Introduction to Consumer Law June 2014

Introduction to Consumer Law June 2014
Jason Freeman Director of Consumer Law Competition and Markets Authority

What is consumer law?

What does Consumer Law cover?
Fundamental contractual rights –implied terms etc Essential contractual information Unfair terms –contracts should be clear and not contain traps for consumers: should be a level playing field with and between traders Distance selling –consumers should get information about the trader and the goods, and be able to send the goods back –to facilitate the internal market Doorstep selling –consumers should be able to think further about contracts when surprised –to enable shopping around Advertising and aggressive practices –consumers should be able to make efficient and informed choices –to encourage cross border trade Credit –a risky area due to complexity of arrangement and risk of over indebtedness Competition Commission type remedies –Point of Sale Warranties, Home Collected Credit, PPI –to ensure effective competition

… also helps traders Creates a level playing field between businesses
Prevents traders from stealing an unfair competitive advantage Provides some protection for traders Contract law & rights and remedies in relation to quality are also generally available to (although they may be excluded) Unfair Contract Terms Act 1977 (UCTA) Business Protection from Misleading Marketing Regulations 2008 (BPRs) Consumer Credit applies to “individuals” –irrespective of status

Understanding Consumer Law
EU policy intention: to facilitate the internal market High level of consumer protection –so people buy with confidence Level playing field for all EC traders –so national markets open Full harmonisation –restricts national legislation This means: Consumer law is increasingly diverging from English Contract law –European concepts such as good faith. Policy agreed at EU level Purposive, not black letter law. You need to look at EU Directives, CJEU judgments, and how other member states interpret the law Making Markets work well: Efficient allocation of resources, effective competition, empowered consumers Not just about individual redress, but healthy competition Consider along side competition remedies

What makes markets work well?
Consumers drive competition Empowered, informed, confident, shopping around Firms compete fairly On price, quality, range, service Rewarded for best satisfying consumers’ needs The virtuous circle delivers growth innovation, value and choice

Consumers and traders What is a consumer?
There are slight variations in legal definition of a “consumer” used by different pieces of legislation Generally speaking a “consumer” will be a person who is acting for purposes outside their business, trade or profession What is a trader? Someone acting for purposes related to their business, trade or profession Includes companies, partnerships and individuals Can also include public bodies

Sounds simple? Not always!! Mixed use contracts Preparatory activities
Economically active consumers Consumer to business transactions (C2B) Consumer to consumer transactions (C2C) What about buying a laptop which you use for personal and work reasons? What if you live on a farm? What about training courses – e.g. vocational courses, modelling portfolios What about trading shares? What about when you sell something to a business – e.g. cars, gold What about when you sell on eBay? When does it stop being a hobby?

Who is a Consumer? (the detail)
Slight variations in definition Generally someone who may enter into a contract “for reasons outside their business, trade or profession” A consumer is an individual who acts for personal or family purposes, or in order to satisfy human needs –for sustenance, shelter, intellectual stimulation or entertainment for example Economic activities? –eg investment, buy to let etc Main business? Or relates to main business? Scale of activities? Do they bring expertise it? “Consumer” refers to “any individual not engaged in commercial or trade activities” (CJEU BKK Mobil (C 59/12) para 33 (UCPD context) Preparation for a business? Purchases? Training? How speculative is the ultimate business purpose? Mixed use contracts? Consumer Contracts Regs 2013 –consumer if acting for purposes “wholly or mainly outside” trade, business, craft or profession –similar to Evans v Cherry Tree Finance [2008] EWCA Civ 331 Otherwise, where a transaction is for both business and personal purposes, it is likely to be deemed a non-consumer transaction, unless the business aspect is “negligible” (CJEU Gruber v BayWa AG C ) If individual says the purpose is business, they are not a consumer? (Overy v Paypal [2012] EWHC 2659 (QB))

Consumer v Business purpose cases
France v Di Pinto [1993] 1 CMLR 399 –a person selling their business is not a consumer Benincasa v Dentalkit Srl Case C-269/95 [1997] ECR I-3767 –a person setting up a dentist business was not a consumer Standard Bank London Ltd v Apostolakis [2001] Lloyd’s Rep Bank 240 –an engineer and a lawyer, engaging in large investments, were consumers Ghandour v Arab Bank (Switzerland) [2008] ILPr 35 (Athens decision) – a person who borrowed very substantial funds from a bank for the purpose of speculating on financial products and markets in circumstances where she relied upon her own expertise and judgment as to which investments she bought and sold could not be regarded as a consumer Maple Leaf Macro Volatility Master Fund and Another v Rouvroy and Another [2009] 1 Lloyd's Rep. 475 (disapproved of Standard Bank) -a contract entered into for the purposes of pursuing the business of managing a company was entered into for business purposes, even though the individual managers gave personal guarantees. OFT v Foxtons [2009] EWHC 1681 –agreed that some landlords can be consumers Turner & Co (GB) Ltd v Abi [2010] EWHC 2078 (QB) –Benincasa did not create a new definition: consumer has autonomous meaning –personal or family purpose, not business purpose: Mr Abi acted in the course of his business Allied Irish Bank Plc v Higgins and Ors [2010] I.E.H.C. 219 –investment in land for development, when not the borrowers’ main trade, was not a consumer transaction.

Traders -“Seller or Supplier”
Any person acting for commercial purposes –need not actually be selling or supplying something Asbeek Brusse v Jahani BV C-488/11 para 27-30 Precise legal status irrelevant: includes public bodies, as long as doing something that could in principle be carried out by a private undertaking to make a profit. Relevant to consider competition law concept of economic activity. London Borough of Newham v Khatun [2004] EWCA Civ 55 paras 86 and 88 and the ECJ case of Hofner and Elser [1991] ECR I-1979. AG’s Opinion in Albany International [1999] ECR I-5751 “Trader” has a ‘particularly broad meaning’ and is any natural or legal person carrying out a ‘gainful activity’, if it has consumers (UCPD context). Specifically includes bodies acting in the public interest, or governed by public law (CJEU BKK Mobil (C 59/12) para 41 Eg public health insurance provider governed by statute

The main tools we currently use
Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs) Consumer Protection from Unfair Trading Regulations 2008 (CPRs) Sale of Goods Act 1979 (SOGA) Supply of Goods and Services Act 1982 (SGSA) Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (CCRs) Consumer Rights Act (CRA) – in force TBC Enforced under the Enterprise Act 2002

Other sources of consumer law
Sectoral rules Financial Conduct Authority Information Commissioners Office Phone Pay Plus Advertising Standards Agency Specific laws E-Commerce Payment surcharges/services Business names

Advertising & unfair trading Information & cancellation
Consumer law overview Advertising & unfair trading CPRs Information & cancellation CCRs Unfair terms UTCCRs Quality & redress SOGA/SGSA Consumer law provides protection at all stages of a consumers interactions with traders From those leading up to a purchase Actually making a purchase and entering into a contract After sales practices Different pieces of legislation regulate different aspects of consumers’ interactions with traders – although their can often be overlap Roughly speaking they can be categorised as follows …

Advertising and unfair trading

CPRs/Unfair Commercial Practices Directive
Prohibit unfair commercial practices (before, during and after a purchase) which cause or are likely to cause the average consumer to take a different transactional decision Intended to provide a high level of consumer protection. Sets the legal standard across whole EU

“Commercial Practice”
Any act, omission, course of conduct, representation or commercial communication (including advertising and marketing) By a trader Directly connected with the promotion, sale or supply of a product to or from consumers Before, during or after a commercial transaction (if any) Intended to be a broad concept… Usually involves a direct relationship between businesses and consumers But there may be instances where a commercial practice has a sufficiently close connection with consumers that it falls within the scope of the CPRs, even though the trader himself does not deal directly with consumers – don’t have to make a sale themselves but their practices be directly connected to the sale in some way Scottish & Southern case – a non-trading parent company was responsible for providing training to the staff of it’s trading subsidiary – the staff were trained to deliver misleading sales scripts – the CoA held that even though the non-trading parent company did not make any sales itself – the training was so closely connected to the promotion of a product (even if not by the trader) that it constituted a commercial practice - described by the CoA as a term of “width and elasticity”

