I recently placed an online order for a perishable product with a large, well-known company (who shall remain nameless). The wrong product was delivered and said company offered me the choice of credit, or a different item. It took several emails before I received my full refund. Under the Consumer Rights Act 2015 (CRA) consumers have a legal right to reject goods that are of unsatisfactory quality, unfit for purpose or not as described, and get a full refund.
In April, the UK Government’s business secretary Alok Sharma urged retailers to continue trading online “as a vital lifeline” for the nation amid the Covid-19 pandemic. As more companies are relying on online sales during the current crisis, it occurred to me that even larger companies may not be complying with the relevant consumer legislation which could be detrimental to the lifeline they are providing. Businesses may, for example, struggle to monitor cancellation requests due to increased sales or be unable to provide a delivery on the date agreed with the consumer.
So, what key consumer legislation should business be aware of, and compliant with?
Importance of online T&Cs
The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (CCRs) set out what pre-contract information must be provided by companies selling online to consumers (CCRs do not apply to the sale of some goods and services such as banking services or immovable property).
This information includes:
- a description of the goods, service or digital content
- the total price of the goods, service or digital service
- how the consumer will pay for the goods or services and when they will be provided
- all additional delivery charges and other costs
- details of any right to cancel (the trader also needs to provide, or make available, a standard cancellation form to make cancelling easy)
- details of who pays for the cost of returning items if the consumer has a right to cancel
- information about the seller, including their geographical address and contact details and the address and identity of any other trader for whom the trader is acting
Under the CRA it is an implied term of a contract that the information set out above is provided to the consumer. This information is often provided in the form of terms and conditions. It isn't uncommon for companies to write their own terms and conditions without engaging professional advice. Online T&Cs are probably the most important contract an online company has, and it is vital that the company gets its terms and conditions right.
For goods, the consumer has the right to cancel from the time of placing the order up until 14 days from the day of receiving the goods. For services, the "cooling off" period is also 14 days provided the services have not been provided in the 14-day period. Failure to provide the right information regarding the consumer's right to cancel could extend cancellation rights by up to a year.
Consumers don't have the right to cancel for bespoke goods, perishable items or software/CDs/DVDs where the seal is broken. The 14-day cooling off period doesn't apply where consumers buy a ticket for an event, book a hotel room or pay for catering for a specific date.
Delivery, refunds and returns
Goods and services must be delivered within 30 days unless the prior agreement of the consumer has been given to a longer delivery period. Refunds should be provided within 14 days of either the seller receiving returned goods or the consumer providing evidence that the goods have been returned (whichever is sooner). Consumers are entitled to be refunded the basic cost of delivery. So if a consumer opts for an express delivery service, only the cost of a basic delivery service will be refunded.
Unfair contract terms
The CRA sets out a list of terms which are deemed unfair in a consumer contract. Terms which will always be deemed as unfair include:
- excluding liability for failure to perform with reasonable skill and care
- excluding liability for goods that are not of satisfactory quality or fit for purpose
- excluding or limiting liability for death or personal injury caused by the trader's negligence
- limiting liability to less than the contract price for failure to comply with statutory terms
The CRA also sets out that a term in a consumer contract will be considered unfair if it causes a significant imbalance in the rights and obligations of the trader and the consumer to the detriment of the consumer. It is worth noting that non-contractual notices are also subject to the fairness test so traders should ensure that online material describing a product or service range is compliant with the CRA (for example any safety warnings or other notices that alert a consumer to a particular point will not be enforceable if deemed unfair).
The 14-day cooling off period does not apply to contracts concluded online for the supply of accommodation, vehicle rental services, catering or services related to leisure activities where the contract provides for a specific date or period of performance. It isn't unusual for these types of contracts to have a cancellation policy. If, on cancellation by consumers, the amount kept or charged by the trader is too much, or consumers have to pay a fixed amount in all circumstances, the business may receive double compensation, and consumers may be paying a disproportionate financial sanction.
Terms regarding advance payments and cancellation charges are more likely to be fair where:
- deposits act as a reservation fee and are a small percentage of the total price
- advance payments reflect the business' actual costs
- non-refundable advance payments and cancellation charges should reflect the business' net costs or net loss of profit resulting directly from the cancellation
- sliding scales of cancellation charges reflect the business' genuine pre-estimate of loss resulting directly from the cancellation
Terms and conditions should:
- be written in clear language
- be provided to the consumer prior to entering into the contract (websites and apps should be set up to implement this)
- not include any small print
- draw attention to any unusual or onerous terms
If the “vital lifeline” provided by retailers selling online is to remain strong, online businesses large and small should regularly review their terms and conditions and trading practices to check for compliance with consumer legislation. Failure to do so could cause further distress for the business, the consumer and, ultimately, our recovering economy.
The content of this webpage is for information only and is not intended to be construed as legal advice and should not be treated as a substitute for specific advice. Morton Fraser LLP accepts no responsibility for the content of any third party website to which this webpage refers. Morton Fraser LLP is authorised and regulated by the Financial Conduct Authority.