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Fundamental Guidelines to the Consumer Rights Act 2015Back

MILSLogo2Significant changes are being introduced by the Consumer Rights Act 2015 which comes into force on 1 October 2015. For all motor retailers this will mean reviewing existing complaints handling procedures, sales and service processes and importantly contractual terms and conditions of business.

We would therefore strongly advise all members to contact the MILS legal team to ensure that they fully understand the legislative changes. Members are reminded that MILS can provide advice and assistance in reviewing contractual terms and conditions and business as part of the RMI membership.

The Consumer Rights Act 2015 (CRA) consolidates previous consumer rights legislation incorporated within the Sale of Goods Act 1979 (SOGA), Supply of Goods and Services Act 1982 (SOGSA), and the Unfair Contract Terms Act 1977 (UCTA).

Importantly the CRA introduces new remedies for consumers and extends these protections to digital content.

Statutory rights; Goods

The actual rights remain substantially the same. The implied terms remain that goods must be, of ‘satisfactory quality’, ‘fit for purpose’, and that they correspond with their description. These terms are already implied into every consumer contract and the act simply confirms that this position remains the same, unless any specific differences are brought to the consumers’ attention

  • Satisfactory quality – Section 9 (1)-(4) of the CRA re-order the current section 14(3)-(5) of the SOGA
  • Fit for a particular purpose section 10 CRA is substantially similar to the current rights as provided by the SOGA
  • As described Section 11 of the CRA is substantially similar to the current rights as provided by the SOGA. It should be noted that this section includes a substantial change from the SOGA in that any pre-contract information provided under The Consumer Contracts (Information. Cancellation and Additional Charges) Regulations 2013 (CCR) will; now become an implied term of the contract, see below
  • Pre-contractual information. Whilst section 12 was not contained specifically within the SOGA, it was highly likely to have been implied as a matter of law in any event. The CCR requires motor traders to provide consumers with pre-contract information in certain circumstances. Failure to provide this information can enable a consumer to cancel the contract. Under the CRA, this pre-contract information will be deemed to be an implied term of any consumer contract. Consumers will be entitled to compensation if a motor trader breaches these implied terms.
  • Goods to match sample Section 13 of the CRA is substantially similar to the current rights as provided by the SOGA
  • Goods to match a model seen or examined Goods have always had to be accurately described, and match any ‘Sample’ provided. Section 14 is a development of this for the CRA and goes one step further. Where a consumer is shown an example of goods to be purchased it will be an implied term that the goods purchased will have the same characteristics as any example unless the differences are sufficiently brought to the consumer’s attention prior to the contract.
  • Installation as part of the contract Section 15 of the CRA is a newly worded consumer protection for the CRA. However, this is commensurate with the most likely application of the current law. If the motor trader installs goods that are deemed not to conform to the contract then the installation will be deemed to be incorrect.
  • Goods not conforming to the contract if digital content does not conform. Section 16 is new for the CRA. Digital content is now to be treated as any other goods when supplied. In application, this is unlikely to significantly impact on the motor trade.
  • Motor trader to have the right to supply goods. Section 16 is commensurate with the current application of the law.

Remedies

Where goods are supplied in breach of the act, consumers will be entitled to the following:-

  • Short term right to reject– consumers will have the right to reject goods that are faulty or not as described within 30 days. If this right is not exercised within this time frame then the right is lost. The consumer can still agree to a repair. If the motor trader replaces or repairs goods during this time this limit is extended. The 30 day period is put on hold during the period of any repair and the consumer will retain the right to reject the vehicle for either 7 days from its return or the remainder of the 30 day period whichever is greater.
  • Repair/replacement– consumers will have the right to request that faulty or not as described goods are repaired or replaced even after the 30 day right to reject period has expired. The motor trader can require one opportunity to repair or replace the goods. However the parties can agree to any number of repairs. If the repair or replacement is claimed by the consumer, the motor trader must carry out the work at no cost within a reasonable time and without inconvenience to the consumer. The consumer cannot demand a full replacement over a repair if this would place an unfair burden on the motor trader. Thus the motor trader should always be able to argue that he can replace a defective part rather than having to replace an entire car.
  • Final right to rejection/ price reduction. In the event that the repair or replacement is impossible, or the motor trader’s one attempt at rectification fails, the consumer has a final right to reject the vehicle or claim a price reduction. Consumers will have the right to reduction in the price or to reject the goods after one successful repair or replacement. Where this rejection is outside of the initial 30 day period then motor traders are entitled to deduct an amount for the use of the vehicle.

Burden of proof

The onus will be on the consumer to prove that the goods do not perform to the contract if they are seeking to enforce their short term right to reject, however goods will be presumed to not conform to the contract if a consumer seeks to exercise their right to a repair or replacement, price reduction, or a final right to reject within 6 months of delivery.

Deductions for consumer use

Motor traders may be entitled to make a deduction in respect of any use the consumer has had of the goods before they are rejected in certain circumstances. No deduction can be made if the consumer exercised their final right to reject within the first 30 days. However a deduction can be made for use for motor vehicles rejected after the short term right to reject.

