In this article on the Consumer Rights Act (CRA), we look at the implications the CRA will have on businesses and consumers where goods sold are found to be faulty.
We shall discuss the other changes being introduced by the Act in future articles leading up to the date the CRA fully comes into force, which is expected to be in October 2015.
The Sale of Goods
The CRA is expected to harmonise existing consumer legislation (such as the Sale of Goods Act 1979, the Sale and Supply of Goods to Consumers Regulations 2002, and the Unfair Contract terms Act 1977) and will also simplify and modernise the language used to make it easier to understand. For instance the term “trader” replaces the term “Seller” and whereas the Sale of Goods Act 1979 (SOGA) talks about the transfer of “property in goods” the CRA refers to transfer of “ownership in goods” – a term more readily understood.
The CRA will replace the implied terms currently contained within the SOGA with an express provision that sale contracts are to be treated as automatically including the following terms:
• Goods to be of satisfactory quality (clause 9)
• Goods to be fit for a particular purpose (clause 10)
• Goods to be as described (clause 11)
• Goods to match a sample (clause 13)
• Trader to have the right to supply the goods (clause 17)
In addition to codifying the implied terms, the CRA will introduce additional rights and remedies which are summarised below.
(i) Early right to reject
The CRA replaces the current undefined ‘reasonable period’ in which a consumer may reject faulty goods and obtain a full refund with provision for an ‘early right to reject’.
The early right to reject will be triggered if the goods are found to be faulty within 30 days of a consumer taking delivery and/or the goods being installed. If the goods are found to be faulty after the 30 day period then the consumer must firstly request that the trader attempts to repair or replace the goods before seeking to reject.
(ii) Right to repair or replacement
Current legislation permits a trader to refuse to repair or replace the goods on the grounds that it would be a disproportionate remedy compared with other remedies available (reduction of purchase price or termination of the contract). The CRA will however remove the trader’s ability to refuse to repair or replace the goods – which may prove to be costly and inconvenient to the trader.
The CRA also goes further by introducing a provision whereby a consumer need not give the trader a reasonable period of time to attempt the repair if to do so would cause significant inconvenience to the consumer. What is considered to be “significant inconvenience” is a matter of interpretation and will undoubtedly be the subject of litigation as the new provisions of the CRA are tested in the courts.
(iii) Right to price reduction or final right to reject
In the event the trader is unable to repair or replace the goods then the consumer may have a right to choose between keeping the goods and receiving a partial refund (price reduction) and exercising the final right to reject the goods and receiving a refund.
(iv) Common features of the early and final right to reject
The CRA introduces provisions previously not contained within the SOGA which expands how consumer rights are exercised and what effect they have, namely:
• A right to reject gives the consumer the right to treat the contract as at an end and the consumer may be entitled to recover damages from the trader for non-performance of the whole contract.
• To reject the contract a consumer must indicate to the trader that the goods are rejected and the contract is to be treated as at an end. There is no requirement that the consumer must give an indication in writing but the indication must be clear enough to be understood by the trader.
• The consumer is entitled to receive back the same amount of money paid to the trader and the refund must be made without undue delay and, in any event, within 14 days beginning with the day on which the trader agrees the consumer is entitled to a refund.
• The refund must be made by the same means as the consumer made payment and the trader cannot charge a fee for making the refund.
• The consumer is under a duty to make the goods available for collection by the trader or to return them as agreed and the trader must bear any reasonable costs of returning the goods.
A key finding of the Law Commission when drafting the CRA was that the current law on the rejection of faulty goods is confusing and is a frequent source of disputes between consumers and traders. The law Commission commented that this lack of clarity is often a source of confusion for consumers and traders which therefore weakens consumer confidence and causes unnecessary and costly disputes – the net effect being a burden on business.
Initially the CRA will undoubtedly cause unwelcome headaches to traders as sale contracts and terms and conditions will have to be updated and adapted to ensure compliance with the CRA. However, in the age of social media where bad consumer opinion and reviews travel fast, complying with the CRA, and being openly seen to be complying with consumer protection rules, makes commercial sense and therefore the benefit derived from updating sale terms before the CRA comes into force is likely to justify the time spent in doing so. It is therefore a good idea to seek legal advice from a solicitor, who will be able to review existing terms and conditions and make any necessary amendments.
If you are involved in a dispute or are looking to update your terms and conditions and would like advice on this or a related topic, please contact Richard Slater. Richard is a member of the Dispute Resolution Team in Exeter and specialises in commercial litigation. He advises on a wide range of matters relating to consumer and financial services disputes.