Consolidating consumer contract law

The Consumer Rights Act (CRA) 2015 is a major reform of business-to-consumer (B2C) contract law. This article covers some of the key provisions on rights and remedies in goods and digital content (DC) contracts. Further articles will conclude the discussion of goods and DC remedies, and also cover the rules on services contracts and unfair terms. The CRA also includes other provisions which are not considered here, for example, on enforcement powers, private actions in competition law, the student complaints scheme, letting agents, and secondary ticketing.

Conformity standards in goods contracts

Sections 9-18 of the CRA contain terms and rights on satisfactory quality; fitness for particular purpose; compliance with description, samples, and models; the trader’s right to supply the goods; pre-contact information included in the contract; goods containing defective DC; and installation of goods. 

The first important point is that these provisions (with some appropriate adjustments) apply to all typical contracts for the supply of goods: sale, hire, hire purchase, and other contracts for the transfer of goods, for example, work and materials, exchange, etc. Previously, many of the above terms and rights were spread over various other pieces of legislation depending on the sort of transaction: most importantly the Sale of Goods Act 1979 (sales), the Supply of Goods (Implied Terms) Act 1973 (hire purchase), and part 1 of the Supply of Goods and Services Act 1982 (supplies such as ‘work and materials’). 

There are no significant changes to the provisions on quality, fitness, description, right to supply, etc., but three matters are of note:

Section 12 treats as part of the contract certain information (e.g. price, additional delivery charges, and arrangements for payment, delivery, and performance) which must be provided prior to the contract under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013;

Section 15 provides that where a trader agrees to both supply and install goods, then if they are ‘incorrectly’ installed (i.e. defective or broken after installation), this is a non-conformity (a breach of contract). Previously, in such circumstances, it was necessary to show a lack of reasonable care and skill by the trader, but this is no longer necessary – suppliers are liable ‘strictly’, simply based on the state of the goods; and

Section 16 provides that even if goods otherwise conform, they do not if they contain DC that does not conform to the contract.

Conformity standards in DC contracts

The DC market is enormous and constantly expanding. For example, as long ago as 2012, around 40 per cent of home internet connections were used for playing games and downloading music or video. Until now, where DC was supplied on a tangible medium, it could be classified as goods and therefore covered by the goods’ implied terms. Where there was no tangible medium, it was unclear whether the contract ?was sui generis, containing a common law implied term of reasonable fitness for purpose, or a contract for services, in which case there would ?be a statutory implied term of reasonable care and skill. 

The CRA responds to this uncertainty by recognising DC as a distinct type of contract and imposing the same standards as apply to goods (as well as some specially designed for DC). ?DC is defined in section 2(9) as ‘data which are produced and supplied in digital form’, covering downloads, games, films, e-books, apps, etc. There is a contract for DC where such DC is supplied for a price (whether money or a facility, such as a token or virtual currency, for which money was >>

>> originally paid) under section 33(1), or where the DC is supplied free with goods, services, or other DC for which the consumer pays a price, and which is not generally available to consumers unless they have paid a price for it, or for goods, services, or other DC (e.g. free software given away with a paid-for item) under section 33(2).

Various terms and rights apply to such contracts. As with goods, there are terms on satisfactory quality, fitness for particular purpose, compliance with description, and the trader’s right to supply the DC (sections 34-36, 41). Also, ?as with goods, section 37 treats as part of the contract certain information (generally the same sort of information as with goods, as to price, additional delivery charges, etc.) which must be provided prior to the contract under the Consumer Contracts Regulations 2013.

There are also new rules especially designed for DC. If the consumer has access to a processing facility through which DC can be received from, and transmitted to, the consumer, there are terms providing that this processing facility must remain available for a reasonable time, unless the contract specifies a more specific availability period, under section 39(3)-(5), and that the quality, fitness, and description terms also apply to any DC supplied through the processing facility under section 39(6). In addition, where DC is supplied subject to the trader’s right to later modify it, the DC must continue to comply with the terms on quality, fitness for particular purpose, and description after the modification under section 40(1). 

Short-term right to reject 

Under sections 19 and 20, in all contracts for the supply of goods, the consumer (as in the past) can reject the goods and receive a refund where the goods are in breach of the above terms on quality, fitness, description, compliance with sample, compliance with a model seen or examined, or the right to supply the goods, or if they contain defective digital content. In DC contracts, there ?is a new right to a refund if there is a breach of ?the term on the right to supply the DC under section 42(5).

The CRA improves clarity by spelling some things out – for example, refunds are to be provided ‘without undue delay’ and no more than 14 days from the trader agreeing one is due, and the trader may not impose a refund fee on the consumer.

However, the most significant reform is the new approach to when the right to reject is lost. ?Before the CRA, the right to reject was lost in sales contracts by ‘acceptance’ – intimating acceptance, doing an act inconsistent with the ownership of the seller, or failing to reject after the lapse of a ‘reasonable time’ – following section 35 of the Sale of Goods Act. In supplies of goods other than sale, the common law ‘affirmation’ rules applied. In practice, consumers tended to be most affected by the reasonable time and affirmation rules, usually losing the right to reject after a few months, depending on the circumstances (see, for example, Clegg v Andersson [2003] EWCA Civ 320).  

These rules no longer apply in B2C contracts. Now, under section 22, the consumer simply loses the right to reject if they have not exercised it within 30 days of acquiring the goods, unless the parties have agreed to extend the 30-day period. An agreement fixing a shorter period is not binding on the consumer, but the period is appropriately reduced in the case of perishable goods.

If the consumer asks for repair or replacement during the 30-day period, the ‘clock stops’ for a ‘waiting period’, until the trader provides the repaired or replacement goods. If these still do not conform to the contract, the consumer then has the remainder of the 30-day period or seven days (whichever is longer) to reject the goods (section 20(6)-(8)).

Although consumers have a ‘final’ right to reject after a failed repair or replacement, it could still be very important to have the short-term right to reject (which guarantees a full refund), as with the final right to reject, the courts can reduce the refund to take account of the consumer’s use of the goods. While this normally only applies after six months, with cars it applies from immediately after receipt of the goods.

Remedies in goods and DC contracts 

Repair, replacement, price reduction, and long-term rejection remedies, which are alternatives to the short-term right to reject, have been available in sale and some other supply of goods contracts since 2003 (see the Sale and Supply of Goods to Consumer Regulations 2002). They are now extended to other goods contracts (most importantly hire and hire-purchase agreements) under sections 23 and 24, and all except the final right to reject are extended to DC contracts under sections 43 and 44, although full refunds are sometimes available for DC (sections 44 and 45). These rules will be considered in the next article in this series.

Chris Willett is a professor in commercial law at the University of Essex School of Law and a council member of Which? @EssexLawSchool www.essex.ac.uk/law