“Average Consumer” Notional average consumer whom the commercial practice reaches or to whom it is addressed – but not statistically average Benchmark = Reasonably well informed, observant and circumspect, taking into account social, cultural and linguistic factors If a commercial practice is targeted at a particular group – will be the average member of that group If reasonably foreseeable that a particular group will be vulnerable to a commercial practice (because of infirmity, age or credulity) in a way that might distort their economic behaviour – will be the average member of that group Someone who takes reasonable care of themselves – rather than someone who is ignorant, careless or hasty (i.e. the fool in a hurry) But - certain types of people, particularly those who are vulnerable, can be more susceptible than others because of their circumstances

“Transactional decision”
Wide range of decisions that have been or may be taken by consumers in relation to products Also wide in chronological scope, covering decisions taken before, during and after a contract (if any) is formed Any decision directly related to the decision whether or not to purchase a product Not just the actual decision to purchase – but decisions directly in the run up and also after

“Transactional decision”
Agree to sales presentation Travel to sales outlet Continue with web transaction (the next ‘click’) Decide not to buy from Trader PURCHASE DECISION Return or not return goods Purchase Warranty Post-Purchase Go into shop Pre-Purchase Bring legal or other proceedings complain We would say all of these actions are transactional decisions

List of key factors mainly info about the product, trader and price
UNFAIR COMMERCIAL PRACTICES General prohibition (Regulation 3) Contrary to the requirements of professional diligence (Likely to) appreciably impair the average consumer’s ability to make an informed decision And as a result Causes (or is likely to cause) the average consumer to take a different transactional decision Misleading action (Regulation 5) False or deceptive practice in relation to a specific list of key factors And Misleading omission (Regulation 6) Omission (or unclear/untimely provision) of material information Aggressive practice (Regulation 7) Aggressive practice by harassment, coercion or undue influence (Likely to) significantly impair the average consumer’s freedom of choice or conduct Banned Practice (Schedule 1) One of 31 specified practices No impairment or transactional decision tests Essentially, for the general prohibition to apply, the trader’s practice must be unacceptable when measured against an objective standard and must also have (or be likely to have) an effect on the economic behaviour of the average consumer. The second condition is likely to be met if, for example, because of the practice, the average consumer would buy a product they would not otherwise have bought, or would not exercise cancellation rights when otherwise they would have done so. List of key factors mainly info about the product, trader and price Material information is anything the consumer needs to make an informed decision – depends on the circumstances, product etc, but some thing s will always be material in an invitation to purchase (communication which gives you all the information you need to buy, i.e. description and price – menu in a shop, checkout page on a website) – info about the trader, the product and the price Aggressive practices – not just physical threats and intimidation (can be psychological) – exploiting circumstances and putting pressure on consumers in a way which limits their choices – taking consumers on to a holiday club presentation and refusing to take them back if they don’t sign up – but can be much more subtle Banned practices are prohibited outright – no need to consider impact on the average consumers transactional decisions - Falsely claiming to work for the government - Saying something is free when it isn’t - Refusing to leave someone’s home - Repeatedly calling them after they’ve asked you to stop

Private right of redress
The Consumer Protection (Amendment) Regulations 2014 introduced a private right of redress for consumers If a consumer enters into a contract with OR makes a payment to a trader after the 1 October 2014 as a result of a misleading action OR an aggressive practice – may have a right to redress Unwind the contract and get money back Discount on the purchase price Damages

Key reading OFT/BERR Guidance on the Consumer Protection from Unfair Trading Regulations 2008 OFT Guidance on Property Sales: Compliance with the CPRs and the BPRs CMA Guidance on Lettings (forthcoming) Europa.eu materials on UCPD Unfair Commercial Practices Directive -& Recitals! BIS guidance on private rights for consumers

A note on Payment Surcharges
Traders cannot charge more than actual cost of processing payment Consumer Rights (Payment Surcharges) Regulations 2012 Dripping of payment surcharges likely to be misleading CPRs misleading action or omission May also infringe sectoral legislation Air Services Regulations

Information and cancellation

EU Consumer Rights Directive (CRD)
Consolidates and adds to the rules relating to consumer contracts (in particular distance and doorstep contracts) Information requirements Cancellation rights Delivery and passing of risk Surcharges for different payment methods Telephone helpline charges ‘Pre-ticked’ additional payments

Why did the EU change the law?
Eliminate hidden charges and costs on the internet Increased price transparency Banning pre-ticked boxes on websites 14 days to change your mind on a purchase Better refund rights Introduction of an EU-wide model withdrawal form Eliminating surcharges for the use of credit cards and hotlines Clearer information on who pays for returning goods Better consumer rights in relation to digital products Common rules for businesses to make it easier for them to trade all across Europe

The CCRs Implement the CRD in the UK Come into force on 13 June 2014
Replace the Consumer Protection (Distance Selling) Regulations 2000 (“DSRs”) and the Cancellation of Contracts made in a Consumer’s Home or Place of Work etc. Regulations 2008 (“Doorstep Selling Regulations”)

What do the CCRs apply to?
On-premises contracts (e.g. buying in a shop) Off-premises contracts (e.g. buying on the doorstep) Home, consumer’s place of work, excursions organised away from Trader’s premises Distance contracts (e.g. buying on-line) No face to face contact … so pretty much everything!! BUT there are some exceptions eg gambling, financial services, creating rights in immoveable property, residential lettings, household goods delivered by regular roundsmen

Information requirements
Require businesses to provide specified information to consumers Information is treated as a term of the contract Information cannot be changed without the consumer’s consent Implied term in the contract that the trader has complied with the information requirements

What information and when?
CONTRACT PRE-CONTRACT POINT OF PURCHASE POST-PURCHASE On-premises Information in Schedule 1 Clear and comprehensible manner UNLESS apparent from the context or involves a day-to-day transaction completed immediately Must expressly consent to any additional payments (BUT not through a ‘pre-ticked’ box) Off-premises (unless worth less than £42) Information in Schedule 2 On paper Must give a cancellation form Signed copy of the contract OR confirmation of the contract (incl. information in Schedule 2) Reasonable time after conclusion of the contract No later than the delivery or commencement of services Distance Appropriate to the distance means being used Must make available a cancellation form Online/mobile sales some information must be provided directly before the consumer places an order AND the consumer must explicitly acknowledge any obligation to pay Confirmation of the contract (incl. information in Schedule 2) Durable medium

Delivery Goods must be delivered without undue delay and within 30 days of entering into the contract (unless otherwise agreed) – goods remain at trader’s risk until they are delivered Goods supplied to the consumer, but not ordered, are a gift.

Cancellation rights Consumers have statutory cancellation rights for distance and off premises contracts (with some exceptions) – right to cancel within 14 days, no need to give a reason, trader must provide a full refund (including standard delivery charges) within 14 days, ancillary contracts are also cancelled Consumer must return goods within 14 days – and pay return costs (unless not told this is the case) May have to pay compensation if diminish value of goods

Early start Services can only start during the cancellation period if the consumer expressly requests and acknowledges effect on cancellation rights – consumer must pay reasonable amount for services provided before any cancellation, if service completed during cancellation period then cannot subsequently cancel If the consumer downloads digital content during the cancellation period (e.g. immediately) then they have no right to cancel if they have given express consent and acknowledged that they will lose the right to cancel

After-sales Telephone helplines – consumer must not be charged more than the basic rate (i.e. should not be a premium rate number), any costs over the basic rate must be refunded to the consumer

Key reading CCRs BIS Implementing Guidance Consumer Rights Directive
EU Guidance

Unfair terms

UTCCRs Apply a test of fairness to terms in contracts between traders and consumers Applies to terms drawn up by trader (e.g. pro-forma contracts) but not individually negotiated terms Terms relating to the main subject matter of the contract or the price (ie Essential Bargain) can only be assessed in a limited way NB, this is a complicated area!

