Time to prepare for the Consumer Rights Act

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The Consumer Rights Act 2015 consolidates existing consumer rights and remedies in respect of the supply of goods and services. However, it also makes a number of changes to the existing regime. Businesses should review their terms and conditions and business practices to make sure they will be compliant with the Act, when it comes into force in October.

Key to the Act are the defined terms “consumer” and “trader”. A “consumer” is defined as “an individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession”. This could include an individual entering into a contract for a mixture of personal and business reasons. A “trader” is defined as “a person acting for purposes relating to that person’s trade, business, craft or profession, whether acting personally or through another person acting in the trader’s name or on the trader’s behalf”. This could include government and other public sector bodies.

Remedies for defective performance of services
Consumers will have statutory remedies of “repeat performance” and a price reduction if the service does not conform to the contract, as follows:

  • if a trader breaches its duty to provide the service with “reasonable skill and care”, or does not comply with information that they have provided to the consumer about the service, the consumer is entitled to repeat performance or a price reduction for the service
  • if the service is not performed within a reasonable time, or the trader does not comply with the information that it has provided to the consumer which does not relate to the service, then the consumer is entitled to a price reduction for the services.

The above remedies are without prejudice to the consumer’s right to claim damages and specific performance of the contract.

The contractual status of voluntary statements
Spoken or written voluntary statements, made by the trader, about the trader or the service may constitute binding contractual terms under the Act. This can be the case where the statement is taken into account by the consumer when:

  • deciding to enter into the contract
  • making any decision about the service after entering into the contract.

Currently, the consumer’s remedy for a misleading statement that induced them to enter the contract would be to bring an action in misrepresentation. When the Act comes into force, they will be able to bring a breach of contract claim.

Supply of goods
Consumers will have an “early” right to reject defective goods, which will be limited to 30 days (shorter for perishable goods, where the period will be how long it is reasonable to have expected the goods to last, e.g. at least until their “use-by” date). This is a change from the current legal position where the period in which a consumer may reject is a “reasonable time”, which will vary according to the circumstances. Traders may extend the 30-day period; they cannot reduce it.

Traders will have one opportunity to repair or replace the defective goods. If repair or replacement is not possible, or the attempt at repair fails, or the first replacement also turns out to be defective, the consumer will have the right to a full or partial refund.

There will be a default delivery period of 30 days, though a longer period may be agreed. Goods will remain at the supplier’s risk until they are delivered to, and in the physical possession of, the consumer.

Digital content
For the first time, there will be bespoke consumer remedies for purchases of digital content. As with the supply of goods, digital content must be of satisfactory quality, fit for purpose and confirm with the description given by the trader.

The new rules will cover paid-for content and content provided free with paid-for goods or services or other digital content, including apps and in-app purchases. The rules apply to digital downloads and also digital content supplied on a physical medium, such as a DVD.

In contrast to physical goods, there is no right of rejection for digital content (save where the digital content comes with physical goods, e.g. on a disk, in which case the 30-day right to reject referred to earlier will apply or where the trader is in breach of a new implied term that the trader has the right to provide the digital content). Instead, there will be a right to repair or replacement or, if not possible, the right to a full or partial refund. Unlike with physical goods, the trader is not limited to just one go at repair or replacement.

The trader will have to compensate for damage to a device or other digital content owned by a consumer where that damage would not have occurred had reasonable care and skill been exercised in the provision of the digital content – even if that content has been provided free of charge. Damage caused by a virus would be an obvious example of what the legislation is getting at here.

Contract terms and consumer notices
The Act merges the two existing regimes governing terms in consumer contracts – the Unfair Contracts Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999. One effect of this is that consumer notices, including for instance, oral warnings and signs, will have to be fair. If they are not the seller will not be able to rely on them.

The most important change in this area relates to “relevant terms”; which are terms specifying the main subject matter of the contract or setting the price. These terms are not subject to the existing ‘fairness’ test provided that they are both:

  • transparent: in plain and intelligible language and, if written, legible
  • prominent: brought to the consumer’s attention in such a way that the average customer (who is well informed, observant and circumspect) would be aware of the term.

This goes further than the existing law, which includes a requirement for transparency but not prominence.

The Act provides that a term can be deemed to be unfair even if it has been individually negotiated with the consumer. In practice, this is rare in consumer contracts.

Additional terms have been added to the “grey list” – terms which may or may not be unfair depending on the circumstances. These are:

  • allowing the trader to decide the characteristics of the subject matter after the consumer is bound
  • allowing disproportionate charges or requiring the consumer to pay for services which have not been supplied when the consumer ends the contract
  • allowing the trader discretion over the price after the consumer is bound.

Enforcement of competition law
The Act makes it easier for businesses and consumers to seek compensation via collective proceedings brought on behalf of groups of claimants, in particularly enabling opt-out collective actions for the first time. These will fall within the jurisdiction of the Competition Appeal Tribunal which will have power, among other things, to approve settlements of collective actions where it considers the terms of the proposed settlement are just and reasonable.