To all those reading this I am David Gibbs; I am a Lecturer in Company and Commercial Law at the University of Hertfordshire.

I created this blog as a general out-let of ideas for my research, as well as keeping those interested up-to-date on my research and general interests.

I completed my PhD thesis at the University of East Anglia in 2014. The thesis was recommended for the award of PhD with no corrections. My external examiner was Prof. Simon Deakin (Cambridge) and internal examiner was Prof. Morten Hviid.
My PhD research centred on directors' duties and company law. The thesis was titled 'Non-Executive Self-Interest: Fiduciary Duties and Corporate Governance'. It was a doctrinal and empirical study on whether self-interest was suitably controlled amongst non-executive directors.

My supervisors were Prof. Mathias Siems, Prof. Duncan Sheehan, Dr. Sara Connolly and Dr. Rob Heywood

All opinions of any existing or future blogpost are my own. They do not necessarily represent the views of any of my associated institutions.
ORCID 0000-0002-6596-8536

Friday, 22 April 2016

What's Wrong with the Consumer Rights Act 2015?

I have now been teaching the Consumer Rights Act 2015 for a year, and having prepared lectures and classes on it, now seems like the time to review the observations I have made. Of course there is the risk some of these observations may be completely wrong, as there is very little case law on this Act, and it is not meant to be a review of all the Act, only those areas that I cover teaching Commercial Law.

1: Another layer of Regulation
The CRA 2015 aims to consolidate existing law and make new provisions in respect of goods, services and digital content. It also does so for unfair terms and consumer notices. The need for such reform is detailed in the Act's explanatory notes, that consumer law was seen as unnecessarily complex and fragmented. Indeed no fewer than 10 Acts would have to be covered to even begin to understand consumer law.

While the Act has consolidated the law in respect of supply of goods, services, digital content, and unfair terms and notices there is still a need to look at other legal provisions if a consumer is to understand their rights, even in these areas the Act has consolidated. There are still the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 SI 2013/3134 in force as well as the Consumer Protection Act 1987 for dangerous goods. The Misrepresentation Act 1967 is also still be applicable. Indeed, the CRA 2015 makes explicit reference to the 2013 Regulations requiring the reader to read that Act as well, see, for example, section 11(4).

Therefore, the Act's purpose of consolidation might have been met in part. The law on unfair terms can now be found in one place, generally. However, the Act does not seem to have made many attempts to make the law more understandable. The Explanatory Notes state that the law was unnecessarily complex, so now that complexity is in fewer places rather than lots. In fact, there might be even more complexity, as I detail below.

2. Services or Goods contract?
Previously the law on whether the contract was a goods contract or something else i.e. services was not particularly easy to ascertain. For it to be a goods contract it would have to fall within the definition of the Sale of Goods Act 1979, s.2 otherwise the consumer would be unprotected. Therefore the Supply of Goods and Services Act 1982 was introduced to give consumers similar protection in transactions where there was a transfer of goods other than one covered by the SGA 1979 and for services.

The main issue was where both goods and services were provided it was not clear whether the transaction was a sale of goods, transfer of goods, or services. The significance may not be important in many cases but in some instances a consumer may be left unprotected or with less protection under one provision than another, highlighting the legal complexities facing a consumer.

For example, a transfer of goods where they are to be installed by a service provider will be protected by the SGSA 1982 implied terms as to sale by description and satisfactory quality, which are both strict liability. The property in those goods does not transfer until the installation is complete. Therefore, if the installation is faulty then the consumer will have a remedy. However, if it is a service contract the service provider only has to exercise reasonableness in their service provision. Therefore, if they are not negligent in the installation, i.e. because they follow the manufacturer's instructions, the consumer will be left without a remedy. Whether it was a goods or services contract was not a clear test, which looked at the substance of the contract, Robinson v Graves [1935] 1 KB 579.

This issue is partly dealt with by the CRA 2015, s.5. Sale of goods, transfer of goods including manufactured goods are to be dealt with as supply contracts, meaning the consumer has the protection of those implied terms with strict liability. Therefore, goods that are to be manufactured would not be dependent on a test of substance to see whether it is one for goods or services. However, it appears that is as far as the CRA 2015 goes in rectifying that problem. It still seems that where both goods and services are provided the consumer will be dependent on the substance test to determine what their rights are. While this might be understandable, because it might be unfair to burden sellers with strict liability for products they did not manufacture, they are in a better place to assess the quality etc. of the goods they purchase from a manufacturer. Coupled with the fact the CRA 2015, s.48 offers no definition for what a services contract is, it seems the Act has missed an opportunity to fully clarify this complexity.

