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Affordable Advice for Business on Trading Standards Compliance and Investigations
The Consumer Rights Act 2015 - Beyond the Headlines.
3 Key areas for managing business risk.
By John Seale, Principal Business Consultant at JMKT.
The arrival of the Consumer Rights Act 2015 (CRA) in October 2015 may not have been the legal revolution heralded by some, but its clarifications and codification of case law mean that wise businesses should familiarise themselves with the new provisions that define consumer law. This article gets under the headlines and looks at the 3 key areas for managing the risks in your consumer contracts.
What risks does the CRA present?
If you sell products to consumers, you are covered by the CRA. To not understand the CRA is comparable to a transport company not understanding road traffic law. Failing to comply with the CRA will expose your business to serious risks, including:
- Unenforceable contracts – i.e. the consumer doesn’t have to pay you.
- Rejected contracts – i.e. you have to give consumers their money back.
- Providing repairs or replacements; - provided by you, free of charge.
- Repeat Performance – you provide the service again, free of charge.
- Price reductions - imposed upon you by consumers.
- Enforcement action, - injunctions, prosecution, fines & prison.
It is worth noting that the government is promoting the CRA to empower consumers.
What are the main changes in the CRA?
The CRA and its predecessors place (implies) statutory rights into consumer contracts as terms and provides legal remedies if these rights are breached. Many of us are already familiar with the key rights as satisfactory quality, fit for purpose and reasonable skill and care, which haven’t changed, so I won’t cover those here. The CRA updates these rights rather than rewriting them, including these key changes;
- Short Term Right to Reject - The time limit for consumers to reject goods has changed from a “reasonable time”, to 30 days, (except perishable goods).
- Right to repair or replacement – There is now just one chance to repair or replace non-compliant goods before consumers can reject or require a price reduction.
- Right to repeat performance - For inadequate services, the CRA clarifies and thereby strengthens a consumer’s right to a repeat performance.
- Right to price reduction - The CRA also clarifies a consumer’s right to a final price reduction for sub-standard goods or services.
3 key areas for managing risk in consumer contracts.
Having touched on the key risks and changes in the CRA, I will now set out the 3 key areas for managing a business’s exposure.
1. Information and Representations:
Careful what you say, or indeed what you don’t say to consumers. The CRA and associated regulations make it clear that anything said or represented to consumers can be held as a term of any resultant contract. So anything said, even in passing, by sales staff or displayed in adverts or notices can become part of the contract, and if misleading can provide a consumer with the means of rejecting the contract.
Conversely the law also provides that certain contracts are not binding on the consumer if the trader has not given them the required information about the company, product, payments, delivery etc. Any such information that is provided also becomes a binding part of the contract and if wrong, may entitle the consumer to use the remedies provided. Careful control of the information supplied to a consumer is therefore our first tool for managing a business’s risk exposure under the CRA.
2. Evidence and Proof:
If products breach contract terms, consumers can then use the statutory remedies; but who needs to prove what to rely on these remedies? The normal standards and burdens of proof are given in the table below, but the CRA changes these significantly by saying that if a defects is found in goods within 6 months of delivery, it is assumed that it was there at delivery, and consequently is the responsibility of the seller. This stands unless the trader can prove otherwise or that the defect was due to misuse. After 6 months things revert to normal with the consumer needing to prove defects were there at the time of delivery.
Whilst the initial burden of proof falls on the consumer, this twist means that businesses can’t just sit back and play hard to get. The CRA adds an imperative for sellers to be able to evidence the condition of their products at the point of delivery. Many businesses are also bound by voluntary or mandatory codes of practice to help investigate consumer complaints. Moreover persistent failure to treat consumer complaints seriously can lead to investigation and possible sanctions under the Enterprise Act. Being able to evidence the condition of goods supplied to consumers is our second tool to manage the risks of the CRA.
A good example of this is the pre-hire car inspection consumers are asked to sign for, recording any pre-existing bumps or scratches before supplying the vehicle. As many will recall the definition of satisfactory quality does not include any defects pointed out to consumers before supply, or any that a reasonable inspection should have identified.
3. Terms and Conditions:
Let’s be clear from the start, businesses cannot restrict or exclude their liability for the CRA rights given to consumers. Not only are such terms void, they are also illegal and likely to lead to enforcement action against your company and its directors. Being clear and precise in your terms and conditions is not illegal and can, if done properly, help control your exposure by making it clear to your consumers.
Such simple issues as being clear about whether a price is a quote or an estimate is very important for managing customer expectations and reducing future disputes. In this respect it is also useful to know at which point negotiations with a customer turn into the offer and acceptance that form a binding contract. In law it is often the consumer who makes the offer and businesses are free to not accept if they choose. Delays and access can also be managed through terms and conditions without affecting a consumers statutory rights, and can iron out misunderstandings before they start.
The rules around terms and conditions state they must be readily accessible to a reasonable person. Consequently some of the over-extended and miniaturised terms I have seen run the risk of making themselves void by virtue of their inaccessibility. Properly written terms and conditions are therefore our third method of managing the risks presented by the CRA.