What do the UTCCRs require?
Terms must be in plain and intelligible language Consumer must be able to understand nature & extent of rights and obligations If there is any doubt over meaning then a term must be construed in favour of the consumer A term will be unfair if it creates a significant imbalance in the parties’ rights and obligations under the contract, to the detriment of the consumer and contrary to the requirement of good faith (ie openness and fair dealing) Unfair Terms must not bind consumers NB –Court cannot rewrite term to make it fair! Terms found unfair in collective challenge are unfair in all circumstances

Significant imbalance
How could a term be used (not just how it is presently being used)? Is the term weighted in favour of the business? Does trader bear a risk, does C derive some benefit? (For trader to prove) Can any legitimate aim be achieved in less harmful way? Does it change the normal position under the law? Is the term surprising? Would notional lawyer press for deletion? Is it a term used in commercial transactions? Context: Nature of product All the circumstances attending conclusion of contract: may need to consider also subsequent events, (how the term is enforced) All the other terms of the contract (or related contract)

Good faith Fair and open dealing
Motives of the trader –commercial morality Is a term ‘hidden’ or given sufficient prominence (especially if surprising or onerous)? But openness alone is not enough Is the trader exploiting the consumer or taking advantage of their weaker bargaining position? (eg behavioural biases) Consider -strength of bargaining positions of parties, if C had inducement to agree to term, if product supplied to special order of C

The Grey List Schedule 2 sets out terms that are likely to be unfair (the Grey List) Broadly the Grey List terms have the aim or effect of reducing the consumer’s rights under the ordinary rules of law or contract (e.g. taking rights away from the consumer or giving the trader greater rights)

Key reading OFT Unfair Contract Terms Guidance
OFT sector specific unfair terms guidance OFT Unfair Terms Hub Unfair Contract Terms Directive J Freeman on Unfair Terms in Kirk & Lewin’s Consumer and Trading Standards: Law & Practice (2013)

Quality and redress

Sale of Goods Act Implies certain terms into a contract for the sale of goods Goods must match their description, be of satisfactory quality, be fit for purpose; trader must have title to sell: if not- Consumers may reject goods or claim damages 6 years to bring claim Special remedies for consumers where defect appears within 2 years Repair or replacement Price reduction or refund If defect appears within 6 months –trader has burden of proof

Supply of Goods and Services Act
Implies certain terms into a contract for the supply of services Services will be carried out with reasonable skill and care Services will be carried out within a reasonable time (if no time is agreed) Goods transferred as part of the service match their description, be of satisfactory quality and be fit for purpose

Key reading TSI Sale of Goods Act Hub
Lowe & Woodroffe, Consumer Law & Practice

Who can resolve my dispute?
Retail Ombudsman Financial Ombudsman Service Parliamentary and Health Ombudsman Energy Ombudsman Communications Ombudsman Legal Service Ombudsman Furniture Ombudsman The Property Ombudsman Housing Ombudsman Phone Pay Plus The Glazing Ombudsman The Removals Industry Ombudsman Tenancy deposit protection schemes European Consumer Centres Citizens Advice TSI Approved Code Schemes Eg removers, will writers, debt managers, cars…

The law on unfair terms and quality is changing
Consumer Rights Act - amends the law on statutory rights and remedies for goods and services, unfair terms Introduces scheme for Digital Products Will also amend the CMA & TSS consumer investigatory powers

Annex The detail

Unfair terms in consumer contracts regulations 1999

Unfair Terms Unfair Terms in Consumer Contracts Regulations 1999 (implementing EC Directive 93/13/EEC) (about to be reformed by Consumer Rights Act) Applies to terms in consumer contracts which have not been individually negotiated (esp. pro-forma contracts) Applies where other party is a trader A challenge may be individual (by the consumer), or collective (by an Enforcer) Art 6(1) is a fundamental public law duty on member states –courts have to assess fairness Read in conjunction with Unfair Contract Terms Act 1977, which applies to contracts generally, and has special rules for consumer contracts Leading UK case: DGFT v First National Bank [2002] 1 AC 481

Aims of UTCCRs Remove unfair terms from existing contracts
Prevent inclusion in future contracts Deter traders from attempting to use them in the first place See ECJ Banco Espanol de Credito (C-618/10) para 68-69 Purposes - Consumer Protection Internal EU market Level playing field between traders

Purpose of the Directive –Consumer Protection
Consumer Protection, advancing the Single Market, driving effective Competition Premised on “the idea that the consumer is in a weak position vis-à-vis the trader as regards both his bargaining power and his level of knowledge, which leads to the consumer agreeing to terms drawn up in advance by the trader without being able to influence the content of those terms” (ECJ Perenicova para 27) Purpose of Directive is to “replace the formal balance which the contract establishes between the parties with an effective balance which re-establishes equality between them” (ECJ Nemzeti para 34) Ie substantive fairness But contract is meant to continue in existence if at all possible Competition focuses on limited factors: consumers should not have to read the small print to avoid nasty surprises; traders should not base their business on taking advantage of consumers’ behaviour

The Common Market objective
UTD is essential for raising the standard of living and quality of life across EU, and strives progressively establish the internal market Banco Espanol de Credito (C-618/10) para 67 Need to understand how Directive is interpreted across EU –not just by reference to UK concepts London Borough of Newham v Khatun [2004] EWCA Civ 55 para 78 Directive needs to be interpreted consistently across EU Director General of Fair Trading v First National Bank [2001] UKHL 52, per Lord Bingham at para 8 and per Lord Steyn at paras 31–32.

Freedom of Competition & choice
UTD stimulates competition Aims to preserve contracts, where possible ECJ Perenicova (C-453/10) para 32 and AG’s Opinion paras 66–68. But does not naively suppose that consumers invariably exercise real choice: only those terms where competition actually operates should be exempt from assessment ECJ Caja de Ahorros (C-484/08) AG’s opinion paras 38–40

Sources for understanding the EU legislation (like UTCCRs)
European policy -the Treaty; policy programmes leading to Directive; early drafts and committees’ opinions; other Directives made on the same treaty base the wording of the Directive (including in other language versions) and (importantly) its recitals: What did the legislator really intend? the Commission Explanatory Memorandum (which has been given significant weight); the use of the same wording in other instruments (eg European Convention on Human Rights); case-law (especially that of the ECJ, but also Advocate General Opinions, and the case-law and administrative decisions of other Member States), the current views of the European Commission and UK Government Departments. See London Borough of Newham v Khatun [2004] EWCA Civ 55 para 76 Also CJEU Asbeek Brusse v Jahani BV C-488/11 para 26

Principles when considering Scope
See Asbeek Brusse v Jahani BV C-488/11 para 29-32 UTD aims to have wide application to pretty much all contracts Key consideration is capacity of contracting parties –if acting for purposes relating to trade, business or profession Does contract relate to essential need of consumer, involve significant sums, do complex national laws apply? Does the professional display a high level of technical knowledge, which consumers may not have (and so may find it difficult to judge the quality of the services provided)? (see ECJ Siba v Devenas C-573/13 para 23, on legal services)

Public bodies and their contracts
Being a public body, or engaging in public functions, does not take you outside UTD –see ECJ Siba v Devenas C-573/13 para 28 – 30 The consumer protection objective is most important See also CJEU BKK Mobil (C 59/12) para 37 in the UCPD context

What do the UTCCRs require?
Contract terms must be construed in favour of the consumer, if there is a doubt (reg 7(2)) All terms must be in plain and intelligible language (reg 6(2)) Terms relating to the definition of the main subject matter of the contract or the price can only be assessed in a limited way (reg 6(2)) Terms are unfair if (1) cause significant imbalance in parties’ rights, (2) to detriment of the consumer, (3)contrary to good faith. (reg 5(1)) Schedule 2 sets out terms that are likely to be unfair Individual and Collective Challenges to terms Effect of unfair term: not binding on the consumer. (reg 8(1)) Trader cannot recommend, include, OR ENFORCE. Also: misleading and therefore a criminal offence to include or rely on an unfair term (see OFT v Ashbourne Management Services [2011] EWHC 1237)

Consequences of unfairness
Term must not bind consumer –but is not void Whole contract could be declared invalid, but generally contract continues to exist (Jana Perenicova C-453/10) Term cannot be re-written by the court –it must exclude application (Banco Espanol C 618/10 para 65) Because traders must be dissuaded from using unfair terms (para 69) and exclusion is the more efficient form of consumer protection (para 70) But court can replace with a more favourable term if otherwise consumer would be penalised (Kasler C 26/13 para 80-84) important to consider the practical economic consequences for the consumer (ECJ Unicaja Banco v Rueda C-482/13 para29-34) Where there is a collective challenge, the term is generally unfair in all circumstances, although the judge can adapt this through the order (see OFT v Foxtons [2010] 1 WLR 663 CA) Where a term is ruled to be unfair, it is not binding in existing contracts made by consumers who are not party to the litigation –see ECJ Nemzeti para 38

