The aim of the Draft Bill is to make consumer law as consistent as possible with the future secondary legislation which will implement the EU Consumer Rights Directive (2011/83/EU) ("CRD"). Additionally, the Bill endeavours to streamline the various consumer rights legislation into one comprehensive source, as the existing framework of consumer law is set out in over 100 separate pieces of legislation.
The Draft Bill implements certain aspects of the CRD relating to:
- Definition of "goods" and "digital content";
- Default rules on delivery of goods within 30 days;
- Rules of passage of risk; and
- Pre-contractual information requirements.
Definitions (Clause 2)
The Draft Bill harmonises key definitions, which are currently inconsistent across consumer protection legislation (“trader”; “goods”; “digital content”; “consumer”).
Notably, “consumer” means an individual acting for purposes which are wholly or mainly outside that individual's trade, business, craft or profession. The trader will bear the burden of proof on showing an individual is not a consumer.
We have split our condensed look at the bill into 5 main areas:
- Rights and Remedies for Supplies of Goods (including Digital Content);
- Rights and Remedies for Supply of Services (including Unfair Terms and Consumer Contracts);
- Reform of Enforcement Powers;
- Extension of civil remedies imposed by public enforcers; and
- Consumer collective actions for anti-competitive behavior.
Rights and Remedies for Supplies of Goods (Chapter 2, Part 1)
The existing law on defective goods requires reform because the current statutory remedies available to consumers if a business sells faulty goods are a confusing mixture of English remedies (rejection), and EU Tier 1 (repair, replace) and Tier 2 (rescission, reduction in price) remedies in the Sale of Goods Act 1979 (“SGA”). There is, currently, uncertainty about when a consumer loses his right to reject when he “accepts” goods, and when to step down from Tier 1 remedies to Tier 2 remedies.
Key points In the Draft Bill:
- Only business to consumer contracts are covered. The new rules will not apply to consumer-to-consumer contracts, or consumer-to-business contracts (clause 1(1), Draft Bill);
- All supplies of goods are covered. The rules on the supply of goods will consolidate the sale of goods, the hire of goods and the hire-purchase of goods. The contracts covered are a sales contract (clause 4, Draft Bill), a contract for the hire of goods (clause 5, Draft Bill), a hire-purchase agreement (clause 6, Draft Bill) and a contract for a non-money transfer of goods (clause 7, Draft Bill). It also includes conditional contracts (clause 3(4), Draft Bill);
- Tiered remedies are to apply to hire and hire-purchase contracts. The effect of consolidating the rules on various types of supplies of goods is that the so-called "tiered" remedies (the right to repair and replacement, and the right to reduction in price and final right to reject) will also extend to hire and hire-purchase contracts. This is a significant change to the existing law;
- Treatment of mixed contracts. A mixed contract is described as, essentially, where a trader supplies or provides goods and/or services and/or digital content (clause 1(4), Draft Bill);
- Residual role of the SGA. The Draft Bill expressly states that "other rules" may apply, such as unfair terms, common law, and the SGA (clause 1(6), Draft Bill).
Remedies (clauses 18-25)
There are two rights to reject:
- Early right to reject is limited to 30 days. This 30 day period can be extended by the trader but not reduced. The consumer may lose the early right to reject goods if he indicates to the trader that he “accepts” the goods, after having a reasonable chance to examine the goods, within that time period. This indication of acceptance must be clear. The early right to reject extends by at least 7 days if the trader has to repair or replace the goods during that time.
- A final right to reject which is not limited to 30 days. The effect of the right to reject is to allow the consumer to treat the contract as at an end and receive a refund from the trader.
Tiered remedies (clauses 23-24)
Once the early right to reject is lost or expired, the consumer has the right to repair or replacement.
If repair or replacement is impossible, the consumer has the right to price reduction or final right to reject.
Digital Content (Chapter 3, Part 1)
The current laws require reform principally due to the inconsistency between a consumer’s protection for digital content sold on a disk and digital content which is downloaded. As the law stands, where software is part of tangible media, it is treated as goods under SGA. However, the same content, if downloaded, is not goods under the SGA. As such, consumers who purchase digital content on a disk are better protected than those who purchase digital content online.
