briefing December 2015 The Cnsumer Rights Act 2015 - a bird s eye view f the new landscape With the bulk f the Cnsumer Rights Act 2015 (the CRA) taking effect n 1 Octber 2015, we highlight imprtant pints t nte and key changes brught in by this verhaul f UK cnsumer rights law. The CRA is a majr new piece f legislatin. Cnsumer-facing businesses shuld make sure they are familiar with the aspects mst relevant t them. While many f the rights given t cnsumers are the same as befre sme are cmpletely new. There are majr changes t the remedies available t cnsumers where a prduct r service falls shrt f expectatins. Updating returns and cmplaints handling plicies will be particularly imprtant. We d nt cver every aspect f the CRA in this nte but aim t prvide a useful verview and highlight key pints. Gvernment guidance prviding mre detail n specific areas can be accessed here: http://www.businesscmpanin.inf/en/news-and-updates/cnsumer-rights-act. What is the purpse f the CRA? The bjective f the new law is t establish a single framewrk fr the key cnsumer rights in cntracts fr gds, digital cntent, services, and the law relating t unfair terms in cnsumer cntracts and ntices. The CRA als makes changes t the way cmpetitin law challenges can be brught, cnslidates the pwers f the varius enfrcement bdies perating in this area and makes targeted refrms acrss varius cnsumer sectrs such as letting agents and secndary ticketing. What des the CRA cver? The CRA sets ut the statutry rights and remedies available t cnsumers wh buy gds, digital cntent and services. The categry f digital cntent is new. Sme key definitins used in the CRA: A trader is "a persn acting fr purpses relating t that persn's trade, business, craft r prfessin, whether acting persnally r thrugh anther persn acting in the trader's name r n the trader's behalf." Nte that business includes the activities f gvernment departments and lcal r public authrities. A cnsumer is "an individual acting fr purpses that are whlly r mainly utside that individual's trade, business, craft r prfessin." Digital cntent is data which are prduced and supplied in digital frm. 213094357_1 1
While the CRA cllects tgether mst f a cnsumer s rights and remedies, yu shuld be aware that sme are left elsewhere. A cnsumer can still sue fr damages under cntract law. And ther imprtant statutry rules remain in place. Fr example: The frmatin f a cntract between a trader and a cnsumer is still gverned by the Cnsumer Cntracts (Infrmatin, Cancellatin and Additinal Charges) Regulatins 2013 (the Cnsumer Cntracts Regulatins). In mst distance and ff-premises cntracts these give the cnsumer a 14-day cancellatin right even when there is nthing wrng with the gds, digital cntent r services. They als set ut requirements abut the infrmatin t be given t cnsumers and hw the cntract is frmed. Certain types f behaviur twards cnsumers are utlawed under the Cnsumer Prtectin frm Unfair Trading Regulatins 2008. A salespersn putting pressure n a cnsumer in their wn hme, fr example, r persuading a cnsumer t make a purchase based n false infrmatin, can amunt t a criminal ffence as well as enabling the cnsumer t make a claim. Supply f gds The CRA brings tgether and updates the rules n the supply f gds t cnsumers. The cre gds rights prmise the cnsumer that: the gds are: f satisfactry quality; fit fr a particular purpse made knwn t the trader by the cnsumer; and as described (including infrmatin abut the main characteristics f the gds required by the Cnsumer Cntracts Regulatins). the gds match a sample r mdel that is seen r examined by the cnsumer. Cnsumers have additinal rights including that: the trader has the right t sell r transfer the gds (with special rules abut hire and transfer f limited rights). there are n unexpected third party rights ver the gds. ther pre-cntract infrmatin prvided by a trader under the Cnsumer Cntracts Regulatins is crrect. The CRA sets ut the statutry remedies available t a cnsumer where there has been a breach f the cnsumer's statutry rights. Fr the cre gds rights these include: a shrt term (30 day) right t reject the gds fr a full refund. the right t a repair r a replacement. the right t a price reductin r final rejectin in sme situatins. 213094357_1 2
Fr the additinal rights the remedies vary. Fr example, breach f the requirement that the trader has the right t sell r transfer the gds wuld allw the cnsumer t reject the gds fr a full refund withut a time limit. The statutry rights cannt be limited r excluded by the trader. Supply f digital cntent The CRA intrduces a cmpletely new set f rights and remedies fr cnsumers purchasing digital cntent. Digital cntent Any f the fllwing in digital frmat wuld be classed as digital cntent: bks, cmputer sftware, audivisual cntent, mbile apps, cmputer games. Als cvered are sftware prgrammes incrprated int gds, such as music n a CD, r built-in vehicle r dmestic appliance sftware. Digital cntent In cntrast, digital cntent des nt include an nline shp selling gds, r a mbile service cntract. Digital cntent previusly fell int an uncertain area. The rapid grwth f this type f purchase persuaded legislatrs t cme up with a tailred set f rules, and specific prvisins dealing with situatins where a cmbinatin f digital cntent with gds r services is supplied. As with gds, the CRA gives cnsumers a set f statutry rights that cannt be excluded. The digital cntent must be: f satisfactry quality; fit fr any particular purpse made knwn t the trader; and as described. In additin, the pre-cntract infrmatin prvided by a trader under the Cnsumer Cntracts Regulatins is imprted as a term f the cntract. And as with gds, the CRA brings in a statutry implied term that the trader has the right t sell r transfer the digital cntent t the cnsumer. The CRA sets ut the statutry remedies available t a cnsumer where there has been a breach f the cnsumer's statutry rights. The cnsumer may request a repair r replacement, where pssible. This must be dne prmptly and withut incnveniencing the cnsumer. Failing this, the back-up remedy f a price reductin up t the full amunt paid is available. Unlike a gds cntract, there is n right t reject digital cntent. Althugh in a mixed supply f digital cntent and gds, such as a music CD, defects in the digital cntent will trigger the remedies available fr gds. An additinal remedy is available fr digital cntent which entitles the cnsumer t claim fr damage caused t his wn hardware r sftware by the digital cntent. This can be called n by a cnsumer even where the digital cntent is supplied fr free. 213094357_1 3