Contracts and terms Broad application to all contracts unless specifically excluded What about contracts that started before 1994, but continue to impose obligations now? “term” = the particular obligation, even if spread over several clauses OFT v Foxtons Ltd [2009] EWHC 1681 (Ch) at para 41. Does not apply to implied terms Margaret Baybut v Eccle Riggs Country Park Ltd (2006 unrept) Does not apply where contract made between two consumers ECJ Vapenik v Thurner C-508/12 para 33

Some exceptions… Mandatory statutory provisions: Terms that are required by legislation are not assessable –presumed that legislator has balanced rights and obligations of parties. Inequality of bargaining power does not influence content of the terms Ie –default clauses that apply independently of choice of parties: those that are mandatory to include, and those that set out the mandatory substance if chosen –EFTA Court Engilbertsson v Islandsbanki E-25/13 para 68, 75. Includes legislation that applies to contracts where no other arrangement has been agreed, & laws that set out consequences for consumer of breaching contract –ECJ Barclays v Sara Garcia C-280/13 para 42 But merely copying out a statutory scheme does not exempt these terms -ECJ RWE Vertrieb AG v VBZ Nordrhein Westfalen Case C-92/11 para 29-31 Where a statutory scheme applies, trader must inform the consumer of the provisions -ECJ Nemzeti v Invitel (C-472/10) para 29 Where law applies to both B2B and B2C, it does not preclude assessment of fairness of terms in the contract –ECJ Unicaja Banco v Rueda C-482/13 para 36-40

Some exceptions… Individually negotiated terms: ie where C has influenced substance of the term. T has to prove that term was so negotiated. Where one term is negotiated, rest of the contract is still assessable (EFTA Court Engilsbertsson v Islandsbanki E25/13 para 122) Merely mentioning the term or getting the consumer to sign next to the term does not amount to individual negotiation (EFTA Court Engilsbertsson v Islandsbanki E25/13 para 124)

What is Plain Intelligible Language?
Consumer must be able to foresee and evaluate, on the basis of clear, intelligible criteria, the economic consequences for him that derive from the term ECJ Kasler C-26/13 para 73-74 Not just grammatical intelligibility (Kasler para 71) Consumer must be able to understand the nature of his rights and obligations for sensible and practical purposes: it is assumed that he reads contract, and is reasonably well informed and circumspect OFT v Abbey National [2008] EWHC 875 (Comm) at para 103 & 119; OFT v Foxtons Ltd [2009] EWHC 1681 (Ch) at para 59 Terms must be transparent, not obscure and unambiguous ECJ Caja de Ahorros (C-484/08) para 38, also Commission v Spain (C-70/03), AG’s Opinion para 14 Terms should not require digging for: OFT v Foxtons Ltd [2009] EWHC 1681 (Ch) at para 74 If a term is not PIL, it is assessable for fairness, may be construed against the trader, and may be unfair because it is unclear –may also be misleading under UCPD Where a term is spread over several clauses, and one clause is not PIL, the whole term may be assessed for fairness (Foxtons [2009] para 66-70

Assessing intelligibility
Standard is whether the Average Consumer, who is reasonably well informed and reasonably observant and circumspect, would be able to assess the economic consequences for him of the term ECJ Kasler (C-26/13) para 74 Ordinary method of construction used: what does the language mean to a reasonable person with all the relevant background knowledge of the parties, leaving aside subjective intentions and pre-contract negotiations? Commission v Spain (C-70/03), AG’s Opinion para 11. What best accords with commercial common sense? AJ Building & Plastering Ltd v Turner [2013] EWHC 484 para 45 Terms should not: Be broad and uncertain Depend on different interpretations Be contradictory Incorrectly set out crucial information required by law Not a pedantic test Obvious errors Legal equivocation Contrived meanings

Construing in favour of the consumer
In individual challenge –make sure consumer benefits But only if a real ambiguity Collective challenge –assume the worst

Exception for Price/Quality Ratio
States may exclude assessment that relates to the main subject matter or price The “essential obligations of the contract” -ECJ Caja de Ahorros (C-484/08) para 34 The factors on which traders compete -ECJ Caja de Ahorros (C-484/08) AG’s Opinion para 40 & 62 What objectively, both parties would view as the core bargain - OFT v Abbey National [2009] UKSC 6 per Lord Mance at para 113; OFT v Foxtons Ltd [2009] EWHC 1681 (Ch) at para 40 and para 50-51(what would the consumer expect instead of being surprised at?) Compromise between consumer protection and competition aims of UTD It must be given an autonomous and uniform EU interpretation ECJ Kasler (C-26/13) para 37-38 It must be construed narrowly As an exception, must be strictly interpreted (ECJ Kasler (C-26/13) para 42) Only terms falling “squarely within it” can be protected from challenge Otherwise the consumer protection purpose of the UTD would be defeated Excluded assessment, not excluded term In order to qualify, terms must be in plain intelligible language Other aspects of the terms can also be assessed –such as transparency & flagging Can assess how exempt terms relate to other aspects of the contract

What is the Main Subject Matter?
Terms that lay down the “essential obligations of the contract, and as such, characterise it” -Distinct from “ancillary terms” ECJ Kasler (C-26/13) para Substance of obligation T has agreed to perform This may not amount to much: what triggers contractual payment? May not be what consumer really wants –eg yearly licence to use static caravan park giving “derisory security of tenure”; or overly long gym membership period. See Foxtons v O’Reardon [2011] EWHC 2946 (QB), paragraphs 60-61 What the contract says What the consumer’s clear expectation is What enables the contract to function effectively

What is the price? Options:
Potentially any payment under the contract (UK) Any payment for which C receives something in exchange (Germany) The price C pays for the Main Subject Matter (ECJ?) “Exclusion concerns only the adequacy of the price or remuneration as against the services or goods supplied in exchange” –because there is no legal scale or criterion that exists to provide a framework for such a review ECJ Kasler (C-26/13) para 54-5 “Main subject matter” and “price” are two sides of the same coin, but disjunctive: this means that payments do not have to correlate to a particular product OFT v Abbey National & Others [2009] UKSC 6. Look at the whole package of services, and the price for this: what does C pay for what he gets (overall)?

Identifying the Price Must be construed restrictively - Bairstow Eves v Smith [2004] 2 EGLR 25: the court should be vigilant to prevent drafting tricks Objective test –not perspective of trader or consumer: Reality of transaction –what did parties in fact intend? Language and headings of contract not conclusive However, what is the impact of CRD, which requires “price” and “main characteristics of product” to be set out? Look at surrounding circumstances, market generally, actual negotiations and assumptions of parties Is it plainly part of the price for a service or package? 30% of banks’ revenue came from unauthorised overdraft charges & everyone knew they paid if went overdrawn. Contingency not determinative –but it surely is still relevant? Exclusion “cannot apply to a term relating to a mechanism for amending the prices of services to the consumer” (ECJ in Nemzeti C-472/10), or terms that merely determine a conversion rate, without any foreign exchange service being supplied in exchange (ECJ Kasler (C-26/13) para 58)

Key case –ECJ Kasler Term in loan enabled bank to tie loan made in Hungarian Florins to the Swiss Franc –and pocket the difference Bank argued this was a revenue stream and therefore the price Borrower argued the price was the amount in HUF ECJ held that it could not be price, because no service was supplied in exchange –and so could not be “remuneration”

Price or not price? Price: 30% of traders’ revenue stream
Sums trader relies on to be able to provide the services profitably Sums the vast majority of consumers know about and expect to pay Early redemption fee for 20 year mortgage Not price: Interest payments payable on default Surprising renewal commission Early redemption charge for a loan Price escalation clauses, default charges (and similar) Terms within paras (d), (e), (f), (l) of grey list Price indexation clauses linking mortage interest to CPI (EFTA Court Engilsbertsson v Islandsbanki E25/13 para 96) Some charges will be ancillary, and so not price. How wide is this class? Delivery charges and trivial extras Charges not necessary to profitable business

