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You will probably be aware that a consumer purchasing goods or services is offered a far greater degree of protection from harsh or unfair contract terms than is the case for a party that purchases goods or services in the course of its business. This is because the law recognises that a consumer will usually be in a disadvantageous position in terms of bargaining power and commercial awareness when compared with the position of the seller. In contrast, a purchaser who enters into a contract to buy goods or services in the course of its business is afforded less legal protection, even where the seller has a stronger commercial position, on the basis that a business should be expected to take more responsibility and have greater awareness of the contracts it enters into, than a consumer.
Nevertheless, although there is a general awareness of this concept, suppliers are frequently at risk of breaching consumer protection laws by unwittingly including terms in their contracts that may be judged as unfair if the purchaser is a consumer. This is most likely to be a problem where a supplier sells goods or services to both business customers and consumers, as happens frequently with online sales. Understandably, a supplier in this situation may seek to employ a single set of terms and conditions in all of its contracts, to avoid the need to switch from one set of paperwork or online form to another depending on the customer. This approach may be acceptable, so long as the terms and conditions are drafted carefully so as to ensure that unfair terms are not inadvertently imposed upon consumers and that any rights which must be extended to consumers are included.
Issues to which you should give careful consideration when selling to a consumer include the following:
- Warranties and Guarantees
Aside from certain statutory rights, it is not compulsory to give guarantees. However, if they are provided, they must be clearly expressed in a language the consumer will understand, including the contents of the guarantee and how a claim can be made. In particular, the duration and territorial scope of the guarantee should be made clear. The guarantee should also state that the consumer’s statutory rights are not affected by the guarantee. The returns and refunds policy of the supplier should be clearly stated.
- Price and Payment
Ensure that prices are clearly set out and are unambiguous. Note that the prices of goods and services targeted at consumers must include VAT. If the amount of VAT is not stated, it is implied that the price listed is inclusive of VAT and you will be able to charge this amount and no more. It is also important to inform the consumer of other extra costs such as delivery costs (including taxes and duties), postage and packing and delivery. If you want to reserve the right to raise the price after the consumer’s order has been accepted (for instance, to cover an increase in the cost of raw materials), the consumer should be given the chance to terminate the contract without penalty.
- Excluding and Limiting Liability
A contractual provision that seeks to exclude or limit your liability will be judged very strictly. You will only be able to rely on such a clause where it is reasonable in the circumstances to do so. What will be reasonable in the context of a sale to a consumer is extremely restricted. For this reason you should avoid any exclusion or limitation that is not absolutely necessary, as any such provision may make the contract between the seller and consumer unfair and it is pointless taking this risk unless the exclusion or limitation is really needed.
Unusual exclusion/limitation clauses (and indeed any other particularly onerous term from the consumer’s point of view) should be prominent and brought to the customer’s attention, for example, by printing the clause in bold type. Some years ago a famous judge commented that some clauses would need to be printed in red ink with a red hand pointing to them before they could be said to have been brought to the consumer’s attention sufficiently! It is all too easy when setting out exclusions/limitations of liability to lapse into the use of technical or legal phraseology which may not be understood by a consumer. You should stick to plain and intelligible language and avoid using phrases such as “consequential loss” without proper explanation. A provision that sets out the extent of the seller’s duties and explains how these may need to be varied is more likely to be fair than a clause that simply raises the drawbridge on the issue of liability. For instance, rather than excluding liability for non-delivery of goods, you could agree to use reasonable endeavours to deliver at the time stated during the order process whilst also informing the consumer that it may be necessary to deliver at another time in the event of unforeseen circumstances.
- Cancellation and Information Rights
These rights are particularly relevant in situations such as contracts entered into away from your place of business, such as at the home of the consumer (so called “doorstep selling”) or contracts entered into by distance means, such as by mail order or online (so called “distance selling”). In the case of both doorstep and distance selling, regulations provide that a consumer has the right to cancel their contract with you, without reason, within a limited period of time (7 days) after the contract is entered into. You are required to give the consumer information about any applicable right to cancel and it is particularly important that you do so because the period within which the consumer may cancel will not start to run until it has received this information. Where you are engaged in distance selling you are also under an obligation to provide the consumer with various information about you, the order process and the goods or services themselves. Legislation which is due to come into force in 2014 will further extend the cancellation period allowed to 14 days and will make it even more important that an appropriate cancellation notice is served as otherwise the cancellation period is potentially extended to 12 months!
- Data Protection
It is highly likely that in the course of supplying a consumer, you will collect personal data that is subject to protection under the Data Protection Act 1998. You will owe various duties in respect of such personal data, including a duty to provide the consumer with sufficient information about what data is being collected, the reasons behind its collection and the intended future use of the data. It is important that you consider this point carefully if personal data is to be used otherwise in the supply of goods or services only. For example, if data is to be passed to a third party seller, the consumer must be informed and their consent to this obtained.
It is imperative, if you are a business which supplies consumers and particularly if you trade online, that you make allowances in your procedures and contractual documentation accordingly.
A range of resources are available that may assist you if you are a business trading in this area.
However, please do also consider seeking legal advice. If you can tell us about the ways in which you supply consumers, we can look at your terms and conditions and any other relevant documentation used including your website content and tell you if they are fit for purpose