Update | Consumer: contracts made in the home

Fresh from redefining how consumers pay for their legal services, Lord Justice Jackson has weighed into the struggle between consumers and traders. Robertson v Swift [2013] EWCA 1794 is a great example of how shopping around changes the traditional consumer/trader relationship. Here, man bit dog, but Jackson LJ bit back.

Consumer protection ensures that an Englishman's home really is his castle. We are well protected against bands of spivs roaming the countryside trying to cheat us out of our hard-earned cash. As soon as they venture out of their offices and yards, everyone from business women to cowboy builders need to look out for the provisions of the Cancellation of Contracts Made In A Consumer's Home or Place of Work, etc Regulations 2008.

Don't let its title put you off. All of us benefit from the seven-day cooling off period it gives, during which we can cancel the contract we have made. But what happens where we didn't make the contract in haste? Its provisions are so wide that the savvy consumer can safely make and break contracts while shopping around for a better deal.

Standard terms

Swift was a businessman running a small removals firm. Robertson wanted to move house and needed a removal man. He asked Swift for a quote to move from Surrey to Devon. The following day, Swift visited Robertson's home to see what was involved and to provide the quote. They verbally agreed a price of 7,595.40 and a removal date in five days time. Swift went back to the office to draw up the paperwork and emailed Robertson the contract. This included his standard cancellation terms, including one that if Robertson changed his mind less than 5 days before the removal date, he would pay 80 per cent of the total fee. There was no suggestion that this contract was in any way unfair or unusual.

That evening, Swift went back to Robertson's house and the contract was signed. Robertson paid the 1,000 deposit and confirmed the removal date. The following day, however, Robertson started shopping around and found a better deal: 3,490. Two days after making the contract (and two days before the removal date), he cancelled his deal with Swift. Swift agreed on the basis that Robertson would pay him 50 per cent of the agreed fee less the deposit - he would not charge the full cancellation fee he was entitled to.

However, when he chased payment, Robertson refused to pay on the basis that he had since found out about the 2008 regulations.Swift sued for the 50 per cent less the deposit sum only.

Inappropriate application

Robertson had realised that he did not have to pay Swift's fees because Swift had never advised him of his right to a cooling off period. Victorian free-marketeers must be turning in their graves at this - after all, Robertson had sought out and engaged Swift's services at short notice. The DDJ and Circuit Judge seem to have shared this view in finding for Swift. So Robertson appealed again.

The problem for Swift was that the principle of caveat emptor has no place in our consumer protection rules (which are firmly founded in EU law). His standard terms simply did not comply with the 2008 regulations and he probably never expected them to be scrutinised in the Court of Appeal.

Paragraph 7(2) of the 2008 regulations states that: "The trader must give the consumer a written notice of his right to cancel the contract and such notice must be given at the time the contract is made". Paragraph 7(3) sets out the mandatory content of the notice and 7(6) the consequences of ignoring this - the contract is unenforceable. Jackson LJ found that it really was that simple - Swift was therefore unable to enforce payment of the remaining 2,450.60 (judgement, paragraph 56).

There was simply no room for the contrary argument that Robertson had not been pressured into making the contract. He had deliberately sought out Swift and Swift had to visit Robertson's house to do business. Swift forcefully argued that this result was commercially preposterous and Jackson LJ agreed with him: "I reach this decision with regret. For consumer protection regulations to apply in the circumstances of this case is, in my view, inappropriate."

This part of the judgment clearly demonstrates the primacy of consumer protection and that we have an absolute right to a cooling-off period where the contract is not made at the seller's premises.Swift needed to visit his customer in order to make the quote and get the contract signed. After agreeing terms, he had to incur expenses and turn other work away. Allowing his customers a seven-day cooling off period would leave him exposed to losing business twice over. However, as Levison LJ pointed out, consumer protection prevails over commercial common sense: "I share Jackson LJ's regret at the conclusion we have been compelled to reach on this appeal. No doubt the judges in the county court were trying to decide the case in accordance with the underlying commercial merits. But the language of the regulations does not permit this."

Testing the court

Such is this primacy that the court also felt unable to agree that the 2008 regulations go too far. Interestingly, the protection provided is wider than both the earlier regulations and the European Directive underpinning them. Council Directive 85/577/EEC, Article 1 specifically excludes contracts made where the consumer has asked the trader to visit him. This only changed in English law in 2008. However, Article 8 makes it clear that the directive provides the minimum level of protection; it is open to member states to put additional protections in place.

Jackson LJ found that this is what we have done. The government carried out a consultation process which identified concerns that some traders might pressurise vulnerable consumers into inviting them into their homes to get around the protective rules. Although there was no suggestion that Swift had done so, it could not be said that the additional protection in the 2008 regulations was unreasonable.

So scissors cut paper - consumers will avoid the reasonable written contractual obligations if they weren't given the cooling off period.

However, rock blunts scissors and Robertson's victory was rendered largely pyrrhic by the failure of his counterclaim. He went too far in seeking to recover his 1,000 deposit. His argument here was that, although he had been unaware of the 2008 regulations when he made the contract, he had nevertheless cancelled it within the cooling-off period they provide. As such, paragraph 10(1) required his deposit to be repaid.

In finding for Robertson on the first point, Jackson LJ had expressed his displeasure: "I cannot pretend that I find the defendant's conduct in the present case to be attractive. He put the claimant's firm to a great deal of work and then sought to resile from his obligations in reliance of consumer protection legislation."

It is perhaps unsurprising therefore that Jackson LJ then used Robertson's own arguments against him on this second point. As Swift had not served the requisite cancellation notice advice, there could be no cancellation period for Robertson to take advantage of.

The net result here was that the consumer lost his deposit because he did not know of his rights to cancel and the trader lost his late cancellation fee because he did not know he had to give that information. From the perspective of each, this was a lot of effort to get little real benefit. Swift had to visit his client to do business; many more traders choose to and so their starting point attracts less sympathy.

Prevention, not cure

Practitioners need to be alive to this risk when drafting contracts for their business clients or advising on their enforceability on either side. The reality is that carefully drafted contracts avoid this issue entirely and so avoid the need for the government to introduce exceptions (as Jackson LJ suggested) - paper wraps rock.

At the risk of sounding mischievous, there is perhaps another consequence of this decision. One effect of Lord Justice Jackson's funding reforms is that personal injury clients have reverted to being private clients (at least in part).

Many firms will send funding agreements out to their clients or have agents visit them at home. Other firms may be offering a better deal. A client may realise later in the case that they could have instructed a firm that would not expect them to pay the 25 per cent success fee out of their damages. If the CFA doesn't strictly comply with the 2008 regulations, is it enforceable against the client? Rock, paper scissors, anyone?