Main subject matter and unfairness OFT v Ashbourne [2011] EWHC 1237
Gym membership periods are part of the main subject matter of the contract, but aspects can be assessed for fairness A term requiring consumers to keep on paying throughout the minimum membership (when they want to stop) may be unfair Because consumers over estimate their usage and cannot predict unforeseen circumstances that may make use impracticable or unaffordable The lock in brings advantages to gyms, but usually the consumer does not benefit, in comparison to pay as you go, until month 10 or 11 The gyms exploited consumer behavioural biases, by using long contracts

Assessing Fairness (Summary)
The test: Significant imbalance in parties rights and obligations To the detriment of the consumer Contrary to requirements of good faith Openness Fair dealing –T considers C’s legitimate interests A composite test –lack of good faith as well as imbalance If term is in grey list, presumed to be unfair Good faith (recital 16): bear in mind –strength of bargaining positions of parties, if C had inducement to agree to term, if product supplied to special order of C Also consider: Nature of product All the circumstances attending conclusion of contract: may need to consider also subsequent events, such as how the term is enforced All the other terms of the contract (or related contract) ECJ Banif Plus Bank Zrt v Csaba Csipai (C-472/11) paras 40-41 In a collective challenge, a regulator may examine a term in the abstract (without reference to the factual matrix) Commission v Spain (C-70/03) para 16

Some rules of thumb when assessing fairness
Consider all the situations in which term might be applicable Does the term appear in the Grey List? Sebstyen (C-342/13) para 31-32 Effect of term on substance of bargain Does C derive any benefit from the term? Is it reasonable? Effect of contract with & without term (eg ordinary legal position): what legal consequences does it have? Aziz (C-415/11) para 68 Does C have any means to prevent application of the term? (Aziz) Does T take on any risks in exchange for the term? Good faith Whether C would be surprised if term pointed out to him, or would he have agreed to it? Would his notional lawyer object and press for its deletion? Is term in common use between commercial parties acting on level terms and at arms length? Does it reflect commercial realities of transaction? Transparency Was there any explanation in the Pre-contract information on the consequences of the term for the consumer? Sebstyen (C-342/13) para 33

Significant Imbalance
What is balance of rights and obligations in contract? Can C assess his contractual liabilities up front? Constructora Principado SA v Menendez Alverez (C-226/12) para 26 and RWE Vertrieb (C-92/11) para 44 Does the term defend a legitimate interest of the trader, or could this be achieved in a less harmful way? Trader needs to prove any benefit they assert C got (such as reduced price) Constructora Principado SA v Menendez Alverez (C-226/12) para 29 What is the impact on C’s ordinary legal rights –eg requiring him to pay for obligations that T has to carry out? Constructora Principado SA v Menendez Alverez (C-226/12) para 23, 26 & 28 Can be a significant imbalance even if cost imposed by term is small in comparison with overall cost of contract Constructora Principado SA v Menendez Alverez (C-226/12) para 22 & 30

Lack of Good faith Would a trader dealing fairly and equitably with the consumer, reasonably assume that the consumer would have agreed to such a term? Constructora Principado SA v Menendez Alverez (C-226/12) para 22 & 30 But not an obligation to check whether C knows what he is doing Bryen and Langley Ltd v Martin Boston [2004] EWHC 2450 at para 46 Looks to trader’s motives and effect of their conduct: commercial morality. About Openness and Fair Dealing Director General of Fair Trading v First National Bank [2001] UKHL 52 para 36

Openness Terms should be expressed fully, clearly and legibly, containing no concealed pitfalls or traps. Appropriate prominence should be given to terms which might operate disadvantageously to the consumer. C reasonably expects small print to contain detail that is not of every day concern –not important obligations So not determinative when Cs do not read small print attentively (Bairstow Eves v Smith [2004] EWHC 263 QB.) “I agree” to terms an conditions online is not an appropriate way to flag surprising or onerous terms (Spreadex v Cochrane [2012] EWHC 1290 (Comm) at para 21) Be aware of Common Law doctrine of Incorporation of terms: must fairly bring terms to other party’s attention Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1988] 1 All ER 348 (CA) per Dillon LJ at 352. The more unreasonable a clause is, the more notice must be given The clarity and quality of information about the term that the trader provided the consumer is particularly relevant EFTA Court Engilsbertsson v Islandsbanki E25/13 para 98 But even if a term is plainly set out in the pre-contract information, that does not mean it is fair Sebstyen (C-342/13) para 34

Example of Judicial Comment - Spreadex Ltd v Cochrane [2012] EWHC 1290 (Comm)
On line ts and cs for spread betting firm, which are assented to by clicking “agree” contained term 10(3): "You will be deemed to have authorised all trading under your account number". Unauthorised trading took place. Firm sought to rely on term –held unfair. It was not individually negotiated. The firm would assume no obligations and C would have no rights. The term made C liable for any unauthorised trade on the account. The result was a significant imbalance in the parties' rights and obligations. Without any limitation on the customer's liability, that imbalance was contrary to good faith and unfair. Also the manner in which S sought to make the customer aware of cl.10(3) was entirely inadequate and a further factor in rendering it an unfair term (paras 17-21).

Fair Dealing A supplier should not, whether deliberately or unconsciously, take advantage of the consumer’s necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position or any other factor listed in or analogous to those’ in [Recital 16] Goes further than transparency Similar to but broader than doctrine of unconscionable bargain? Multiservice Bookbinding Ltd v Marden [1978] 2 All ER 489 at p 502. Impact of Legal advice? Impact of necessary intervention of a court?

Example of judicial comment Turner & Co v Abi (obiter)
It is plain that the terms with which I am concerned cause a significant imbalance in the parties’ rights to the detriment of the party other than Turner. It is also clear that, in their very complicated language, their very small print and their surprisingly broad scope, these terms constitute a trap for the unwary. If this were a consumer contract, Turner would not be dealing in good faith with a consumer by subjecting him to such wide and unexpected liabilities without the clearest possible explanation of the scope of what the consumer was letting himself in for.

The grey list Aims to give concrete form to the high level principles set out in Directive & guides courts as to the sorts of factors they should consider Still subject to fairness assessment Terms in para 1 may be unfair Terms in Para 2 may be fair

Jurisdiction Clauses Requiring a consumer to submit to different jurisdiction is unfair: Oceano Groupo para 22 and ECJ VB Penzugyi (C-137/08) para 54. It may be too far for the consumer to travel to enter an appearance conveniently. If the dispute is for a small sum it may be disproportionately costly for the consumer to attend. This sort of term has the object or effect of excluding or hindering the consumer’s right to take legal action, as set out in para 1(q) of the grey list (Sch 2). By contrast, this sort of term enables the trader to deal with all the litigation relating to his trade in one court, and makes it less onerous for him to enter an appearance. Standard Bank London Ltd v Apostolakis (No 2) [2002] CLC 939 at paras 49–51. Language problems C may be pursued in many jurisdictions Impact may not be understood by C

Arbitration Clauses S.91 Arbitration Act 1996 –unfair to require arbitration for sums less than £5K But statutory arbitration requirement is not unfair

Price variation clauses
ECJ Nemzeti (para 24-29) & RWE Vertrieb (para 49-54): Bear in mind Sched 2 para 1(j) (l) & para 2(b) & (d) What is the reason for and method of the variation? This must be set out in the contract & brought to C’s attention It is fundamental that the consumer should be able “to foresee, on the basis of clear intelligible criteria” what amendments the trader might make & should have been given the chance to examine the terms properly If the trader is relying on mandatory statutory rights, he must tell the consumer what these are. The consumer must have the right & ability to terminate the contract: this includes assessment of what options he has, costs of switching, time he has to organise it, information given at time of variation EFTA Court Engilsbertsson v Islandsbanki E25/13 para CPI indexing Must provide “an explicit and comprehensible description” of how the price could vary –to enable the consumer to make an informed choice before signing the contract Information must include schedule of estimated payments, with a clear warning that the amounts might change

Price escalations and penalties
Bairstow Eves v Smith,[2004] EWHC 263 QB –double commission for late payment: held to be a penalty and a trap When is a price a penalty? Consider are rights of trader proportionate to the breach? Any derogation from a rule of law Can C remedy the matter? Or does the term make it harder for C to exercise their rights See ECJ Mohamed Aziz v Caixa d’Esalvis de Catalunya (C-415/11) para in the context of terms in a mortgage contract for accelerated payment, default interest rates and unilateral determination by the lender of the amount outstanding.

