Lecture 14 - CONSUMER SALES CONTRACT PDF

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CONSUMER SALES CONTRACT...

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COMMERCIAL LAW TOPIC: CONSUMER SALES CONTRACT SOURCES OF LAW there are four sources of law 1. Terms of the contract at issue 2. Statutory provisions a. Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (“CCR 2013”) b. Consumer Protection Act 1987 c. Consumer Protection from Unfair Trading Regulations 2008 (“CPR 2008”) d. Consumer Protection (Amendment) Regulations 2014 (“CPR 2014”) e. Consumer Rights Act 2015 (“CRA 2015”) Ø See Consumer Rights Act 2015 – Explanatory Notes, published by the Department of Business, Innovation and Skills to assist understanding of the CRA provisions (“CRA 2015 Explanatory Notes”) f. EU regulations, decisions, and directives (until conclusion of the Brexit negotiations) 3. Case law principles 4. Academic opinion and approaches in foreign jurisdictions FORMATION OF A CONSUMER CONTRACT Generally, contract principles apply as to o Offer o Acceptance o Intention to create legal relations o Consideration o Vitiating elements: mistake, misrepresentation, fraud, duress o Contractual capacity: minors, mental illness, immigration restrictions. CONSUMER CONTRACT DEFINED When is a sale of goods or supply of a service contract a consumer contract? – Reg 3 (1) of the Unfair Terms in Consumer Contracts Regulations 1999: a consumer means a natural person who, in contracts covered by these Regulations, is acting for purposes which are outside his trade, business or profession.” – Overy v PayPal (Europe) Ltd [2012] EWHC 2659 (QB); 2013 Bus. L. R. D1 – Replaced in section with “consumer” means an individual acting for purposes which are wholly or mainly outside that individual’s trade, business, craft or profession”: s.2(3), Consumer Rights Act 2015; reg 4, Consumer Contracts Regulations 2013 • “trader” means 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.

WHICH COUNTRY’S LAW GOVERNS CONSUMER CONTRACTS • In this discussion, we are concerned with a consumer contract entered by a consumer habitually resident in the UK. • Regulation (EC) No. 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (“Rome I Regulation”) sets out the rules for determining the law applicable to a consumer contract. See generally para 27 of the Explanatory Notes to the CRA 2015, a publication of the Department of BIS – Three steps are involved in the ascertainment: § Step One is Article 3 read with Article 6 (2), which provides that the law chosen by the consumer and the trader shall govern the contract. The choice must be expressly or clearly demonstrated by the terms of the contract. If the chosen law is that of a foreign country, for example China, but the law applicable in the absence of choice would have been UK law, the protections afforded the consumer under the UK law will remain applicable and enforceable against the Chinese trader. § Step Two: where the contract does not have an express or implied choice of law upon application of Article 3 (1), Article 6 (1) provides that the contract is governed by the law of the country where the consumer is habitually resident, i.e. UK law, provided § (i) the consumer concluded the contract “for a purpose which can be regarded as being outside his trade or profession”; (ii) the trader pursued its commercial activities or directs such activities to the UK, the consumer’s country of habitual residence; and (iii) the contract falls within the scope of those activities. § Step Three: if the consumer does not satisfy the requirements of Article 6 (1), the governing law of the consumer contract by virtue of Article 4 (1) (a) is the law of the country where the trader has its habitual residence. • Step Two raises a critical question: When should a consumer contract be treated as having been concluded for a purpose “which can be regarded as being outside his trade or profession”? See the decisions cited in the next slide. The view taken in the cases adopts the explicit meaning of reg 3 of the UTCR 1999, AND the wording in Art 6 (1) resembles that of reg 3. • Crucially, however, it will usually be unnecessary to determine the governing law of a consumer contract between a consumer habitually resident in the EU and an EUbased trader, because the consumer rights, including the key protections he enjoys are substantially of the same scope and depth across the EU member countries. Thus, it will not matter that the law applicable to the contract is the law of the country in which the consumer habitually resides or the law of the trader’s country, insofar as both the consumer and the trader are within EU countries. CONSUMER CONTRACT CONTEMPLATED IN ARTICLE 6(1) • “A contract would be treated as having been concluded by a person for a purpose which could be regarded as being outside his trade or profession only if any business purpose was insignificant or negligible and the contract satisfied an individual's own needs in terms of private consumption.”

