Does your website comply with the new consumer contract regulations?

It is only 15 days until the world goes bonkers (well a solid portion of it) and the World Cup kicks off in Sao Paulo, Brazil.

As ever, many businesses will be concerned about balancing their commercial needs with growing employee excitement over the matches: 'How do we keep productivity at normal levels?'

Dealing with employees who suddenly become poorly on match days or who clog up the company's internet with hours of streaming coverage will be a challenge for many businesses.

What certain businesses should be more concerned about, however, is the fact that a day after the World Cup starts (13 June) new regulations come into force which regulate selling over the internet. If you sell via this medium, you should ideally be ready for these changes but if you are not, beware! Failure to comply with them might make your contracts unenforceable.

Below we interview Simon Bates, solicitor at Jordans Corporate Law, on this new law. He assesses the changes and suggests the government guidance is not detailed enough for many businesses:

What changes are happening on 13 June 2014?

Changes to the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, (CCR 2013) will come into force on 13 June 2014. They have implications for most businesses that sell to consumers:

  • by distance contracts (such as online, mail-order or over the phone)
  • off-premises (away from the trader’s premises and so including the consumer’s home)
  • on-premises in the case of non-day to day transactions (such as in a shop)

Certain types of contracts are outside the scope of the new regulations including contracts for banking, residential letting, construction of new buildings as well as insurance and credit services. Others are partially exempt such as passenger transport contracts.

The new regulations will replace the Consumer Protection (Distance Selling) Regulations 2000 and the Cancellation of Contracts made in a Consumer’s Home or Place of Work Regulations 2008 (Doorstep Regulations)

Why is the new law being introduced?

The new regulations are required in the UK to implement the Consumer Rights Directive 2011/83/EU so there is a consistent approach across the European Union for all consumer contracts.

How will the new laws affect businesses?

The key changes include:

A model cancellation form

There will be an obligation to make this form available to consumers in both distance and off-premises contracts. The consumer does not have to use the form to cancel but it must be made available. An online retailer will need to make the model cancellation form available on its website.

Extended cancellation period

An extension of the current cancellation period to 14 calendar days (for distance and off-premises sales) aims to give consumers more time to change their minds. Consumers will not have a right to cancel once a digital content download has started provided they have given both their express consent to the download starting before the end of the 14-day cancellation period and an acknowledgment that the right to cancel will then be lost.

The cancellation period will be extended by 12 months if the trader fails to provide the requisite information about the conditions, time limits and procedures for exercising the cancellation right.

Refunds

Refunds for cancellations must be made within 14-days of receipt of the goods. However, there is good news for traders, as they will also have a right to reduce the refund to reflect any loss in value where the goods have been used or handled ‘beyond the sort of handling that might reasonably be allowed in a shop’.

Labelling

There will be an obligation to label any online order button with the words ‘order with obligation to pay’ or similar wording. [See our previous blog post on this button here.]

There will also be a prohibition on certain practices, such as the use of pre-tick boxes for payment of additional services and the use of premium rate customer telephone helplines.

Heads of information

Traders will be required to clearly provide up to eleven heads of information to consumers for many on-premises sales. The heads of information are set out in Schedule 1 of the new regulations.

Traditional bricks and mortar retailers carrying out non-day to day transactions will have to provide information that includes the main characteristics of the goods, full identity of the retailer and details of any complaints handling policy. Information will only have to be provided where ‘it is not already apparent from the circumstances’. However, some information such as ‘a reminder that the trader is under a duty to supply goods that are in conformity with the contract,’ will not, by its very nature, be apparent from the context.

In both distance and off-premises sales, there remains an obligation to provide consumers, before and after making a sale, with specified information set out in the schedules to the new regulations. While the Distance Selling Regulations (DSRs) set out nine heads of information that had to be provided, the new regulations set out 24 possible heads of information that need to be provided. In the case of digital content, significant new information needing to be provided includes information relating to the functionality and compatibility of the digital content.

What are the potential problems with the new law?

Any business currently caught by the DSRs or Doorstep Regulations only has a limited period of time in which to make substantial changes to their websites, terms and conditions, confirmatory emails and even telephone lines.

For traditional bricks and mortar retailers selling ‘non-day to day’ items, the new regulations will trigger a major change involving changing their paperwork (or introducing new paperwork where previously they provided none) and training their staff on the use of that paperwork. It is a breach of contract for such bricks and mortar retailers not to comply, but assessing damages will be difficult.

On the other hand, local trading standards have a duty to consider any complaint relating to contravention of the new regulations. Ultimately general compliance for bricks and mortar retailers may largely be driven by the extent to which trading standards are prepared to bare their teeth.

To help all businesses the Department of Business Innovation and Skills (BIS) has issued some guidance.

How can the guidance be made clearer?

The new regulations run to some 30 pages of small print whereas BIS guidance is only 22 pages of somewhat larger print. This inevitably means the guidance does not go into the depth that would be of assistance to many businesses, although it does contain some useful examples. It gives the example of a cup of coffee or newspaper being a ‘day to day’ item, which is pretty obvious. However, it does not give examples of ‘non-day to day’ items that will be caught by the new regulations for on-premises sales. Would an ironing board be caught for example?

There is no guidance on what is a ‘clear and comprehensible manner’. Therefore beyond the rather inconvenient and blunt prospect of having to produce paperwork where previously on-premises retailers did not, there are no helpful suggestions as to how on-premises retailers can provide this information before a contract is made and so comply.

What are the implications for commercial lawyers?

Faced with advising any business selling to consumers, commercial lawyers must first establish whether goods or services are caught by the new regulations or not. If so, they have little option but to go through the new regulations on a line-by-line basis to make sure the business is complying with each and every requirement.

Getting it right is more important than ever, particularly for online retailers. In the event of cancellation where goods have been used or damaged, it will make retaining part of the refund far easier. However, if the retailer gets it wrong, they could face far greater potential cancellation nightmares.

 

That's it for today.  If you have any thoughts on this, do feel free to let us know. The contact form is below.

PS the quadrennial Goldman Sachs football report predicts that England will exit at the group stages so, on balance, perhaps businesses haven't got that much to worry about, certainly for the latter stages of the tournament.

Simon Bates is a solicitor and a director at Jordans Corporate Law. Simon specialises in advising businesses on their contracts and on legal compliance in the contracting field. Simon was interviewed by Rachel Moloney. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

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