Surprising charges Foxtons –Renewal Commission, Sales Commission & 3rd Party Renewal Commission

Long lock ins OFT v Ashbourne Management Services Ltd [2011] EWHC 1237 (Ch) paras 162–174.
Term tying consumers to lengthy (1 to 3 year) gym contracts at ‘low-end’ gyms: unfair. Consumers were attracted by low monthly subscriptions that were discounted from the rolling monthly membership. There was in fact little benefit to the consumer in this discount unless they remained a member for many months. The gyms were aware that many consumers stopped attending gyms after 2 or 3 months. The gyms did not highlight the risks to consumers of signing these contracts, which were, ‘designed and calculated to take advantage of the naivety and inexperience of the average consumer using gym clubs at the lower end of the market’. Mitigating clauses, in contracts beyond 12 months, to allow the consumer to terminate membership if they lost their job or became ill were not adequate because they did not address the fact that the consumer is likely not to use the gym at all after 2 or 3 months.

So, when is a term unfair? (see OFT v Foxtons)
Can the consumer understand his rights and obligations under the contract? (Is it PIL?) Does it operate adversely to the consumer? Does it create a “significant imbalance“ (objectively)? Is it set out transparently, or concealed? (ie openness) Is it surprising? Would a lawyer object to it’s insertion? Is it concealed in some way in the small print, or is it clearly brought to the consumer’s attention (actively flagged)? Is the trader taking advantage of the consumer’s weak bargaining position? (ie good faith) Are there particular circumstances that make it more or less unfair? Schedule 2 ‘grey list’ –indicative and non-exhaustive, but can be determinative of unfairness Eg.1 Exclusion clauses for Death or Personal Injury Eg.2 Making consumer overcompensate for breach

Contracts found to be fair
UK Housing Alliance v Francis [2010] EWCA Civ 117–sale and rent back buyer could keep 30% of price if tenant defaulted on the lease. This was not a significant imbalance, as house might be worth less in the future, and hard to let. Seller had legal advice and term was clearly expressed. du Plessis v Fontgary Leisure Parks Ltd [2012] EWCA Civ 409 –caravan pitch fee increase fair, because part of a carefully balanced review procedure, and actual increase carried out fairly

Sale of goods & supply of services

Sale of Goods Act 1979 Read alongside Supply of Goods and Services Act 1982 (next slide) For more information see OFT “Sale of Goods Act (SOGA) Hub” Are all products either goods or services? What about digital downloads? Licences? Implies terms into all goods contracts –goods includes tickets Title, Description, Satisfactory Quality, Fitness for purpose Terms can’t be excluded from consumer contracts (see s.6 UCTA 1977) Terms are conditions, so breach gives consumer right to reject goods (repudiation)

Supply of Goods and Service Act 1982
Comparable implied terms where goods supplied Service will be carried out with reasonable care and skill (s.13) Service will be carried out within a reasonable time (s.14) Consideration to be paid will be reasonable, where not otherwise agreed (s.15)

Acceptance and Rejection
Cannot reject goods once accepted (factual assessment) Buyer “accepts” goods if (s.35): He says he accepts them, He treats them as if his own He retains them for a reasonable time (Q of fact) No acceptance merely because buyer asks for a repair (s.35(6)) Seller may be under a duty to supply information so that buyer can decide whether to accept it, post repair –see JH Ritchie Ltd v Lloyd Ltd [2007] 1 WLR 670 HL Where goods delivered Buyer has a reasonable time to examine them (s.35(2)) Does not have to return them if rejects them (s.36)

Satisfactory Quality (s.14)
Consider: reasonable view, description, price, any advertising made to consumers (s.14(2D-F), other relevant circumstances, any specific purpose the consumer says he is buying the goods for (s.14(3)) “Caveat Emptor” –satisfactory if defect specifically brought to consumer’s attention, or consumer examined goods and should have seen defect (s.14(2C))

Special remedies for Consumers (s.48A onwards) –parallel to UK law
Where goods do not “conform to the contract” when delivered If defect within 6 months of purchase, presumption that it was defective at date of delivery The rights: Repair or Replacement within a reasonable time Subject to the remedy being possible and proportionate (ie balance between trader’s costs and consumer’s convenience) Or if repair or replacement not possible or reasonable Price reduction or Rescission The repair or replacement should be at no cost to the consumer -Quelle AG v Bundesverband der Verbraucherzentralen und Verbraucherverbande (C-404/06) Where defective goods are installed, trader must bear the cost of removing them, if they can’t be repaired - Gebr. Weber GmbH v Wittmer (Joined Cases C-65/09 and C-87/09) Some traders try to insist on repair or replacement –this is contrary to the law if consumer has right to reject for breach of condition. It is the consumer’s right to choose to insist on repair or replacement (but if he does, must give the trader the chance to do so

Sale of Goods Example Anne sees a dress, tries it on and buys it. Later she notices stitching coming loose, and wiring digging into her flesh. Takes it back. The shop says she can’t have any refund, since she tried it on before purchase, and should have noticed any defects. What do you advise?

Some answers…. Issues: Shop relying on SoG s.14(2C) –no implied term of satisfactory quality where buyer examines before purchase and ought to have seen defect. Should she have seen this?? Also, s.48A gives consumers additional rights: If defect appears within 6 months, onus on shop to show it was in a fit condition when sold Many defects are not apparent at purchase Anne has the right to a replacement or repair, or if neither possible, a price reduction too –to put her in position she would have been in if she had noticed a defect before purchase and brought it to shop’s attention –ie bought a different dress, had a discount etc. If outside 6 months, goods may still be unsatisfactory quality: should it have lasted this long at least? Some traders claim shoes should only last 6 months: if a defect after then, it’s tough! Need to check case law –see Chitty on Contracts.

What should she do? Write to shop customer care team setting out the law Complain to Trading Standards –who can intervene and persuade shop to comply with law Bring a Small Claim –she ought to win, and get issue fee back. There is some risk, as with all litigation. In this case, she did win.

Consumer Contracts (Information, cancellation & additional payments) regulations 2013

Consumer Rights Directive 2011/83/EU
Implemented by Consumer Rights (Payment Surcharges) Regs 2012 Consumer Contracts (Information, Cancellation & Additional Payments) Regs 2013 (in force June 2014) Replace Consumer Protection (Distance Selling) Regs 2000 and Cancellation of Contracts made in the Consumer’s Home, Place of Work etc Regs 2008 See BIS Implementing Guidance (Dec 2013) Commission Guidance due May 2014

Scope Applies to most contracts (see Reg 6 for exceptions –eg small sums, timeshare, financial services, real estate, rental accommodation) Small sums do not include CFA agreements, under which costs will be paid by the losing side (see Hurley v Makuni Manchester County Court) Limited application to passenger transport services Aims (in summary)- to ensure C has information in durable format Breach of contract not to give the (correct) information (query –is it a breach of condition or warranty?) And has cancellation right for off premises and distance contracts Right to delivery of goods Restrictions on surprise and exorbitant extra charges

Purpose of Directive High level of consumer protection
Under old Directive, consumer should not be disadvantaged for using distance means (ECJ C-49/11 Content Services para 36) Improve functioning of internal market by facilitating cross border trade –especially internet trade (hence full harmonisation) Strikes a balance between consumer and business rights

Basic information rights

Basic information rights –On Premises contracts
Pre-contract information must be given or made available to consumers, in a “clear and comprehensible manner” (see Sched 1) eg Trader information Main characteristics of product Price (incl taxes) Delivery charges & arrangements Reminder of trader’s duties to supply goods that conform with contract (SOGA s.48A) How to terminate the contract Information about digital content “made available” means that consumer must be able to access it, bearing in mind fact that some consumers are disabled (reg 8 & recital 34) This information is a term of the contract (reg 9(3)); breach of contract not to supply (reg 18) None of it can be changed without “express agreement” between consumer and trader (ie Novation) (reg 9(4))

Consequences of failure to provide information (in all contacts)
It is a term of the contract that the prescribed information has been provided So failure to do so is a breach of contract Query –is it a condition or warranty? Can C rescind contract for failure?

