22 April, 2020
For businesses facing supply chain disruption, an important consideration is the potential impact on consumer rights. Consumer contracts (business to consumer) are subject to additional rules, mainly found in the Consumer Rights Act 2015 (CRA) and Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (CCR). This article will consider these rules in the context of COVID-19.
The starting point is to look at whether the consumer has the right to cancel under the contract. This right generally applies to 'off-premises' contracts (concluded at a consumer's home) and 'distance' contracts (concluded online, by email, or over the telephone) as set out in the CCR. Contracts concluded with both parties being present at the supplier's business premises are not likely to include the right to cancel for any reason.
The standard cancellation period is 14 days, known as the 'cooling-off period'. There are certain exemptions to this right, for example perishables and personalised goods. Suppliers who are struggling to deal with cancellation requests due to a reduced workforce should ensure they communicate with consumers about likely delays. This may help reduce the number of customer service complaints. Many businesses are also temporarily extending their returns policy to allow consumers additional time to return unwanted goods, however there is no express obligation to do so.
Consumer contracts may contain a provision akin to force majeure, whereby a supplier may postpone performance of their contractual obligations or in some circumstances cancel the contract altogether. To be enforceable, the clause will need to satisfy the CRA's concepts of fairness and transparency. As the term 'force majeure' may not be understood by consumers, the clause should instead use wording such as 'events outside our control'. Clauses which specifically refer to epidemics/pandemics are most likely to be triggered by COVID-19, but a catch-all phrase if drafted sufficiently clear enough may also suffice.
One solution to deal with supply chain delays may be to substitute certain items or components. This may be possible where no specific statements have been made about the particular component, or where an express term in the contract makes it clear that an item may be substituted. You will need to ensure that any alternative matches the description and any sample or model. Failure to do so may give the consumer the right to reject the product.
Products must also comply with any standards or marketing statements that you have made about them, for example sustainability claims. Failure to comply may give the consumer a right to a price reduction.
Consumer contract terms must be "fair", otherwise they will be unenforceable. A potential issue that may arise in any COVID-19 dispute is whether or not a clause that is being relied upon to the detriment of the consumer, is unfair. Under the CRA, a term is unfair if it "causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer". Businesses should review and update consumer contracts to ensure they pass the fairness test.
Whilst consumer protection rules remain unchanged, the COVID-19 landscape may alter their practical application, especially given that more consumers are likely to be regarded as vulnerable at this time.
For advice on and assistance with understanding your position under existing consumer contract arrangements in light of COVID-19, or reviewing and updating your contracts to ensure their suitability contact a member of our team.
For more information contact John Pickervance in our Commercial department via email or phone on 0333 207 1134. Alternatively send any question through to Forbes Solicitors via our online Contact Form.