Rejection of goods

As a general rule, if a part on a motor vehicle is faulty then it is unlikely that the consumer will be able to terminate the entire contract. The consumer is obliged to make rejected goods available for collection by the motor trader at the consumer’s choice of location, unless the motor trader has made it a term of the contract that obliges the consumer to return the vehicle to the motor trader.

The costs of returning rejected goods

The motor trader is responsible for the reasonable costs of returning the goods unless they are being returned to the motor dealership. The consumer is not able to recover excessive return costs but the consumer, as part of any damages claim, would be able to claim consequential damages connected to the rejection of the goods, i.e. breakdown recovery charges etc…

It should be noted that no fee can be imposed for processing a refund.

Supply of Services

Terms will still be implied into consumer contracts for the supply of services that the service will be performed with:

  • reasonable skill and care. Section 49 is substantially similar to section 13 of the SOGSA
  • information about the trader or service to be binding. Whilst Section 50 is new, and its application is subject to clarification by the courts, it has always been the case that certain statements would form the basis of the contractual terms contained within a contract
  • the price will be reasonable if not agreed. Section 51 is substantially similar to section 15 of the SOGSA; and
  • the service will be performed within a reasonable period if not agreed Section 52 is substantially similar to section 14 of the SOGSA.

The definition of reasonable care will be deemed to be what is reasonable within the motor industry. What is reasonable may therefore vary depending upon the nature of the repair service and price paid.

Section 50, Information about the trader or service to be binding

This is a potentially dangerous section. The CRA states that anything spoken or written to the consumer by or on behalf of the trader or the service becomes incorporated into the agreement if it is taken into account by the consumer when deciding to enter the contract or make decisions during it.

There is no requirement that the motor traders themselves make the statement, simply that it is made on their behalf. This clause has the potential to bind the motor trader to statements or descriptions made by third parties such as manufacturers advertising statements, or standard servicing and maintenance schedules. There is no requirement within the act that it must be reasonable for the consumer to rely on such statements. This has a significant potential for complications in the future.

Remedies

  • Repeat performance. If the service is not performed with reasonable care and skill, or if it does not conform to pre-contractual statements made by the motor trader, consumers can require the trader to perform the service again to put it right. The consumer can request a price reduction.
  • Reduction in price. If the service is not performed correctly the consumer can require the price to be reduced by a reasonable amount. This can be a reduction of up to 100%. However, a consumer must first allow a motor trader the opportunity to rectify the fault through repeat performance, unless this is either impossible or they have done so and the repeat performance was not completed within a reasonable time.

This section does not fix how this amount is to be calculated. However, as with the supply of goods any refund must be paid within 14 days from that date that a refund is agreed between the parties. The refund must use the same means of payment as the original service and no fee can be levied.

Unfair Contract Terms

In addition to implied terms, the CRA also deals with terms that will be deemed unfair and so will not be enforceable. This is not a new concept. The main legislation currently in force is the Unfair Contract Terms Act 1977 (hereinafter ‘UCTA’) and the Unfair Terms in Consumer Contract Regulations 1999 (hereinafter ‘UTCCR’). However, there are a few more.

Contracts and notices covered by this Part

The CRA clearly extends legislative protection to notices as well as written contractual terms. Notices include any announcements whether or not in writing. In practice any notice purporting to include contractual terms would likely been caught by the previous legislation. However, as the CRA more clearly and widely defines this it is more likely that consumers will be successful in challenging unfair terms.

Requirement for contract terms and notices to be fair

The CRA defines a potentially unfair term more widely than previous legislation. Section 62 states that a term is unfair if it is :

  • contrary to good faith
  • causes significant imbalance in the parties rights and obligations under the contract
  • to the detriment of the consumer

Whilst this term appears detailed, the terminology is such that there appears to be no defined measureable test as to whether any particular term or notice would or would not be unfair.

The CRA defines 2 types of unfair contractual terms. Those that are potentially unfair and those that must be regarded as unfair. These terms are contained Schedule 2 of the CRA

Exclusion from assessment of fairness

Not all terms of the contract can be assessed for fairness. Provided the terms are in plain and intelligible language, the court is prevented from assessing any terms that specify the main subject of the contract.

A motor trader must ensure that a written term of a contract is transparent and that any especially onerous or unusual terms are brought to the consumer’s attention. Further if a contract term is ambiguous or has different meaning, then a court will use a meaning most favourable to a consumer.

This article has been written by Christopher Baylis, Barrister and Head of Legal at Motor Industry Legal Services (MILS) and Paul Carroll, Solicitor, Partner at MILS. Full details of the Legal Team can be accessed here

Members should also be aware that Christopher Baylis heads Riverview Chambers which comprises 40 Barristers who are experts in commercial and motor industry law. Full details of the Chambers can be found here

Motor Industry Legal Services (MILS Solicitors) provides fully comprehensive legal advice and representation to UK motor retailers for one annual fee. It is the only law firm in the UK which specialises in motor law and motor trade law. MILS currently advises over 1,000 individual businesses within the sector as well as the Retail Motor Industry Federation (RMI) and its members.

 

 

Posted by Sue Robinson on 04/09/2015