Significant changes will soon affect all businesses selling goods or services to consumers. The Consumer Rights Bill received Royal Assent on 26 March 2015 and will come into force as the Consumer Rights Act 2015 on 1 October. With this Act representing the most extensive reform of consumer law in decades, commercial solicitor Lyndsay Gough examines the necessary steps businesses should be taking before the Act comes into force.
The current framework of consumer law is enshrined in more than a hundred separate pieces of legislation. The aim of the new Act is to consolidate and streamline consumer rights and the existing law covering contracts for goods, services and digital content, together with the law relating to unfair terms in consumer contracts.
The Act will apply to all business to consumer (B2C) contracts.
What are the key changes?
New definitions of ‘consumer’ and ‘trader’
A ‘consumer’ means an individual acting for purposes wholly or mainly outside that individual’s trade, business, craft or profession.
The term ‘trader’ (replacing ‘seller’) means a person acting for purposes relating to that person’s trade, business, craft or profession, whether acting personally or through another person acting in the trader’s name or on the trader’s behalf.
New standards for goods
The Act retains standards applicable under the current law to the sale of goods (satisfactory quality, fitness for purpose, and being supplied as described). However, additional obligations are imposed by the Act on traders. Where, for example, a model has been seen or examined by a consumer, the goods must match that model unless differences are specifically brought to the consumer’s attention.
Traders will also be bound by pre-contractual statements made to consumers, such as in sales literature.
Short-term right to reject faulty goods
The Act gives consumers the right to a full refund if they return faulty goods within 30 days. This gives some clarity, as previously the consumer lost such a right to claim a refund after a ‘reasonable period’, but there were difficulties in interpreting what period might be deemed ‘reasonable’.
Repair or replacement of faulty goods
If faulty goods are returned after the 30-day period, the consumer will still be entitled to require replacement or repair of the goods. If the replaced or repaired goods also prove faulty, the consumer will have the right to a reduction in the price or to reject the goods after one unsuccessful repair or replacement.
This new tiered system of remedy means that traders have only one opportunity to repair or replace the goods before they will need to offer a price reduction or a refund if the goods are returned later.
If goods develop a fault within the first six months after delivery, there is a rebuttable presumption that the defect was present at the time of delivery. After six months, however, it will be up to the consumer to prove that the fault was present at the time of delivery.
New rules for the supply of services
The Act applies to any contract where a trader agrees to provide a service to a consumer, although some sectors have their own rules (such as financial services) and are thus exempt from the Act.
The Act reiterates the existing standards which are applicable to services. A trader must perform the services with reasonable care and skill. If a fixed price has not been agreed in advance, a reasonable price should be charged. If a fixed time has not be agreed, the services should be performed within a reasonable time.
As with goods, the Act provides that a trader will be bound by pre-contractual statements. Anything the trader communicates to the consumer about the trader or the service will become an implied term of the contract if it influences the consumer’s decision.
If the service does not comply with the contract, generally the consumer can ask the trader to re-perform the services with a reasonable time at the trader’s cost. A consumer will be entitled to a price reduction in certain circumstances.
New rights for digital content
Some confusion arose in the past as to whether digital content (such as computer games, software and downloads) should be treated as ‘goods’ or ‘services’. If treated as ‘goods’, consumers had wider legal rights than if the digital content were treated as ‘services’. The anomaly arose, therefore, that a consumer buying digital content on a disk had better protection than if he acquired the same digital content by a download from the internet. The Act removes this inconsistency, by introducing a new definition of digital content and applying new quality standards to all forms of digital content.
Under the Act digital content must be of satisfactory quality, fit for a particular purpose and as described. If not, consumers have the right to ask for a repair or replacement within a reasonable time or a reduction in the price. If, however, digital content is faulty (for example, because of software bugs) there is no right to reject the faulty digital content and obtain a refund, as there would be with goods. This is because of the difficulty of returning digital content and ensuring that a consumer does not still continue to use a faulty copy.
A consumer also has the right to claim compensation if digital content supplied by a trader damages an electronic device or other digital content belonging to the consumer, provided that it can be shown that the trader has not used reasonable skill and care.
So what next?
Businesses have until 1 October 2015 to review their existing consumer contracts and complaint-handling and returns procedures to ensure that they are ready for the new Act. As pre-contractual information may become an implied term of the contract, sales and advertising staff should be briefed on how to minimise the risk of claims. Given the enhanced remedies for consumers (including where buying digital content), retailers might need to revisit their own levels of protection in contracts with their suppliers to mitigate against possible commercial and legal exposure.
This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.