Please note the Law may have changed since the publication of article.
This statutory instrument, which came into force on 31 October 2000, is designed to protect consumers from abuses particular to distance selling.
With certain exceptions it applies to any contract between a business and a consumer which is not made face to face. Although the European Directive on which the Regulations are based was originally formulated with mail order and telesales in mind, the Regulations are likely to have most impact on B2C (business to consumer) e-commerce.
You need to provide certain information to consumers before they enter into a contract with you including:
- your name and, if the consumer pays in advance, your address,
- a description of the goods or services and the price,
- delivery costs and arrangements for delivery,
- how long the offer or the price will remain valid,
- the existence of a right to cancel and who will be responsible for returning the goods, and
- if appropriate, the length of time that the contract will remain in force (for example, if services are being provided over a period of time).
Certain information (including all the above) must also be confirmed in writing in ‘durable form’ and there is some question as to whether this includes fax and email – the DTI certainly seem to think so. In addition to the above the written confirmation must also state details of any after sales service or guarantee and how a contract with no particular end date (such as telephone, gas or electricity supply contract) may be terminated by the consumer. These details can appear in a catalogue or an advertisement but more usually would appear in the standard terms and conditions provided before the contract is concluded. Updating your existing standard terms will be vital to ensure compliance with this provision.
If a consumer is telephoned at home by a business the caller will have to identify who it represents and the commercial purpose of the call at the beginning of the conversation.
Consumers’ cancellation rights
Consumers also have a ‘cooling-off period’ of seven working days in which they can cancel the contract without penalty. The period commences on the date of receipt of the goods or, in the case of services, the day on which the consumer agreed to proceed with the contract. However, if at that point the information requirements (see above) have not been complied with, the period of seven working days commences when the information has been provided to the consumer or at the expiry of three months from delivery whichever is earlier.
If the consumer exercises the right to cancel it must make the goods available for collection (they are under no obligation to return them) and a full refund must be provided within 30 days of cancellation. It seems that the obligation to make goods available and the right to a refund cannot be linked. Therefore, if a customer has failed to allow a business to collect items, the business may still be required to provide the refund. The customer is obliged to look after the goods between cancellation and collection.
The only charge the business can make is a sum equivalent to the direct costs of recovery of the goods provided a term in the contract requires the consumer to return the items and he or she has failed to do so. An update to your terms and conditions could prove useful in this area.
If the contract is cancelled, any related credit agreement will be automatically cancelled at the same time.
There are certain contracts which cannot be cancelled such as contracts for the sale of software, CD-ROMs and videos once unsealed by the consumer and newspapers, periodicals and magazines (although, interestingly, not for books which would seem to leave the cancellation rights open to abuse against booksellers). Also the sale of perishables such as flowers is exempted as are items which cannot be returned such as electricity and items which are made to the customer’s specification.
Where a consumer’s payment card is used fraudulently in connection with a contract concluded other than face to face the consumer is entitled to cancel the payment. If the payment has been made, the consumer is entitled to a refund. This removes the existing potential liability of the consumer for the first £50 of loss caused by fraudulent use of a payment card which exists under the Consumer Credit Act 1974. This now only applies to face to face contracts.
Performance of contract
Unless agreed otherwise the contract must be performed (e.g. goods delivered) within 30 days and, if this is impossible, the consumer is entitled to be informed and to receive a refund. Any related credit agreement will then be cancelled. The business may be able to substitute other goods and services of equivalent quality and price for those which are unavailable if the contract with the consumer so provides.
Again scrutiny of your standard terms should be undertaken in view of the ability to mitigate the effect of this provision.
Where unsolicited goods are sent or services are provided to a consumer and the goods or services are not provided in respect of the consumer’s business, that person may use or deal with them as though they were a gift. The rights of the sender are extinguished and it is an offence to demand payment for the goods or services. This pretty much restates existing law save that an offence of demanding payment for unsolicited services is created.
Not all contracts fall within the ambit of the Regulations. These ‘excepted contracts’ include contracts concerning the sale and purchase of land, auctions, financial services, vending machines and pay-phones. Other types of contracts are exempted from certain regulations, for example contracts for the supply of food, drink, accommodation, transport and leisure services.
Fortunately, the original proposal that breach of certain of the Regulations would constitute a criminal offence has now been dropped. However, particularly in the case of the compliance with the information requirements, businesses will ideally want the ‘cooling-off period’ to begin and end as quickly as possible and it is important to ensure that these requirements are complied with. The Director General of Fair Trading has the task of investigating complaints and enforcing the provisions of the Regulations – through use of injunctions, if necessary.
What businesses should do next
The terms and conditions applicable to consumer contracts must be considered to ensure that they comply with the information requirements. If they do not, all distance contracts you enter into will be capable of cancellation for a period of three months from delivery of the goods or performance of the services.
Consumers cannot be asked to contract out of their rights under these regulations save where specifically provided. The effect of the Regulations can be mitigated in certain respects (as indicated above) by an update to your terms and conditions.
The full text of the regulations can be found at the HMSO website and advice is also provided on the DTI’s website.
For further information, please contact Simon Halberstam
Title: Consumer protection (Distance selling) Regulations 2000
In force: 31 October 2000
Application: with certain exceptions the Regulations apply to any contract between a business and a consumer which is not made face to face (mail order, e-commerce, telesales).
- certain information must be provided to consumers before entering into a contract such as your name, address, price, delivery details etc;
- this information must also be confirmed in durable form – writing, email (possibly) and fax;
- consumers have a right to cancel a contract during a 7 working day cooling off period and, upon cancellation, a full refund must be given;
- contracts must be performed within 30 days (e.g. goods delivered) unless certain exceptions apply.
- You should consider your terms of business with consumers to ensure compliance with the Regulations.