Doorstep selling

Off Premises contracts -Scope
Any contract concluded (or offer made by C) in a place that is not the business premises of the trader Eg doorstep sales, incl solicited visits Contract concluded in business premises of T, or through distance means, after consumer personally and individually addressed somewhere else by the trader (and both physically present) Eg solicited on the street Contract concluded during an excursion organised by a trader with the aim or effect of promoting and selling products to C Eg invited to a sales presentation in trader’s offices or a hotel “business premises” means immovable retail premises where T operates permanently, or movable retail premises where T operates usually

What is an excursion? Old rules required “excursion away from business premises” –now only has to be an excursion to promote products –so appears to be wider See Travel Vac v Sanchis ECJ Case C-423/97 paras 27-38 Where consumer invited to a hotel not clearly identified as premises for sales to the public, it is an excursion. So if consumers invited to private offices rented by the trader, cancellation right applies Re Tag World Services [2008] EWHC 1866 (Ch) para 24 where consumers are invited to a hotel for a holiday club presentation, it is an excursion: the hotel carries on their business their, not the promoter. Any other position would “defeat the evident consumer protection purpose underlying the Regulation.” Logbook Loans v OFT [2011] UKFTT 643 (GRC) para 151-2 Where a trader used another trader’s premises, under a semi formal agreement, but there was no control over the premises and they did not conduct business to a substantial degree, these were not the trader’s business premises.

Off Premises Contracts -Information
Pre-contract information must be given (not ‘made available’) to consumer in a clear & comprehensible manner (reg 10 & sched 2) Main characteristics of the product Identity & details of trader –including address Total price of product (incl taxes) Subscription charges per billing period Length of contract & how to terminate Delivery charges & arrangement Costs of using means of distance communication (if not basic rate) Details about cancellation & returns (incl costs) Code membership & redress Digital content informaion Must be given on paper, or other durable medium (if C agrees): must be legible Info is a terms of the contract & can’t be changed without express agreement of consumer and Trader. Breach of contract not to comply (reg 18) Cancellation rights must be given in form set out in Sched 3

What is “durable medium”?
Must be provided in writing or other durable medium before contract concluded, or soon after (see ECJ Case C-49/11 Content Services) Must be “provided” –ie C should not have to take any steps to get it, even clicking on a link (para 31-37) “Durable medium” is the digital equivalent of paper (para 39-43) –must allow C to store the information, ensure that its content is not altered and keep the it accessible for an adequate period, and allow C to reproduce it unchanged. A link on the trader’s website is not sufficient

Off Premises Contracts –copy of contract (reg 12)
C must be given copy of signed contract or confirmation of contract Containing all Sched 2 info (unless already provided) On paper or other durable medium (if C agrees) No later than delivery of goods Before performance of service begins

Repair & maintenance contracts –special rules (reg 11)
Where service, explicitly requested by C, to be carried out immediately, and for less than £170 T must give C pre-contract information: Main characteristics of product Trader identity & address etc Total price Any delivery charges Cancellation right (if applies) Circumstances in which C loses right to cancel

Surprising charges & small print
C only liable to pay subscription charges if T has set these out in clear and comprehensible manner (reg 10(4))

Distance selling

Distance Contracts -meaning
Contract concluded between T and C under “organised distance sales or service provision scheme” Without simultaneous physical presence of T and C Exclusive use of means of distance communication up to and including time contract concluded

Distance Contracts -Information
Trader must give or make available information (as for off-premises contracts) –similarly incorporated into contract & can’t be changed unilaterally (reg 13(1). Breach of contract not to comply (reg 18) Where means of communication allows limited space or time, must provide (reg13(4)): Main characteristics of the product Identity of trader Total price (incl tax) Additional delivery or other charges For subscriptions –costs per billing period Cancellation information Duration of contract & how to terminate it Must confirm the information on durable medium No later than delivery of goods and Before performance of any service Must provide cancellation form as set out in Sched 3 Part B

Distance Contracts –additional rules for online & mobile commerce
Directly before consumer places order, T must make C aware ‘in a clear and prominent manner’ of main characteristics of the product Total price (incl taxes) All additional charges If subscription –total costs per billing period Duration of contract & how terminated Minimum duration of consumer’s obligations If there are restrictions on delivery or means of payment, these must be indicated ‘clearly & legibly’ and ‘at the latest by the beginning of the ordering process’

Ordering on-line In order to be bound, C must ‘explicitly acknowledge’ the obligation to pay –eg by a clearly labelled button (reg 14(4-5)): this restricts use of Subscription Traps See OFT Principles on use of CPAs C not obliged to pay for delivery or other charges, subscriptions or costs of return unless these obligations are set out in a ‘clear and comprehensible manner’ (reg 13(5) Cannot use pre-ticked boxes to sign consumer up for payments for anything in addition to T’s ‘main contractual obligation’ (reg 40(2)) Must get C’s ‘express consent’ for any additional payments (reg 40(1))

A note on payment by card
Consumer Credit Act s.75 –credit card supplier is liable for any breach of contract or misrep by trader Payment Services Regulations 2009 –protection against unauthorised transactions on all cards (reg.59-79) But must notify bank as soon as possible and within 13 months (reg.59) Continuous Authorities (“subscription traps”) –if trader refuses to terminate the payments, bank has to (PSRs) Beware of any bank’s use of unfair terms requiring consumer to get the trader’s agreement first Consumers are entitled to request their bank to stop all future payments –but best to notify trader in advance Chargeback schemes –VISA and Mastercard offer repayments if notified within 120 days of the transaction

A note on traders based overseas
Brussels I Regulation (on jurisdiction and enforcement of Judgments) Art 2(1) –generally you sue in the state where Defendant is domiciled, or place of contractual performance. Art 15(1) derogation –consumer may sue in own jurisdiction where trader pursues activities in C’s state or “by any means” “directs” his activities to C’s member state (or directs to several states including C’s state). Aim of Regulation is to ensure protection for consumers, as weaker parties (see ECJ Case C-180/06 Ilsinger [2009] ECR I3961, para 41) –also provides more protection than old Brussels Convention (Ilsinger para 50): especially due to internet commerce. Cs should not be dissuaded from relying on the Reg So contract does not have to be concluded by distance means (ECJ Muhlleitner C-190/11 para 44) And contract does not have to be caused by the trader’s directing activities to C’s state (ECJ Emrek v Sabranovic C-218/12 para 32) Rome I Regulation (on contractual obligations) Art 6(1) uses comparable wording, and intends to be consistent with Brussels I Regulation

So when can you pursue an overseas trader in UK?
ECJ –Pammer & Hotel Alpenhof [2010] ECR I –disputes about quality of package holiday and hotel, provided by overseas trader Mere existence of a website (with T’s contact details) accessible from C’s state is not enough Must be some intention by T to reach that state (para 80ff) Eg specific reference to “UK”, spending money on improving search results in UK, offering tourist activities (especially reference to itineraries departing UK), using international numbers, “.co.uk” webaddress, testimonials by UK customers, accepting payment in £ Sterling, use of English, using an intermediary who T knows targets UK market. ECJ – Muhlleitner v Yusufi (C-190/11) –German T sold car to Austrian C, following online advert (international dialling code, express statement that cars on sale to Austrians). Contract does not have to be concluded by distance means Relevant that contact made at a distance, goods or services reserved at a distance –this is sufficient for consumer to be protected. ECJ –Emrek v Sabranovic (C-218/12) –French T sold car to German, who heard about him through friends: established in border town (in fact town partly in Germany), offered German phone number Causal link not necessary Causation is evidence of ‘directed activity’, as are the facts above

What about where one trader is in the UK?
Maletic v lastminute.com GmbH and TUI (ECJ C-478/12) Brussels Reg applies also to traders based in C’s state, so that C can sue them in own court, where the international element is otherwise present International element will be supplied where another defendant is based overseas The aim of the Regulation is to minimise possibility of concurrent proceedings and to ensure conflicting judgments not given

Cancellation rights

Cancellation right -off premises & distance contracts
Enables C to cancel contract during the cancellation period, without giving any reason (reg 29) C can also withdraw offer before it’s accepted Usually no further liability except (regs 34-36) Where enhanced delivery chosen by C Where value of goods diminished by C Where goods returned by C –may need to pay postage Where C requests early supply of services

Exceptions to cancellation right
Exceptions to right to cancel (reg 28) incl: Products whose price depends on fluctuations on financial markets Public auctions Goods made to C’s specification or clearly personalised Goods which expire rapidly Urgent repairs or maintenance (where C specifically requests a visit) But can still cancel any additional products sold in the visit Leisure services, transport, accommodation where specific date/period of performance Right to cancel is lost where (reg 28(3)): Goods sealed for hygiene/health reasons, if unsealed Sealed audio, video or software, if unsealed Goods become mixed inseparably with other items after delivery