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See Overy v Paypal (Europe) Ltd [2012] EWHC 2659 (QB), [2013] Bus LR D1; Benincasa v Dentalkit Srl (Case C-269/95) [1997] ECR I-3767 Gruber v Bay Wa AG (Case C-464/01) [2006] QB 204 Ø A person who concluded a contract relating to goods intended for purposes which are in part within and in part without his trade or profession does not qualify as a consumer contemplated in Article 6. Effectively, where Article 6 (1) is inapplicable, then, pursuant to Article 4 (1)(a) the law governing the consumer contract will be the law of the country of the seller’s habitual residence, i.e., China UK GOVT REGULATIONS IMPLEMENTING EU TREATIES • A designated Minister or department in the UK government may by order, rules, or regulations, make provision: § (a) for the purpose of ‒ implementing any UK’s obligation to the EU, or ‒ enabling any rights under the EU Treaties to be enjoyed in the UK. § (b) In the exercise of its statutory power to legislate by means of orders, rules, or regulations, the Minister or UK government department may have regard to the objects of the EU. § See section 2 (2) of the European Community Acts 1972. CONSUMER CONTRACTS REGULATIONS 2013 Ø Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (“CCR 2013”) • Came into force on 13 June 2014 • Replaced § Consumer Protection (Distance Selling) Regulations 2000 § Cancellation of Contracts made in a Consumer’s Home or Place of Work etc Regulations 2003 (“Cancellation of Contracts Regulations 2003”). • Regulations 2013 implement Directive 2011/83/EU of the European Parliament and of the Council of 25 Oct 2011 on consumer rights. CONTRACTS COVEREDD UNDER THE CCR 2013 Ø See generally reg 5 on the definitions • On-premises contracts: a contract between a trader and a consumer which is neither a distance contract nor an off-premises contract • Off-premises contracts: contract concluded o in the simultaneous physical presence of the trader and the consumer, o in a place which is not the business premises of the trader. o contract concluded on the business premises of the trader or through any means of distance communication immediately after the consumer was personally and individually addressed in a place which is not the business premises of the trader. o The words “immediately after” are not defined and can give rise to difficulty of interpretation. •

Distance contracts:

o A contract concluded between a trader and a consumer under an organised distance sales o without the simultaneous physical presence of the trader and the consumer, but o with the exclusive use of a means of distance communication up to and including the time at which the contract is concluded. o A contract is NOT a distance contract if § it is entered into on a strictly occasional basis outside a commercial structure dedicated to the conclusion of distance contracts; or § The consumer and an intermediary acting for the trader are simultaneously physically present at some stage before the conclusion of the contract. MEANING OF “consumer” AND “trader” • “consumer” means an individual acting for purposes which are wholly or mainly outside that individual’s trade, business, craft or profession. • “trader” means 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. − Reg 4 of the Regulations 2013.

CONTRACTS OUTSIDE THE CCR 2013 • The Regulations 2013 do not apply to - Gambling contracts - Financial services, such as banking, credit, insurance, investment. - Creation of immovable property. - See further regulation 6. REQUIREMENTS AS TO SPECIFICIED INFORMATION – A ON PREMISES CONTRACT • Consumer not bound by an on-premises contract unless the trader makes available to the consumer at the time of entering into the contract the information described in Schedule 1 in a clear and comprehensible manner: reg 9 (1)

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The information is treated as a term of the contract. A change to the information, made before the contract or later, is not effective unless expressly agreed between the consumer and the trader: reg 9 (4)

INFORMATION REQUIRED REGARDING ON PREMISES CONTRACT • An on-premises contract is not binding on the consumer unless the trader gives or makes available to the consumer the following information: ‒ The main characteristics of the goods ‒ Identity, geographical address, and phone number of the trader ‒ Price of the goods, including taxes. ‒ Trader’s compliant handling policy ‒ Notice to the customer that trader is under an obligation to supply goods in conformity with the contract. Ø See further Schedule 1 to Regulations 2013. LIMITS OF REG 9 ON INFORMATION REQUIREMENTS • Pursuant to regulation 9 (2), the trader is not required to comply with reg 9 (1) in relation to contracts which involve a day-to-day transaction and performed immediately at the time when the contract is entered into. OFF PREMISES CONTRACT – The information which consumer must be given before entering into an offpremises contract Ø See regulation 10 (1) and (5) Ø The trader must give the consumer the information listed in Schedule 2 in a clear and comprehensible manner, and • (b) if a right to cancel exists, trader must give the consumer a cancellation form as set out in part B of Schedule 3. • The information provided pursuant to reg 10 is treated as a term of the contract. • The required information and cancellation form must be given on paper or, if the consumer agrees, on another durable medium and must be legible – reg 10 (2) • The information may be provided by means of the model information or cancellation set out in part A of Schedule 3 –c.f. the mode of complying with reg 10 (1)(b) as to right to cancel. WHEN IS A SPECIFIED INFORMATION CONSIDERED AVAILABLE TO CONSUMER? Ø Information is made available to a consumer only if the consumer can reasonably be expected to know how to access it: regulation 8 Ø Information to be provided before making an on-premises contract SPECIFIC INFORMATION RELATING TO DISTANCE AND OFF PREMISES CONTRACT ― Paragraph (l), Schedule 2: The conditions, time limit and procedures for exercising a right to cancel the contract in accordance with regulations 27 to 38. ― Paragraph (m), Schedule 2: In case of cancellation of the contract, the consumer will bear the cost of returning the goods. ― Paragraph (g), Schedule 2: All payable additional charges

