The Consumer Rights Act 2015 is a new law in the United Kingdom covering dealings between traders and consumers. The Act only applies to consumer sales (B2C) and does not apply to commercial sales (B2B). It applies to all consumer contracts whether or not individually negotiated.
The Act consolidates the law applicable to consumer sales and in doing so replaces or amends the application of certain existing legislation to consumer sales. This legislation includes the Sale of Goods Act 1979, the Supply of Goods and Services Act 1982, the Unfair Contract Terms Act 1977, the Unfair Terms in Consumer Contracts Regulations 1999, the Consumer Protection from Unfair Trading Regulations 2008; the Enterprise Act 2002 and the Sale and Supply of Goods to Consumers Regulations 2002. Any application of this legislation to nonconsumer sales remains unaffected.
The Act is structured in three parts.
Part 1 applies where there is a contract between a trader and a consumer for the trader to supply goods, digital content or services. It applies whether the contract is written or oral or implied from the parties’ conduct, or more than one of these combined. Within this part there are separate chapters covering variously:
(a) goods (sections 3-32);
(b) digital content (sections 33-47);
(c) services (sections 48-57).
Part 2 applies general rules about fairness of contract terms and notices.
Part 3 covers miscellaneous point such as enforcement.
What is new?
Much of the content of the Act is a consolidation of existing law that was previously spread over different legislation. So much is not new. However, there are some points that invite comment.
1. Digital Content as a separate category of contract
The Act introduces digital content as a separate category of contract in addition to contracts for the sale of goods and contracts for the supply of services. This overcomes the conceptual difficulty arising when digital content is supplied in its own right e.g. by downloading, rather than in association with the supply of goods e.g. a physical medium such as a DVD or a CD.
The chapter covering digital content applies not only to contracts for the supply of digital content directly but also to the supply of digital content if:
(a) it is supplied free with goods or services or other digital content for which the consumer pays a price, and
(b) it is not generally available to consumers unless they have paid a price for it or for goods or services or other digital content.
The terms covering contracts for the supply of digital content include express provisions1 covering damage to devices or other digital content caused by the digital content supplied.
2. Supply of services – pre contractual statements
Under section 50 of the Act anything said or written by, or on behalf of, the trader regarding the trader or the services is to be considered a term of the contract if is taken into account by a consumer when deciding to enter into the contract for the supply of services. Previously any pre-contractual representations would not normally form part of the contract and the only legal remedy that a consumer had would have been in misrepresentation This change now enables consumers to claim for breach of contract in appropriate cases.
3. Supply of goods – remedies for faulty goods
Sections 20 to 24 of the Act create a tiered system of remedies in respect of faulty goods.
4. Unfair terms – Fairness regime extends to Consumer Notices.
The fairness regime established in Part 2 of the Act applies not only to consumer contracts but also to “Consumer Notices” that are notices or statements outside a contract that:
(a) relate to rights or obligations as between a trader and a consumer, or
(b) purport to exclude or restrict a trader’s liability to a consumer.
“Many end user licence agreements do not have the status of contract terms, yet they often contain exclusion clauses. The clauses are usually unenforceable but may still have a damaging effect by discouraging consumers from claiming their rights “.2
The fairness regime should now apply to such EULAs irrespective of whether a contractual relationship has been established.
5. Unfair terms – Core terms exclusion
Section 62 of the Act states that a term is unfair if, contrary to the requirement of good faith3, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer.
Section 64, however, excludes from the assessment of fairness the so-called core terms i.e.
(a) the main subject matter of the contract, or
(b) the appropriateness of the price payable under the contract by comparison with the goods, digital content or services supplied under it.
This exclusion is only effective if such core terms are transparent (expressed in plain and intelligible language and (in the case of a written term) is legible) and prominent (brought to the consumer’s attention in such a way that an average consumer would be aware of the term.).
The background to these provisions is an intention to prevent traders from advertising products with low headline prices whilst earning profits on other ancillary charges buried in the small print of the contract which might be excessive4.
6. Unfair terms – Extension of grey list
Schedule 2 of the Act contains an indicative and non-exhaustive list of terms of consumer contracts that may be regarded as unfair (“the grey list”). These include three new terms in addition to terms in the grey list existing under earlier legislation. These new terms are terms which have the object or effect of:
- permitting the trader to determine the characteristics of the subject matter after the consumer is bound by it;
- permitting the trader to claim a disproportionately high sum in compensation or for services which have not been supplied where the consumer decides not to conclude or perform the contract;
- giving the trader the discretion to decide the price payable under the contract after the consumer has become bound by it, where no price or method of determining the price is agreed when the consumer becomes bound.
In proceedings before a court which relate to a term of a consumer contract under section 71 of the Act the court must now consider whether the term is fair even if none of the parties to the proceedings has raised that issue.
1 Section 46
2 “Unfair Terms in Consumer Contracts: Advice to the Department for Business, Innovation and Skills‟, the Law Commission and Scottish Law Commission (March 2013) s36.
3 Note that the meaning of this term is not defined. As to good faith see our earlier articles Good faith and the exercise of discretion in contracts and Good faith in commercial contracts revisited.
4 Triggered by the Supreme Court decision on ancillary charges in Office of Fair Trading v Abbey National plc  UKSC 6. This was a case against seven banks and a building society. The issue was whether charges for unauthorised overdrafts were exempt from an assessment for fairness because they were price terms.