Is Your Business Ready for the New Consumer Contracts Regulations?
12 May 2014
On 13 June 2014, the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (SI 2013/3134) (the “Regulations”) will come into force to implement all remaining parts of the Consumer Rights Directive (2011/83/EU) and will apply to all contracts made on or after that date which are in scope, namely:
- distance contracts;
- off-premises contracts; and
- on-premises contracts.
- the Consumer Protection (Distance Selling) Regulations 2000 (SI 2000/2334) (Distance Selling Regulations); and
- the Cancellation of Contracts made in a Consumer's Home or Place of Work etc. Regulations 2008 (SI 2008/1816) (Doorstep Selling Regulations).
Summary of changes
Different rules apply depending on whether your contract is a distance contract, an on-premises contract or an off-premises contract.
- traders must seek the consumer's express prior consent before taking any additional payments (for example, pre-ticked boxes will not be permitted);
- traders must, unless the consumer agrees otherwise, deliver any goods purchased within 30 calendar days;
- traders must not make the consumer use a premium rate telephone line to contact the trader about an existing contract;
- traders must not impose excessive payment surcharges when consumers pay by certain means, such as credit or debit cards - this change was in fact made under separate Regulations and has been in force since April 2013;
- for the first time, a new concept of digital content is introduced into UK law.
For all on-premises contracts:
The rules introduce a new list of pre-contract information that a trader must give or make available to such consumers. (The information is not required in respect of day-to-day transactions which are performed immediately, and there is no requirement to provide it where it is already apparent from the context.)
For all distance and off-premises contracts:
- the list of pre-contract information that a trader must give to a consumer is extended - there are some differences between distance and off-premises contracts in this regard;
- there are new rules on the cancellation of contracts for the supply of digital content not on a tangible medium;
- the statutory cancellation period (sometimes known as the cooling-off period) is extended to 14 calendar days;
- where a consumer has a right to cancel a contract, the trader is required to provide the consumer with a model cancellation form;
- the cancellation period is extended to one year if the trader fails to provide certain pre-contract information;
- online traders are required to make it clear (for example by labelling the payment button with "Order with obligation to pay"), where proceeding with the transaction will trigger a payment;
- the consumer is required to return goods within 14 calendar days of cancelling the contract;
- the trader is allowed to withhold a refund until the goods are returned (or evidence of their return is provided);
- the trader is allowed to deduct an amount for the diminished value of the goods when refunding payments;
- the list of ancillary contracts which will be automatically terminated on termination of a distance or off-premises contract, has been extended.
To determine if a contract is “in scope” you’ll need to apply the following 4 step test:
Step 1 - Is the seller a “trader” and the buyer a “consumer”?
The Regulations define a trader as:
"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."
The Regulations define a “consumer” as:
"An individual acting for purposes which are wholly or mainly outside that individual's trade, business, craft or profession."
- first, the consumer must be an individual (a natural person) and this means a corporate entity or other business entity can never be a consumer;
- second, as the individual must be acting for purposes wholly or mainly outside that individual's trade, business, craft or profession, consumers acting for mixed purposes (business and personal) will be able to rely on consumer protection - the main issue in practice is likely to be how far the business purpose can extend before an individual loses his consumer status.
Although the expression "wholly or mainly" is not used in the Consumer Rights Directive, the recitals to the Directive acknowledge that there may be "dual purpose contracts, where the contract is concluded for purposes partly within and partly outside the person’s trade and the trade purpose is so limited as not to be predominant in the overall context of the contract". The Directive confirms that such a person should be considered as a consumer.
The Consumer Contracts Regulations do not apply to a contract to the extent that it is for:
- financial services (save for in a few limited circumstances);
- creation of immovable property or of rights in immovable property;
- rental of accommodation for residential purposes;
- construction of new buildings, or construction of substantially new buildings by the conversion of existing buildings;
- household goods delivered by roundsmen – in other words the supply of foodstuffs, beverages or other goods intended for current consumption in the household and which are supplied by a trader on frequent and regular rounds to the consumer's home, residence or workplace;
- package travel;
Also the Regulations do not apply to contracts:
- concluded by means of automatic vending machines or automated commercial premises;
- concluded with a telecommunications operator through a public telephone for the use of the telephone;
- concluded for the use of one single connection, by telephone, internet or fax, established by a consumer;
- contracts under which goods are sold by way of execution or otherwise by authority of law.
Step 3 – Check the list of partial exemptions
This is a fairly complex area of the Regulations and a more detailed note on the partial exemptions can be provided on request if required.
A distance contract
This is a contract concluded between a trader and a consumer under an organised distance sales or service-provision scheme without the simultaneous physical presence of the trader and the consumer, with the exclusive use of one or more means of distance communication up to and including the time at which the contract is concluded.
This is a contract between a trader and a consumer which is any of the following:
- a contract concluded in the simultaneous physical presence of the trader and the consumer, in a place which is not the business premises of the trader;
- a contract for which an offer was made by the consumer in the simultaneous physical presence of the trader and the consumer in a place which is not the business premises of the trader;
- a contract concluded either: (a) on the business premises of the trader, or (b) through any means of distance communication, immediately after the consumer was personally and individually addressed in a place which is not the business premises of the trader in the simultaneous physical presence of the trader and the consumer.
- a contract concluded during an excursion organised by the trader with the aim or effect of promoting and selling goods or services to the consumer.
This is a contract between a trader and a consumer which is neither a distance contract nor an off-premises contract. While this will cover contracts made on business premises, the scope of on-premises contracts is in fact wider than this and it will include contracts which fall outside the scope of the definition of distance contract or an off-premises contract for a particular reason. For example, a contract made over a means of distance communication where there is no organised scheme as required by the definition of distance contract (for example where the trader only exceptionally sells in this way) would be an on-premises contract.