The Consumer Rights Act 2015 - A Summary of Key Changes

Consumer law has changed, with the new Consumer Rights Act (“CRA”) which came into force on 1st October 2015. The Act is exclusively about consumers doing business with traders, and will affect both consumers and businesses selling to consumers.

The new law is aimed at helping to avoid disagreements. However, if disputes do arise, it is it aimed at giving consumers greater access to redress via alternative dispute resolution, without having to resort to court proceedings. If court proceedings are necessary, the CRA significantly increases the court’s ability to intervene in consumer contracts.

What will the CRA cover?
Contracts for (a) the sale of goods or (b) the supply of services, made between a trader and an individual consumer, and whether or not individually negotiated with the consumer.

Definitions
You are a “trader” under the CRA if you are acting for purposes relating to your trade, business, craft or profession. Individuals, partnerships, companies, charities, government departments and local and public authorities can all be "traders". You are a trader even if, in entering into or performing a contract, you appoint someone else to act on your behalf (e.g. you sub-contract the performance of part of a contract to another business).

The CRA defines a “consumer” as an individual. This means that the consumer rights set out in the CRA will not apply to small businesses or legally incorporated organisations.

An individual is a consumer if he is acting for purposes that are wholly or mainly outside his trade, business, craft or profession. The inclusion of the word “mainly” means that an individual who, for example, buys a laptop for his personal use, but uses it while working from home one day a week, is a consumer under the CRA. Consumer can include a person who is combining business with non-business activities, providing that the non-business activity is the main one.

Sections of the CRA
The CRA is divided into three parts:

• Part 1 deals with consumer contracts for goods, digital content, and services.
• Part 2 deals with unfair terms.
• Part 3 contains miscellaneous provisions, including enforcement powers.

The most significant change within Part 1 is the inclusion of a chapter relating to digital content. Previously, intangible digital property was not considered “goods”. For example this meant that songs were treated as goods if purchased on CD, but not if downloaded from the internet. Consequently, songs purchased from virtual retailers online were not subject to regulation by the Sale of Goods Act 1979. The CRA has a new chapter which focuses solely on digital content, to ensure that a consumer is still protected when the goods in question are digital. It introduces:

• Implied Terms: Digital content must be of satisfactory quality, fit for a particular purpose, and as described. If not, consumers have the right to a repair, replacement or a reduction in price.
• Compensation for damage to devices or content: Consumers will be entitled to claim compensation if digital content supplied (even if supplied for free) damages their electronic device or other digital content, so long as the consumer can show the trader did not exercise reasonable care and skill.
• A limited automatic refund right: A consumer has an unqualified right to receive a full refund if the trader has no right to supply the digital content.

Part 1 also deals with “services”. A service must be performed with reasonable care and skill, undertaken at a reasonable price, and performed within a reasonable time. If not, the remedies available to the consumer are for repeat performance or a price reduction. The first step for a consumer is to call for repeat performance. If that is not done in a reasonable time, or is impossible, then step two is the price reduction. A price reduction under this section may, if appropriate, be the full amount of the price. If any refund is given then it must be given without any undue delay and at least within 14 days, beginning on the day which the trader agrees that the consumer is entitled to a refund.

Part 2 of the CRA focuses upon unfair contract terms and transparency. The CRA has the effect of merging the Unfair Contract Terms Act 1977 with the Unfair Terms in Consumer Contracts Regulations 1999.

New remedies for defective or faulty goods:

A consumer has a tiered system of remedies available.
Those remedies are:

1. Short term rejection – within 30 days, although this can be extended by the business (but not shortened); 
2. Thereafter, partial rejection; or 
3. Repair or replacement; or
4. Price reduction and final right to reject.

The 30 day period runs from the date on which all of the following three facts are established:  

• Ownership/possession of the goods has passed to the consumer;
• The goods were delivered; and 
• If installation or any other action was required to allow the consumer to use the goods, the trader has told the customer that this has happened.

The time limit is shorter for perishable goods, and is usually the shorter period in which the goods can be expected to perish.

Nothing in the CRA is intended to remove the previous rights of the consumer to seek damages, specific performance, return of the price paid, or repudiation for other reasons.

Conclusion:
The CRA serves primarily to consolidate existing law in one statute. It represents a significant increase in the rights of consumers and in the powers of the court. It will provide greater flexibility for public enforcers (such as Trading Standards) to respond to breaches of consumer law.

What implication will this have on law firms and businesses?
In light of the changes, it is likely that all terms and conditions of business/engagement will need to be reviewed to ensure that they comply with the obligations of transparency and are accordance with the new regime.

If you would like to discuss the ways in which Hughes Paddison may be able to help you, or if you have any queries relating to this guide, please do not hesitate to contact a member of the litigation team on 01242 574 244.