Consumer law issues you need to know as a small business owner

Consumers have significant rights, and companies need to be aware of them. Here, Guy Wilmot explores the most important issues to be clued up on. 

 Consumer law issues you need to know as a small business owner

Consumers have significant rights, and companies need to be aware of them. Here, Guy Wilmot explores the most important issues to be clued up on. 

Most businesses who deal with the general public are aware that consumers are well protected. Consumers have a significant body of rights under various pieces of legislation both domestic and European, but there are also a number of myths which are shared by both consumers and traders about consumer rights.

A ‘consumer’ is a customer who is not buying or consuming in the course of business. The rights a consumer can rely on will depend on the type of business and the agreement or terms and conditions of the trader.

Generally speaking the best-protected consumers are those who have purchased goods or services at a distance (eg over the internet or by phone) on the trader’s standard terms and conditions. A consumer buying goods in a shop is not as well protected.

Consumer rights can be divided into four main categories: 1. Rights under the Sale of Goods Acts; 2. Distance Selling Rules; and 3. Unfair Contract Terms.

As well as the various regulations and legislation consumers also have common law rights to claim against sellers or manufacturers of defective products which cause harm or injury.

1. The Sale of Goods Acts

The Sale of Goods Acts are probably the most well known pieces of consumer protection legislation and they have been in existence largely in their current form since the 1970s.

Under the Sale of Goods Acts, as most people know, if you sell goods to a consumer in the course of trade those goods have to be of reasonable quality, fit for their intended purpose and must match any descriptions given.

One common myth in relation to the Sale of Goods Acts is that there is a fixed time limit for rejecting goods if they are (for example) not of reasonable quality. There is no such time limit, the only obligation is to notify and claim against the seller within a reasonable time. Broadly speaking the consumer is entitled to a refund, repair or replacement at their option.

The Sale of Goods Acts also deal with services which requires that services be provided with reasonable skill and care and within a reasonable time.

Perhaps the most common myth in relation to the Sale of Goods Acts is that there is a ‘right’ to return goods that the consumer is not happy with which are not otherwise faulty.

This is not true. While it is true that the vast majority of retailers do accept returns even where goods are not faulty or misdescribed they are not under an obligation to do so. Offering a returns policy is more a matter of goodwill.

Traders should be aware that if they do offer a returns policy for non-faulty items (eg 30 days) then that time limit will not apply if a consumer wishes to return goods which are faulty and the consumer has notified the trader within a reasonable time.

2. Distance Selling/Consumer Regulations

The supply of goods and services ‘at a distance’ (eg over the internet) used to be covered by the Distance Selling Regulations.

The distance selling regulations were replaced in June last year with the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations, which are usually called the ‘Consumer Regulations’.

The Consumer Regulations are relatively complex but the main points for traders to be aware of are:

  • There is an obligation when you are in the business of supplying goods or services at a distance, eg internet, telephone or mail order to give consumers a no questions asked 14-day right to cancel their order.
  • It has to be easy to cancel and a specific form for this purpose must be given to consumers.
  • Traders must tell consumers up front about the consumer’s right to cancel.

The right to cancel cannot usually be avoided (except for certain types of goods and services like personalised good, perishable goods etc.)

If you fail to tell consumers about their right to cancel then the consumer has up to a year to cancel the contract and receive a full refund and failing to tell consumers about their cancellation rights is actually a criminal offence.

Sellers may put in place a more generous cancellation policy and many internet retailers do for instance have a cancellation period longer than 14 days.

A common myth is that delivery costs do not have to be refunded. The consumer can be required to pay for the return shipping but any delivery costs paid by the consumer must be refunded.

The cancellation right does apply to services but if a consumer asks for services to start within the 14 day cancellation period then while they still have a right to cancel, the consumer will lose their right to a refund for the services which were provided up to the cancellation. It is however important that the consumer expressly agrees to this.

The regulations also prohibit pre-ticking boxes for additional charges and there are separate regulations which prevent charging an exaggerated mark up for credit card payments.

3. Unfair contract terms

As well as the main rights above, there are also general rules in the Unfair Contract Terms Act and the Unfair Terms in Consumer Contracts Regulations which protect consumers against unfair contract terms. An unfair term will not be enforceable against a consumer.

Some examples of terms which are unfair are: seeking to exclude liability unreasonably, giving the consumer an unreasonable timescale in which to raise complaints or disputes, having a cancellation policy which grants more favourable rights to the supplier than to the consumer, having a term which allows a supplier to change the terms of the contract unilaterally, allowing the supplier to change the price of goods without giving the consumer the right to cancel if the disagree with that price.

Traders do need to take care to ensure that any terms and conditions meet the requirements of fairness.

Guy Wilmot is a partner in the corporate and commercial group at Russell-Cooke LLP.

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