Thickening the Blanket of Consumer Protection: Consumer Protection Act 2015

From October 2015, the Consumer Protection Act will be in force. What follows is a brief overview of English law on consumer rights, under the common law, and under the new legislation.

Existing protection

Lord Atkin, in the immortal case of Donoghue v Stevenson [1932], created the modern law of product liability. In formulating the ‘narrow rule’, his Lordship stated that: “[a] manufacturer of products, which he sells in such a form as to show that he intends them to reach the ultimate consumer in the form in which they left him with no reasonable possibility of intermediate examination and with the knowledge that the absence of reasonable care in the preparation or putting up of the products will result in an injury to the consumer‘s life or property, owes a duty to the consumer to take that reasonable care”. This was a sea change in the orthodoxy (and as is often forgotten for such an important case the majority was 3 -2). Lord Abinger, in Winterbottom v Wright (1942) had previously summarised the view of liability by saying that “[u]nless we confine the operation of [contracts’ to the parties who entered into them, the most absurd and outrageous consequences…would ensue.” What Lord Atkin fundamentally understands – and which underlies the wider rule in Donoghue, known as the ‘neighbourhood principle’ – is that in the 20th (and now 21st) century commercial landscape, there is little room for individual engagement, and much less for individual negotiation of terms, in contracts. Though this has largely been cut down (in Caparo Industries plc. v Dickman [1990]), it remains true that consumer rights must come from different areas of the law – whether tort or legislation, in those areas where the individual cannot contract with the producer.

Whilst this may at first seem like a contractual problem (if C [the consumer] cannot exercise their English law given right to freedom of contract with P [the producer] then it is contract law which should deal with the problem) it is at heart a tortious problem too. The law of torts acts, not least, as a gap filler for where contract law does not stretch. Despite not suffering from a limitation period (as most statutory remedies do) there are two problems with common law product liability. Firstly, and notwithstanding doctrines such as res ipsa loquitur – which make short work of the proof element of negligence (seminal case: Grant v Australian Knitting Mills [1936]) but which are highly restrictive doctrines – negligence can be difficult to show. Secondly, the extent of liability is limited to personal injury, damage to property, and consequential damage to property. In other words, pure economic loss cannot be recovered. The courts have been strict on this, no matter the inventiveness of the claim. A good example is the complex structure theory of Murphy v Brentwood District Council [1991]. Complex structure theory seeks to argue that one part of a product or thing can damage another. In Murphy, the idea was that “ancillary equipment” added to the house (central heating system) could damage the house itself. This was rejected by, what was then, the House of Lords.
Section 14(2) of the Sale of Goods Act 1979 created an implied term in any contract of sale of goods, that the “goods supplied under the contract are of satisfactory quality”. This addressed the scope of liability (the second problem highlighted above). It also provided for strict liability for any breaches of that term (addressing the first problem of proof). The Consumer Protection Act 1987 compounded strict liability as the status quo by extending it to cases where any damage is done by a dangerous product to a consumer. The 1987 Consumer Protect Act was a result of a European wide initiative. The EEC Directive 85/374 sought to harmonise the national laws of consumer protection for a single market. It is a technical piece of legislation which defines everything required for liability. On the other hand, for contractual terms which are unfair the specialist and layman alike must turn to the Unfair Contract Terms Act 1977.

In light of the above considerations the following are seven things to note about the Consumer Protection Act 2015:

1. Application of the Act

To all contracts for the transfer of goods, as long as consumers are acting outside of the course of business. This is a wide term. Consumers acting outside the course of business can engage even where there is a regulated hire, a hire-purchase, or a conditional, sale contract.

2. Implied Terms

Previous case law on implied terms will remain valid. However, a new implied term has been created by statute. Where a model has been examined by the consumer, the contract will hold a term which states that the goods delivered must match the model shown.

3. The emerging ‘role of the dealer’

A consumer will have (from the 1st October 2015) the right to reject a product which does not conform to the sale contract. This rights extends thirty days from the delivery of the good. It goes hand in hand with the consumer’s right to refund which also extends thirty days – but from delivery or installation (the later of the two). It has been argued that this provision will cause difficulty because the definition of ‘trader’ is broad. Looking to the language of the act (a trader is also “another person acting in the trader’s name or on the trader’s behalf”) it seems that the breadth is something that the Act is looking to achieve. It has further been argued that this exposes a finance provider to a risk, which they cannot regulate. For example, where they provide for a good for a dealer, but through the dealer’s fault this good is rejected they lose the sale. The financers must refund the customer and they themselves do not have a statutory clause permitting returning the good to their own supplier. They will be defenceless short of any contractual arrangements they made with their supplier. However, when taken in the broader commercial context this does not seem like an undue burden. Dealers will be vetted more thoroughly by finance suppliers, to ensure competence. This seems like a clear initiative being taken to increase business-to-business trust, not a way of leaving some members of the community without legal defence.

