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.
Lord Atkin, in the immortal case of Donoghue v Stevenson , 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 ), 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 ) 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 . 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.
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.