Cancellation period 14 days from (reg 30)
Date of contract (services and digital content) Date goods (or last item if multiple order) come into physical possession of C eg order of 5 books or table & 6 chairs Date first item comes into possession of C if contract for regular delivery eg magazine subscription Where cancellation right information not given (reg 31): 14 days from when trader provides the information Or 1 year after it would ordinarily expire under reg 30 Cancellation must be sent by C before period expires (reg 32(5)) But C must be able to prove he sent cancellation (reg 32(6)

Failure to give cancellation rights (old regs)
Trader cannot enforce contract unless notice given in manner required –ie no good if he gives it later –Reg 7(6) Payments actually made in ignorance of right are refundable, and consumer has no obligation to pay any future sums under the contract in the case of a solicitor acting under a CFA, the bill must be set at nil (Hurley v Makuni Manchester County Court, Sept 2012) Consumer is not able to affirm the contract as deprived of vital information, so making payments does not deprive him of cancellation right See W v Veolia Environmental Services (UK) PLC [2011] EWHC 2020 (QB) para Where the cancellation right information is not given, the 7 day time limit does not start to run “so that the consumer can exercise his right of renunciation at any time” See E.Friz GmbH v Carsten von der Heyden ECJ C-215/08 para 39 There is no limitation period permissible to stop the consumer from cancelling where the notice has not been given. If this causes the trader legal uncertainty, that is fine, since the trader should give the required information. See Heininger ECJ C481/99 para 46. But where all contractual obligations have been discharged, statutory limitations may terminate the right to cancel See Hamilton v Volksbank ECJ C-412/06 para 40-43 If consumer does not take the point, the Court arguably has a duty to do so: see W v Veolia para 47; ECJ Martin v EDP Editores C-227/08 [2010] 2 CMLR 27 (para 29)

How to cancel (reg 32) C must inform T clearly of decision to cancel
Need not use any particular form But there is a form in Sched 3 part B If T offers a webform, he must send an acknowledgement in durable medium immediately

Effect of cancellation
Both parties’ obligations end (reg 33) Any ancillary contracts automatically terminated (reg 38(1)) ie any contract for related goods or services, incl credit contracts No further costs for consumer Trader has to refund money paid by C (reg 34) May not impose any fee for reimbursement

Refunds (reg 34) T must reimburse
All payments received already from C Any delivery payment –except where C expressly chose a more expensive kind, T has to refund what the basic delivery would have been (see also Handelsgesellschaft Heinrich Heine GmbH v Verbraucherzentrale Nordrhein-Westfallen Ev (ECJ C-511/08 para on old rules) Must use same means of payment as C used (unless C expressly agrees otherwise) Reimbursement to be made within 14 days of Goods received by T or C supplies evidence of sending goods or C informing T of cancellation of service contract In goods contracts, T may deduct compensations for diminution in value, if caused by C’s handling of goods C may only handle to establish nature, characteristics and functioning of the goods (eg as would be allowed to do in a shop) But not if T has not provided the written information

Returning goods (reg 35) T must collect goods if
Contract says so Where off-premises contract is for goods that cannot by their nature be normally returned by post Has failed to give C written information about costs of return as required C must otherwise hand over or send back goods within 14 days of cancellation C must pay for return (unless T has failed to give C written information about cost) C may have to pay for T to collect if he agreed to do so (reg 35(8) What about small print that says this?

Urgent service contracts (reg 36)
T must not start work during cancellation period unless C expressly requests it and Where off-premises contract, C requests on durable medium Where request made: Cancellation right lost if contract fully performed (and C has acknowledged that this would happen) C must pay for any service supplied Pro rata –based on total price of contract, or market value of service if contract price is excessive But C will not pay if T has not given the written info

Digital Content & cancellation period (reg 37)
Applies where supplied not on tangible medium Eg Apps, downloads T must not begin supply unless C expressly consents C acknowledges right to cancel will be lost if digital content supplied C need not pay if: Express consent not given Acknowledgment not given T did not provide confirmation of the contract in durable medium (as req’d by reg 12(5) or 16(3))

Off-premises –Offences (reg 19)
Criminal offence to enter into an off-premises contract and not to provide: Conditions, time limit and procedures for exercising the cancellation right Information about any costs to return item Information about obligation to pay reasonable costs for any service provided at C’s request during cancellation period Some defences available Enforced by TSS, who have investigation powers

Direct selling & Customer service

Nuisance phone calls (reg 15)
Trader must disclose at the outset of the call: Their identity Identity of anyone they are acting on behalf of The commercial purpose of the call Failure to do so may also be an offence under CPRs

Inertia Selling (reg 39) Where the trader demands payment for products supplied, or the return or safekeeping of products supplied, but not ordered by the consumer (CPRs Sched 1 para 29 –criminal offence) What amounts to “ordering”? What about small print obliging C to take out a subscription? Consumer has no obligation to pay for such products Consumer may treat such items as a gift

A note on goods sent by mistake
If a trader mistakenly sends goods the consumer holds them as an involuntary bailee Cannot treat the goods as an unconditional gift and must not recklessly or deliberately damage them If keep or dispose of goods the trader may sue the consumer unless Establish that abandoned (consumer must prove this) Dispose of them in an emergency, because keeping them was difficult or attempted to contact trader and got no response Best to contact trader and ask to collect (if consumer tries to return the goods themselves they owe a duty to take reasonable care to ensure they are delivered to the correct person)

Customer Service Where T operates a phone line for Cs to contact them about contracts they have entered into (reg 41) Cannot require C to use a phone number that costs more than basic rate T must repay any additional charges

Delivery and risk

Delivery of goods (reg 42)
T must deliver goods to C Without undue delay Within 30 days Unless C agrees otherwise C may end contract and be reimbursed if Timely delivery is essential, or C told T timely delivery was essential, Or T has delivered late, and C gives a date for delivery

Can enforcers secure refunds in case of non delivery? Shop 4 Tek
Failure to deliver goods on time or at all. Failure to refund. Breaches of SOGA s.27 (duty to deliver) s.28 (duty to be ready and willing to supply), s.29 (duty to dispatch within a reasonable time unless specified otherwise) DSRs reg.14 (recovery of sums paid on cancellation, within 30 days of cancellation), reg 19 (duty to supply within 30 days unless agreed otherwise) and CPRs reg 5 (a) existence of product, reg. 5(5)(a) availability of product, AP 5 (making an I2P when can’t supply) E-Commerce Regs Reg 6 –must make trader’s details (incl ) available on website

Consumer Rights (payment surcharges) Regs 2012

Excessive Payment Surcharges
T cannot charge more than the ‘cost borne by the trader’ for the use of the given means of payment These should be the direct (marginal) costs caused to the trader to accept the specific payment Full compliance by 12 June 2014 Some contracts excepted (reg 5) Any unlawful surcharges must be repaid Breach of contract to fail to do so

A note on advertising and unfair trading
Consumer Protection from Unfair Trading Regulations 2008 creates a duty not to trade “unfairly”. This is defined as: Practice contravening professional diligence and likely to materially distort economic behaviour of typical consumer Misleading action likely to cause typical consumer to take transactional decision he would not have taken otherwise Misleading omission likely to cause typical consumer to take transactional decision he would not have taken otherwise Aggressive action (eg harassment, coercion, force) likely to cause typical consumer to take transactional decision he would not have taken otherwise One of 31 listed banned practices Most infringements are criminal offences May give rise to consumer rights –eg “unsatisfactory quality” if advertising misleading, in extreme cases, duress or misrepresentation

Questions?? For a good overview of Consumer Law, get Lowe & Woodroffe, Consumer Law & Practice For reference use Butterworths Trading and Consumer Law

Introduction to Consumer Law June 2014

Similar presentations

Presentation on theme: "Introduction to Consumer Law June 2014"— Presentation transcript:

Similar presentations

About project

Feedback

Log in

Auth with social network:

Introduction to Consumer Law June 2014

Similar presentations

Presentation on theme: "Introduction to Consumer Law June 2014"— Presentation transcript:

Similar presentations

About project

Feedback