It should be noted that the 2015 Act also contained a “final right to reject”, which arises after one unsuccessful repair or replacement. This seems incredibly draconian. Considering the costs which a supplier, financer, and dealer incur in providing a consumer with a good, and further considering the one chance nature of this rule it seems one-sided. Especially because the trader’s right to make deductions for use of goods when they are rejected does not apply in these circumstances. It is submitted that what might instead happen is that, in that situation, the merchant will offer some kind of incentive for the consumer to remain with that good. This last minute dealing might not be entirely desirable.

4. Pre-contractual information as an implied term

Under the Consumer Rights Act 2015, much of what was contained under the Consumer Contract Regulations 2013 will become statutory. This will take the form of an implied term (and as usual, the breach will trigger damages). This may even extend to installation. As has already been pointed out, it will be critical that any literature given to sales agents is accurate, lest in their haste to get a sale they provide information which is then used to obtain a refund.

5. Unfair Terms

The Competition and Markets Authority (CMA) which deals with unfair terms has published new guidance in light of the 2015 Act. Since schedule 2 of that Act replaces the Unfair Terms in Consumer Contracts Regulations 1999, the CMA has issued guidance on what it understand that schedule to mean.

There are three levels of guidance for firms: short guidance, intermediate guidance, and detailed guidance. Particularly helpful is the last, which also includes an annex which discusses which historic examples of past unfair terms may still be relevant.

Without going into the technical details, it is worth drawing attention to the fairness and transparency tests of Part 2 of the Consumer Rights Act 2015.

6. Digital Expansion

Under the new regime, digital content has been covered. Namely, implied terms definitively stretch to the provision of digital content, and corrupted devices can be recovered as long as the consumer can show that there was not “reasonable skill and care”. This is a welcome nod to technological developments of the 21st century.

7.  Competition Law

Part 3 of the Act touches on breaches of competition law. The Act deals primarily with rights, as seen through the increase jurisdiction of the Competition Appeals Tribunal (CAT) and the addition of opt-out (from pure opt-in) collective actions.

To a significant extent, this can be regarded as the manifestation of the importance of ADR. The European Directive on Alternative Dispute Resolution requires that all contractual disputes between consumers and business must be able to go through ADR.

 

Summary

It is important to understand that the Consumer Rights Act 2015 is part of a wider wave of EU and UK consumer protection. The 2015 Act brings together previously disjointed laws on consumer protection. This is of critical importance in the consumer world. Consumers are for the most part non-specialists. The point of offering them protection is only valid if it is easy to access and understand. The point has been made that the Act is not crystal clear on the nature and extent of some obligations. It is important to remember that the aim of consumer legislation is to provide for clear rights and remedies for the consumer (and not necessarily the corresponding duties of the business community). To see whether this is the case, we must await litigation.

The British General Election 2015 VI: Liberal Democrats

1. Home Affairs

A. Taxes and Economy: Raise the personal allowance – the point at which you start paying income tax – to £11,000 in April 2016 and then to £12,500 by 2020.

This is part of the idea of a set of “strict new fiscal rules” with the aim of eliminating the defiecit by April 2018. Such promises should be viewed with scepticism, even while they are indicative of the general trend. “Mansion tax” was the brain child of the Lib Dems – yet they have shown immaturity in allowing Labour but in contrast to Labour have set out how it would operate. Tying it to rise in house prices rather than in line with inflation sounds clever, but it does exactly the opposite of what Ed Ball promised, which was that it would not hit those who are asset-rich but cash-poor. By definition an increase in the value of a house (fixed asset) does not translate into something with which you can pay an increase. Perhaps then, in keeping clear of clarification, the Lib Dems have at least avoided such a blatant error.

B. The NHS: An extra £1bn for the NHS every year.

Half of the extra funds (drawn from increased taxation) would go to combatting mental health illnesses. This, together with ensuring appointments for people with depression in 18 weeks.

C. Jobs: An extra £1 an hour for the lowest paid apprentices. Campaign to create a million more jobs.

This seemingly seems to piggyback off of the ideas of “old brother” parties. Creating new jobs is a common feature – but there is still no focus like that of the Greens and Tories, which is disappointing given that the Lib Dems have been in government, they should be expected to come up with a more consistent plan. Raising the minimum wage is nothing as revolutionary as it seems either.

D. Education:  Protect the education budget from cuts. Guarantee qualified teachers and a core curriculum set by independent experts, as well as compulsory sex education, in all state schools including academies and free schools. More money for disadvantaged school children and free childcare for all two year olds. Supports lowering the voting age to 16 in all UK elections.

Promising protection of key services is something that has become classic in this election as being a squaring off against the austerity stance of the Tories. It is difficult what making money available to disadvantage school children will achieve. Lowering the voting age has already been problematised as has the language of teachers being “unqualified”.

E. Law and Order: End prison sentences for personal drugs possession, instead using non-custodial sentences and appropriate medical treatment. Replace Police and Crime Commissioners with Police Boards made up of councillors from across the force area. Pass a Digital Bill of Rights to help protect people from unwarranted intrusion and give them more control over their own data.

