How will the new Consumer Rights Act affect your business?

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The new Consumer Rights Act (the “Act”) will come into effect on 1 October 2015; bringing with it changes to the law that are intended to improve clarity and understanding and increase the confidence of both the consumer and the businesses directly selling to them. It is therefore important that your business, and its staff, is aware of these changes and is ready to comply with the new provisions.

Many of the changes brought about by the Act represent significant updates to existing legislation, such as those concerning unfair contract terms and anti-competitive behaviour by businesses.

If you are selling goods you should be aware that the warranties concerning satisfactory quality, fit for purpose and confirm to descriptions remain unchanged, but consumers will have the right to reject defective goods up to 30 days after receiving them. They will also be entitled to a full refund during this time. Afterwards the consumer may be able to obtain a repair or replacement.

Of particular note is the advent of new provisions relating to the supply of digital content (data produced or supplied in a digital format) thus covering data contained in mobile phone apps, digital ‘mp3’ music and computer software. When the Act comes into force it will mean that digital content supplied to consumers is to be treated in the same way as if it were physical goods regardless of what the express terms of a contract may say. Therefore the digital content must comply with standards of quality and description, and must be fit for its intended purpose. Currently these standards only apply to physical goods and this is a big change, but one which is not unexpected in our ever changing digital age.

There are some differences between the protections which will be provided to digital content as opposed to physical goods which businesses should also be aware of. By way of an example, there is no right of rejecting digital content unless it comes with physical goods. If the digital content damages the device upon which it is loaded then compensation may be payable (even if the content was distributed free of charge) and, unlike physical goods, business are not limited to one attempt at repair/replacement in the event that the consumer has made a complaint more than 30 days after purchase.

Further important differences apply in relation to the protections relating to the provision of services. The requirements of the Sale of Goods Act 1982 will continue to apply in relation to the services being undertaken within a reasonable time and with the application of reasonable skill and care; but now if a price has not been clearly and expressly agreed for the services prior to their engagement, businesses may only charge a price that is ‘reasonable’. Should the service prove unsatisfactory, the consumer will therefore now be entitled to require a repeat performance of the service or claim a price reduction, and in either event with the ability to claim compensation if a loss has been suffered.

The Act brings with it an additional emphasis on trying to avoid disagreements altogether between businesses and their consumers. Should a dispute occur, there is now a focus on settling the matter by way of Alternative Dispute Resolution (“ADR”) as opposed to the Court process, which is becoming increasingly expensive.

From July 2015, ADR was made available to all businesses to assist with any consumer dispute which could not be settled directly. Previously this mechanism was only available in certain specific business sectors. Now, any business involved in such a dispute is obliged to notify the consumer of a relevant ADR provider and to advise the consumer as to whether or not they are prepared to resolve the issue using this mechanism; although businesses will not be forced to use ADR unless the sector in which they operate (such as the financial services sector) is governed by legislation that dictates otherwise.

To minimise the risk of a dispute, and to be certain of compliance with the new Act, it is important for all businesses to ensure that they are aware of the new Act and that its contractual documentation and procedures for dealing with customers comply with the new Act.  Please contact our Commercial Team, or if your query concerns ADR, please contact our Commercial Litigation Team.