Supply f services The CRA brings tgether and updates the statutry rights and remedies fr the supply f services t cnsumers. In summary, the statutry rights fr cnsumers are: the service is t be perfrmed with reasnable care and skill. infrmatin prvided abut the trader r the service that influences the cnsumer s decisin-making is binding. pre-cntract infrmatin prvided under the Cnsumer Cntracts Regulatins is binding. a reasnable price is t be paid if the price has nt been fixed. the service is t be perfrmed within a reasnable time, if the timing has nt been fixed. The CRA gives a cnsumer statutry remedies, if the service falls shrt. These are: a right t repeat perfrmance f the service within a reasnable time and withut incnvenience t the cnsumer. This remedy is nly available where the service has nt been perfrmed with reasnable care and skill, r the infrmatin terms have been breached in a way that relates t the service itself; a right t a price reductin by an apprpriate amunt. The amunt f the reductin is left fr negtiatin between trader and cnsumer and wuld nrmally be the difference between the value f the service the cnsumer paid fr and the value f what was received. Where incrrect infrmatin abut the trader has been given, the service prvided may be f the same value, but the guidance accmpanying the CRA indicates that the trader shuld still negtiate a price reductin. The statutry rights cannt be excluded, and a trader cannt limit its liability fr breach f the statutry rights t an amunt that is less than the cntract price. Unfair terms in cntracts and unfair ntices The CRA updates and clarifies existing laws n unfair cntractual terms, remving sme lng-standing uncertainty and cnfusin. Cntractual terms that are deemed unfair will nt be binding n a cnsumer, unless the cnsumer chses t be bund. And fr the first time, the CRA impses equivalent standards n ntices addressed t cnsumers where they affect the rights and bligatins between a cnsumer and trader r seek t exclude the trader s liability. The discussin belw applies t bth terms and ntices. A term will be unfair if, cntrary t the requirement f gd faith, it causes a significant imbalance in the parties rights and bligatins t the detriment f the cnsumer. Whether a term is fair is assessed: taking int accunt the nature f the subject matter f the cntract; and by reference t all the circumstances when the term was agreed including any ther related cntract/ntices. As under the previus law, the CRA includes an indicative list f terms which may be regarded as unfair the grey list. This is in cntrast t the black list f terms that are never allwed, such as excluding r restricting liability fr death r persnal injury resulting frm negligence, r the cnsumer s statutry rights and remedies. Grey list terms range frm exclusin f the trader s respnsibility t fulfil its bligatins under the cntract t disprprtinate charges fr early terminatin by the cnsumer. 213094357_1 4
Certain terms are excluded frm the assessment f fairness, namely: terms which specify the main subject matter f the cntract; and the apprpriateness f the price the cnsumer pays fr the gds, digital cntent r services supplied. Hwever, this exclusin can nly apply if the term is bth transparent and prminent. What is a transparent term? A term expressed in plain and intelligible language and (in the case f a written term) is legible. What is a prminent term? A term which is brught t the cnsumer s attentin in such a way that an average cnsumer wuld be aware f the term. What is an average cnsumer? A cnsumer wh is reasnably well-infrmed, bservant and circumspect. The CRA requires traders t ensure that all their written terms in cnsumer cntracts and cnsumer ntices are transparent, and prvides that any ambiguus terms will be interpreted in the way mst favurable t the cnsumer. Where a cntract cmes befre a curt, the CRA requires fairness t be cnsidered, even if it is nt raised by the cnsumer. Regulatry bdies such as Trading Standards and the CMA als have enfrcement pwers t deal with breaches f the unfair terms rules. Cmpetitin law cmplaints New rights fr cnsumers t bring cmplaints under cmpetitin law are brught in by the CRA. Actins fr damages can nw be brught n a stand-alne basis, withut the need t fllw enfrcement actin taken by a bdy such as Ofcm. The CRA als includes imprtant new rules fr cllective actins. These prvide fr pt-ut actins in additin t pt in actins. Opt-ut actins are curt prceedings that are brught n behalf f all cnsumers falling within a particular categry except fr thse individual cnsumers wh actively pt ut f the prceedings, and s this culd braden the number f cnsumers likely t receive cmpensatin. Isabel Teare Technlgy Lawyer fr Mills & Reeve LLP +44(0)1223 222402 Isabel.Teare@mills-reeve.cm www.mills-reeve.cm T +44(0)344 880 2666 Mills & Reeve LLP is a limited liability partnership authrised and regulated by the Slicitrs Regulatin Authrity and registered in England and Wales with registered number OC326165. Its registered ffice is at Mnument Place, 24 Mnument Street, Lndn, EC3R 8AJ, which is the Lndn ffice f Mills & Reeve LLP. A list f members may be inspected at any f the LLP's ffices. The term "partner" is used t refer t a member f Mills & Reeve LLP. The cntents f this dcument are cpyright Mills & Reeve LLP. All rights reserved. This dcument cntains general advice and cmments nly and therefre specific legal advice shuld be taken befre reliance is placed upn it in any particular circumstances. Where hyperlinks are prvided t third party websites, Mills & Reeve LLP is nt respnsible fr the cntent f such sites. 213094357_1 5