Reform of drug law is something which is happening across the Atlantic – effects to be confirmed. The Digital Bill of Right is a powerful symbol – as strike against the establishment. This is problematic because many governments around the world seem to have made the move towards a policy of surveillance. PRISM (the USA program) has been massively criticised – but overall, there seems to have been a settlement of the dust it kicked up. Seeking to undermine the ability of a government to do this, seems to undermine the ability to play with on the international league.

2. Foreign Affairs

A. Immigration: Reintroduce exit checks at borders, so the government can identify people who are overstaying their visa. Will require all new claimants for Jobseekers Allowance to have their English language skills assessed, with JSA then being conditional on attending language courses for those whose English is poor. Ensure that EU migrants have to “earn” their entitlement to benefits.

This has policy has surprisingly little to distinguish it with the trend taken by all the other major parties. Notice that this is not consistent with the largely pro-immigrant stance of the Lib Dems in the past.

B. EU: Campaign to reduce the number of Trident nuclear submarines. Push for greater European Union efficiency.

Greater European efficiency is something to strive for, both at the national and on the international plane. Having efficiency as a key component of the manifesto seems to misunderstand that internal changes to the structure are much better achieved through the work of MEPS – rather than a national government putting pressure from outside.

The nuclear issue has exploded since Michael Fallon MP, Defence Secretary used it to make a personal attack on Miliband. Although they seemed to have died down since a powerful performance in the leaders debate. Having said that, this is a minor issue. It has recently been said that the policy on nuclear trident is in fact a feature to distinguish Labour and SNP, rather than anything else.

In synthesis, the Lib Dem’s haste to differentiate themselves form the Tories, have moved towards Labour. They have pledged protection of key services (like Labour) and taken a stronger stance on immigration to appear tougher. Although an argument which should be developed, it might well be suggested that time in office has hollowed out the Lid Dems rather than strengthened them.

Patent-ly Commercial?

Apple has been ordered to pay $533 million for the infringement of Smartflash LLC’s patents. This is significantly less than the figure of $852 that Smartflash had asked for. Apple is appealing the jury’s decision that (i) there was an infringement and (ii) that it was willful.

It should be noted that this is the second decision against Apple stemming from a Tyler federal court (the first being an award against Apple of $368 million for patent infringement of VirnetX Inc which was struck down at appeal because of the wrongful calculation of the figure).

More broadly, it is a move in a wider war. Samsung, Google, and Apple have been waging this legal to-and-fro for the last three years. Initial reactions in August of last year, when Apple and Samsung agreed to drop all claims outside of the US were focused, primarily, on possibility that the two would strike a cross-licencing agreement. That this has not yet happened is hardly surprising; given the competition between the two (repeatedly vaulting over each other for the top spot on the smartphone sales list) it seems strange that a mutually advantageous tone be taken – where the rest of their business model is competitive.

More persuasive was this analysis of the decision to reduce the scope of the war. The landmark ruling, catching headlines in America gave a judgement awarding Apple damages from Samsung of the value of $1 billion (which was later cut to $598 because the judge found two errors in the jury’s calculation method) was more of a commercial blow, for two reasons. Firstly, it signaled to the public that there was fault on the party of Samsung. Secondly, the entire process was having a negative impact on the Samsung-Google relationship (which is fundamental since Samsung focuses on hardware and Google on services).

What does this mean?

It means that patent law is being used as a tool to sculpt commercial relationships. It has been argued that the decision to reduce the scale of legal war was based on commercial reasons. For Apple, there was a clear win and continuing to increase the amount of resources is not a good business decisions. For Samsung, the stakes as a business were getting ever higher. This was the position near the middle of 2014. Now, it seems that smaller companies are copying the new approach, of using patents as a commercial tool – to bring the argument back around to the news story with which I began.

I would like to express some dissatisfaction with the use of the law in this manner.The law should be a shield and not a sword. There are many reasons for this, but above them all is the fact that commercial relationships should be just that – whether they are between companies or between an individual and a company. Adding the law as a variable in these relationships, which is the effect of patent law decisions at the present, risks upsetting these delicate webs. “Infringe” at your peril.

ISIS: A Constitutional Challenge?

The BBC continues to focus on the developing influence of extremism into the traditional Western lifestyle. However, there has been little or no discussion of the legal-political response to the challenges that facing terrorism brings. Terrorism was originally a tool of the State. During the 1793-4 Reign of Terror in the post-Revolutionary France of the 18th century, terror was used as a method of ensuring a political end. Much has changed in the way that we conceive terrorism. Primarily it is used by non-State actors. On the other hand, the fundamental political drive of terrorists seems to remain true. It remains a political object, even where it is founded on religion. This highlights the problem. Something which is, at heart, political, is difficult to combat because it necessarily interacts with freedom of religion and freedom of speech (two separate rights under the European Convention on Human Rights, arts. 9 and 10 respectively). There are two options open to States: either to qualify human rights, or to disapprove of the method of expression of human rights in a particular way. In fact, this distinction seems arbitrary, because in regulating how human rights need to be expressed, it seems that they are being qualified through the back door. To fight terrorism, Western States must bite the bullet of constitutional change and be ready to qualify human rights.