cancel the contract as opposed to the current legislation which allows for either as soon as possible after the contract is cancelled or within 30 days.

Deduction for use

Under the Regulation the consumer will be responsible for the amount by which the value of the goods is diminished as a result of the consumer handling the goods beyond what is necessary to establish their nature, characteristics and functioning. The trader may deduct the loss in value from any amount that they are obliged to repay the consumer so long as they have informed the consumer of their rights to cancel in accordance with the regulations.

Ancillary Contracts

Where a consumer exercises their right to cancel a contract under the Regulations then any ancillary contract e.g. credit agreements will be automatically cancelled and the onus is on the trader to inform any third party to the ancillary contract.

Downloads

The Regulations introduces specific rules for the supply of “downloads” or “streaming”. Essentially a trader must not begin the supply of the download/stream before the end of the cancellation period unless the consumer has consented to this and has acknowledged that they will lose their cancellation rights and the trader has confirmed this consent and acknowledged this to the consumer. If the trader therefore complies with these obligations before beginning the supply then the consumer has no right to cancel. If the trader does not confirm the consumers consent and acknowledgement back to them when providing confirmation of the contract, then the consumer will effectively be allowed to benefit from the digital contract provided in the cancellation period without cost.

Additional payments

Under a contract between trader and a consumer, no payment is payable in addition to the price agreed for the traders main obligation unless the trader obtains the consumers express consent prior to the contract being formed.

Telephone Helplines

If the trader operates a telephone line which allows a consumer to contact them about a contract they entered into with a trader, then the consumer can’t be made to pay more than the basic rate for the telephone call although there is no definition of “basic rate”. This rule does not however apply to sales telephone lines for the purpose of placing orders. The rules in relation to additional payments and telephone lines will apply to all contracts between traders and consumers unless the contract is specifically excluded under the regulations.

Catherine Bradley is a Solicitor in the Litigation Department at Worthingtons Solicitors and advises commercial and private clients on contractual, consumer & professional negligence disputes. Catherine has been involved in a number of successful mediations.

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