Key Points for Busy Businesses
The CRA implies important terms into your consumer contracts.
You can’t limit your liability under the Act
Certain contracts are not binding if you don’t supply the correct information.
Any information given to consumers may form part of the contract.
It is very useful to understand when negotiations become a binding contract.
The CRA clarifies and thereby strengthens consumer remedies.
Proof and evidence are the key to any consumer dispute.
For defects in goods within 6 months, it is for the trader to prove it wasn’t their fault.
Terms and conditions that restrict CRA rights are void and illegal.
The Consumer Rights Act 2105 - FAQs
Q. A consumer doesn't produce a receipt; does the trader have to do anything even if the goods are faulty?
A. There is no legal requirement for the consumer to provide or produce a receipt. If the trader does not remember the consumer buying the item they can ask the consumer to provide proof of purchase. This can be a credit card voucher or cheque stub or anything that indicates when and where the item was bought.
Q. The manufacturer offers a guarantee; can the trader refer the consumer straight to that manufacturer?
A. The consumer's statutory rights are with the trader who sold the goods to him and the guarantee offered by the manufacturer is in addition to such rights. A consumer can choose whether to pursue the trader or the manufacturer and neither may refuse the consumer his rights and direct him to the other. However, the trader in turn may have rights against their supplier.
Q. If a trader sells sale goods or seconds, surely the consumer doesn't have the same rights against the trader as he would if new or perfect goods had been purchased?
A. The same rights apply whether the goods are in the sale or sold as seconds. However, when assessing the level of quality that is satisfactory, considerations such as price, age and easily identifiable defects would be taken into account.
Q. A consumer comes back to the trader about faulty goods purchased seven years ago. Does the trader have to do anything?
A. A consumer cannot bring a claim to court more than six years after the breach of contract (usually the date of delivery in a contract for the sale of goods).
Q. Someone asks a trader for a quotation; how is this different to an estimate?
A. A quotation is normally a fixed price whilst an estimate is generally a rough guess of what the work would cost.
Q. Can a trader put a notice in their shop stating that refunds are not given in any circumstances?
A. It is illegal to try to exclude a consumer's statutory rights, so a 'no refunds' notice is not permitted. A trader may wish to go beyond what the law requires and offer an exchange or refund policy for consumers who change their mind. A trader can display a notice giving details of such a policy, but it is recommended that the trader seeks advice on the wording of the notice from their local trading standards service. See 'Returns policies'.
Q. A consumer rings a trader to say that the TV he bought in that trader's shop during the previous week is defective, and he demands that the trader collects it from him. Can the trader insist that he returns it?
A. A consumer contract can require the consumer to return rejected goods. The trader has to bear the reasonable cost of return other than the consumer's costs of returning to the place where he took delivery. So, if the consumer collected the TV from the shop and the contract says he has to bring it back if he rejects it, the trader can insist that he returns it. If the contract says nothing about returning goods, then he need only make it available for the trader to collect (but if he chooses to take it back himself, he cannot claim the cost back from the trader).
Q. A trader gives a consumer a credit note but he cannot find anything he wants? Does the trader have to then offer a refund and for how long should the credit note run? Can a trader offer a credit note instead of a refund?
A. In the first instance, if a consumer returns goods that do not conform with the contract, the trader cannot require the consumer to accept a credit note. The consumer can insist on a refund by the initial method of payment or as cash (or its equivalent). Similarly, if the trader has a goodwill returns policy that promises a refund if the consumer changes his mind, the consumer can expect the trader to honour this promise. If a consumer has been misled or pressured into accepting a credit note when he does not have to do so, he can still require the trader to replace it with cash or the original method of payment. In contrast, where the consumer has no legal right to a refund or makes an informed choice not to exercise this right, the trader can offer a credit note. The trader can then determine an expiry date if they inform the consumer of this time period at the time of issue.
Q. A consumer insists on a replacement but the item is no longer manufactured and there are none in stock.
A. A trader can offer the consumer a repair, a reduction in the price or allow the consumer to reject the goods. A repair will only be acceptable if this does not cause the consumer significant inconvenience.
Q. A trader cannot ascertain whether an item is faulty or whether it has failed due to misuse. What should they do?
A. If a consumer wishes to exercise the short-term right to reject the goods, it is for him to prove that the fault is not due to misuse. If a consumer claims a repair or replacement (or, if these fail, a price reduction or rejection) within six months of delivery, it is for the trader to prove misuse. After six months, the onus falls back on to the consumer. In any case, if the trader cannot agree on the cause of the fault, the trader may wish to obtain a second opinion - for example, from the manufacturer or an independent expert. Where an independent expert is to be used the consumer and trader should ideally both agree to this in writing.
Q. A consumer states a specific date for delivery of goods and the trader fails to deliver them on time; does the consumer have the right to cancel the contract?
A. Yes; if the consumer has made it clear that delivery within the agreed time was essential, or if this is clear from the circumstances of the contract (for example, flowers ordered for a wedding) and the trader has failed to comply, the consumer can treat this as breach of contract and cancel the contract.