Under the Draft Bill, unlike with goods, there is no right to reject digital content. This is because there is simply no way to return the digital content. In addition, there is no requirement that the consumer must delete the digital content from his device.
A consumer has a right to a refund only if the trader is in breach of the right to provide the digital content.
A consumer is entitled to payment from a trader where digital content provided under contract causes damage to a device or other digital content belonging to the consumer, and the damage is of a kind that would not have occurred if the trader had exercised reasonable skill and care.
Rights and Remedies for Supply of Services (Chapter 4, Part 1)
The existing law on poor quality services requires reform because there are currently no statutory remedies (other than in the case of transferred or installed goods) available to consumers if a supplier fails to provide services with reasonable care and skill as implied under the Supply of Goods and Services Act 1982 (“SGSA”).
Provisions in the Draft Bill reflect the current standard under SSGA:
- The trader must perform the service with reasonable skill and care; and
- Unless expressly stated or the method of fixing it is set out in the contract, the trader must perform the services within a reasonable time.
In addition to the above, any pre-contractual representations made to the consumer by or on behalf of the trader, which are relied upon by the consumer, are to be treated as terms of the contact.
- The right to require repeat performance; and
- If that is “impossible” (considerably high threshold), the right to a reduction in price
Unfair Terms (Part 2)
Reform of unfair terms is deemed necessary due to the perception that the Unfair Contract Terns Act 1977 (“UCTA”) and the Unfair Terms in Consumer Contracts Regulations 1999 (“UTCCR”) are inconsistent, unnecessarily complex and difficult to apply.
The Draft Bill extends the fairness test (under UCTA and UTCCRs) to consumer notices. Consumer notices which are unfair are not binding on the consumer. (At this stage, however, it is unclear if this means the whole of the consumer notice or just one provision of it.)
Terms related to price/subject matter in consumer contracts are only exempt from the unfair terms provisions if they are transparent and prominent.
All written terms of a consumer contract must be transparent. Transparent means plain and intelligible language.
Three new terms have been added to the “grey list”:
- Terms which impose disproportionately high charges where a consumer decides not to conclude or perform a contract;
- Terms which allow the trader to determine the characteristics of the subject matter after the consumer is bound; and
- Terms which allow the trader to determine the price after the consumer is bound.
The rules on contract terms apply to any secondary contract to a main contract. This is intended to cover any agreements made after, before or in addition to the main contract, but will not include any settlement agreements under the main contract.
Reform of Enforcement Powers (Part 3 and Schedule 5)
As the law currently stands, 13 different public bodies enforce consumer law and derive their powers from over 60 distinct pieces of consumer legislation.
The Draft Bill introduces a consolidated generic set of consumer law enforcement principles.
Extension of civil remedies imposed by public enforcers (Part 3 and Schedule 6)
Consumer law is primarily enforced by certain public bodies, whose powers range from criminal prosecution to injunctive power to stop offending conduct. Such public enforcement benefits consumers generally but often provides no direct remedy to affected consumers, nor does it secure positive remedial action by businesses.
The Draft Bill introduces the following measures, with the aim of developing a public enforcement system which serves consumers directly, by directing businesses to take positive action:
- Redress measures which offer compensation and other redress to consumers who have suffered a loss as a result of the conduct in question; measures offering the consumer the right to terminate a contract; and measures for the collective interest of consumers;
- Compliance measures intended to prevent or reduce the risk of repeat conduct; and
- Choice measures which intend to enable consumers to choose more effectively between different suppliers.
The Draft Bill also introduces the enforcement order/undertaking which may require a person to rake enhanced consumer measures (paragraphs 6-7, Schedule 5). These measures must, of course, be just and reasonable as the enforcer (or a court) considers.
Consumer collective actions for anti-competitive behaviour (Part 3 and Schedule 7)
The Enterprise Act 2002 (“EA 2002”) sought to facilitate private actions for competition law infringements by giving specified public bodies the power to bring damages claims on behalf of consumers on an “opt-in” basis in certain actions. However, only one action has been commenced by a consumer public body under the legislation, and this was settled.
The key reform in this area is the introduction of a limited “opt-out” collective actions regime, which amends the Competition Act 1998 and the EA 2002. Under the new rules, any representative group or trade association may bring an action.
Eligible consumers would be automatically included in the action (and would have to opt-out in order to not be included).
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.