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18 September 2015

The Consumer Rights Act 2015 (CRA) comes into force on 1 October 2015 – are you ready?

One of the key aims of the CRA is to consolidate consumer legislation into one piece of legislation. The CRA pulls together various provisions from over eight different pieces of legislation, which governed consumer rights pre-October 2015. The CRA also updates consumer rights to reflect the both the ongoing growth in e-commerce and the more recent growth in the digital content market.

Standards of goods, digital content, services

Generally speaking, the standards of supply have not changed.  Services must be provided with reasonable care and skill, reasonable price and reasonable time.  Goods must still be of satisfactory quality, fit for purpose, match a description and correspond to sample.

However, digital content is, broadly speaking, now subject to same rights as goods.  This is a substantial change to the law, as previously, those who purchased songs or films direct from a website (via a download for example) did not have direct recourse if the products purchased were sub-standard.  The obligation under the act to provide digital content to the same standard, as if providing goods, will cover not only digital content which is purchased but also digital content which is given away for free with goods or services which are paid for.  The CRA also sets out a compensation mechanism if, for example, digital content contains a virus which damages the consumer’s computer.

Remedies for faulty goods, digital content or services

A new tiered remedy system is introduced by the CRA.

Goods

Under the CRA, a consumer who has purchased goods which are faulty will have a “short term right to reject” (30 days), which, if exercised, will give the consumer a right to a full refund.  After the 30 day period, the consumer will have the right to request either a repair or a replacement, unless either or both are impossible or disproportionate for the trader.

If repair or replacement is impossible or disproportionate, or if the trader fails to carry out the repair or replacement within a reasonable amount of time, the consumer will, at their option, be able to either claim an appropriate price reduction (if they wish to keep the goods) or claim a “final right to reject”.

If a consumer claims a “final right to reject” within the first six months from the date of purchase then (unless the goods in question are a motor vehicle) a full refund must be given.  If the final right to reject falls outside of the initial six month period then it may be possible for a trader to make an appropriate price reduction, on the basis that the consumer has had some use from the goods.

The reason for the distinction, based on the six month period, is that the CRA maintains the assumption that if there is a fault in the goods within the first six months (from date of purchase), the fault existed when purchased and is therefore the trader’s responsibility, unless the trader can prove otherwise.

Digital content

A consumer who has purchased sub-standard digital content will not have the “short term right to reject” (which is only an option if the consumer is purchasing goods) but will have the option to request, at their discretion, a repair or replacement, unless either is impossible, disproportionate or not carried out within a reasonable period of time, in which case the consumer will have a right to a price reduction and potentially, a full refund.

Services

A consumer who has purchased sub-standard services will have the right to require repeat performance, either of the sub-standard part of service, or the whole service if necessary.  This remedy is not available if it would be impossible to finish providing the service to the required standard, for example if the matter was time sensitive, or if repeat performance would be disproportionate or could not be carried out within a reasonable period of time.  In these examples, a price reduction (potentially up to the full cost of the service) would need to be given to the consumer.

Unfair terms

All rules on unfair terms, so far as they effect consumers, are now contained in the CRA.  The rules on unfair terms remain broadly the same except that they now also cover consumer notices, not just the terms of the contract itself.  This means that statements in, for example, general marketing materials are subject to a fairness test if it is reasonable to assume the consumer would have seen or heard such statements.

The CRA provides that written terms must be transparent and prominent.  The prominence aspect is a new requirement and means that traders should review their contracts to ensure that the consumer’s attention is particularly drawn to key terms and that such terms are written in a way which enables the consumer to understand their rights.  This applies particularly to any terms on price or subject matter, which are exempt from the fairness test only if they are both transparent and prominent.

Previous legislation set out a black list of terms (terms which are always unfair) and grey list of terms (terms which are potentially unfair).  Both lists remain in force and the CRA adds three new provisions to the grey list, one of which relates to disproportionately high exit fees.  The Competition & Markets Authority has published guidance on such terms which provides that, to try and ensure fairness, exit fees should not be higher than trader’s reasonable costs of administering contract to point of termination, including costs arising from termination.

Guidance and next steps

Traders can find further guidance on these issues on the business companion website: http://www.businesscompanion.info/.  Traders should make sure they understand the new provisions on consumer rights and how these apply to their business and should also ensure that their terms and conditions are brought up to date to reflect the changes.

If you wish to discuss any of the issues raised in this article, or if you require any assistance updating your terms and conditions, please contact Richard Bailey at commercial@steeleslaw.co.uk or on 01603 598000.

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