EFFECT OF NON-COMPLIANCE WITH REG 10 (1) AND 13 (1) AS TO OFF PREMISES AND DISTANCE CONTRACTS • If the trader fails to comply with regs 10 (1) and 13 (1), consumer is not to bear the cost of returning the goods and additional charges mentioned respectively in paragraphs (g) and (m) of Schedule 2. – See reg 10 (4), relating contract off-premises sales contract. – Reg 13 (5) in relation to distance contract

FAILURE TO GIVE NOTICE OF THE RIGHT TO CANCEL Trader who enters into an off-premises contract to which reg 10 applies but fails to give the consumer the information listed in paragraphs (l), (m) or (n) of Schedule 2, i.e., right to cancel, cost of returning the goods, and consumer’s liability to pay trader reasonable costs. Ø is guilty of an offence, and Ø liable on summary conviction to a fine not exceeding level 5 on the standard scale.

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COPY OF OFF PREMISES CONTRACTS • The trader must give the consumer • A copy of the signed contract, or confirmation of the contract. • The confirmation must normally include all the information referred to in Schedule 2. • The copy or confirmation of the contract must be provided – on paper, – Within a reasonable time after the conclusion of the contract, but no later than the time of delivery of the goods sold under the contract. Ø See regulation 12 and 16 FURTHER REQUIREMENTS FOR DISTANCE CONTRACTS: “ORDER WITH OBLIGATION TO PAY” Ø See generally reg 14 • Distance contract concluded by electronic means (as opposed to a contract by phone) ― Trader must ensure the consumer explicitly acknowledges that placing the order carries an obligation to pay. ― Where placing an order requires activating a button or icon, then the button must be appropriately labelled “order with obligation to pay”. Any words to a similar effect would do. • Consumer not bound by an order if trader fails to comply with the foregoing requirements. CONFIRMATION OF DISTANCE CONTRACTS • Trader must give the consumer confirmation of the contract on a durable medium. • The confirmation must ― include the information mentioned in Schedule 2 ― Be provided within a reasonable time after the conclusion of the contract, and no later than the time of delivery of the goods supplied under the contract.

― Reg 16 RIGHT TO CANCEL AN ORDER • Consumer may cancel a distance or off-premises contract at any time upon entering into the contract and during the cancellation period without giving a reason – reg 29. (But see reg 27 (3): price must be more than £42 for the envisaged off-premises contract) • Cancellation period: 14 days after the day on which the goods come into the physical possession of the consumer or a person identified by the consumer to take possession – reg 30 (3) • As to multiple good ordered but comprising a single order: see reg 30 (4). SCOPE OF APPLICATION OF REG ON RIGHT TO CANCEL • The provisions of Part 3 do not apply to off-premises contracts under which the payment to be made by the consumer is not more than £42. • There is no such limitation of application in relation to distance contracts. HOW SHOULD THE RIGHT TO CANCEL BE EXERCISED? • The consumer must inform the trader of the consumer’s decision to cancel the contract. • The decision may be communicated to the trader by means of the model cancellation form in part B of Schedule 3, or a clear statement: reg 32 (2) and (3). REFUND FOLLOWING CONSUMER’S CANCELLATION OF CONTRACT • Cancellation ends the obligations of the parties to perform the contract (reg 33), and triggers other consequences, to which we now turn. 1. Refund 2. Responsibility for diminished value of goods 3. Obligation to return of goods • A refund of the price and any delivery charges paid: reg 34 (1) – (3) • A refund of the delivery cost paid by the consumer, but subject to regs 34 (2) and (3) where consumer chose a kind of delivery costing more than the least expensive generally acceptable delivery method. • •

Refund must be without undue delay, but no later than 14 days after the day when the trader receives the goods back – reg 34 (5) or (6) Refund to be affected via original means of payment: reg 34 (7)

VALUE OF GOODS DIMINISHED BY CUSTOMER’S HANDLING • Where value of goods is diminished by customer beyond what is necessary to establish the nature, characteristics and functioning of the goods: – Trader may recover for the value up to the contract price of the goods – reg 34 (9) – How should the recovery be made? See reg 34 (10) • Under reg 34 (11), trader has no right to recover for the diminished value if it failed to give the customer information on the right to cancel under paragraph (1) of Schedule 2.

RETURN OF GOODS FOLLOWING CANCELLATION • Trader has the responsibility under reg 35 (1) to collect the goods if it has offered to do so, or if para (b) of reg 35 (1) applies. • Failing application of reg 35 (1), consumer must send back the goods or hand them over to the trader or its authorised person. • Address to which goods to be sent: reg 35 (3) • Period within which goods to be sent to trader: 14 days, reg 35 (4) COST OF RETURNING THE GOODS • Consumer must bear the direct cost of returning the goods – unless the trader has agreed to bear those costs, or – The trader failed to provide the consumer with the information in para (m) of Schedule 2 about the consumer bearing the costs of returning the goods in the event of cancellation: reg 35 (5). – By reg 35 (6), the contract is to be treated as including reg 35 (5)....