3: The lines blurred between a term and a representation
One of the new provisions is CRA 2015, s. 50 that makes pre and post contractual representations about service provisions an implied term of the contract, provided it is taken in to account by the consumer in making a decision about the services.

The difficulty here is that terms and representations are not the same thing and might cause some litigation on the matter. The reasons it was brought in is detailed in the Act's Explanatory Notes para 246, which were to stop service providers making inflated claims about their service provisions they can offer and to ensure parts of the 2013 Regulations (another reference to them) are enforceable.

Thus, if the consumer can show they took a representation in to account then this would amount to a breach of contract. However, terms and representations are distinct and making a representation a term creates uncertainty. It was already possible for a consumer to show a statement was both a representation and a term, but now, it seems, it is only a term. For example, a representation could be a term depending on the importance of the statement to the consumer, Bannerman v White (1861) 10 CBNS 844. So is it required that the consumer show there was a representation or the representation amounted to a term?

If the Act is taken literally the two things required are 'a representation' and 'take in to account'. This suggests that it would require a dual objective/subjective test. First a representation would form the objective assessment. Under common law for a representation to become a contractual term depends on whether the individual making the representation should bear contractual responsibility rather than whether they have agreed, Heilbut, Symons & Co v Buckleton [1913] AC 30, HL. Whether an individual should bear contractual responsibility appears to be a value judgement depending on matters such as the relative importance the consumer placed on the statement made, Bannerman, and any special knowledge the service provider had, Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd [1965] 1 WLR 623; Chess Ltd v Williams [1957] EWCA Civ 5; [1957] 1 WLR 370.

It is questionable whether this will be followed, that the consumer will need to show that the service provider should bear contractual responsibility. If not then the other option is to simply show the standards for a misrepresentation, which might be innocent, fraudulent, negligent, or statutory. These generally require a statement of fact, to be made to the claimant, and induce them in to the contract.

It would then have to be shown that the consumer took it in to account, forming the subjective part. Inducement under common law is a fairly low threshold requiring the consumer to show it was one of the reasons they entered in to the contract.

4: Weaker/Simpler Remedies
This leads on from the terms/representation divide. If a representation is now a term only then the consumer can no longer benefit from the remedies that a misrepresentation offers. It is easier to get out a contract for a misrepresentation than it is a breach of contract. The latter requires the term to be a condition i.e. a serious breach, while the former allows recession for any misrepresentation regardless of its significance, albeit recession can be denied by the court with reference to equitable considerations, Misrepresentation Act 1967, s.2(2).

The measure of damages may also be different for a representation and term. A remedy for breach of term is forward looking, looking to put the individual in a position they would have been in if the contract had been performed. A remedy for a misrepresentation is backward looking, looking to put the individual in a position they would have been in had they not entered the contract.

By making representations terms, the consumer is seemingly denied the choice of remedy that is most favourable to them.

As well as remedies for service contract representations, remedies for supply of goods contracts have also changed. The CRA 2015, ss.19-24 contains remedies including a short term right to reject of 30 days, a right to repair or replacement, a right to a price reduction, and a final right to reject if there has been a breach of contract as stated in CRA 2015, s.19(1). The issue here is to do with damages. The Act stipulates that other remedies can be pursued, s.19(9)-(11), which includes damages, s.19(11)(a), but does not give guidance on the calculation for damages. The Sale of Goods Act 1979, ss.51-53 do not apply the CRA 2015, Chapter 2 Part 1, which is the supply of goods contracts. Therefore damages would seemingly be calculated using the common law rules from Hadley v Baxendale (1854) 9 Ex 341. The same issue arises for specific performance, where the SGA 1979, s.52 permits specific performance at its discretion but this is mainly discretionary, Beswick v Beswick [1968] AC 58, HL.

5. Remedies: Repeat Performance
For service contracts the CRA 2015, s.55 makes available the remedy for repeat performance. The difficulty with this is, is what is the doctrine of repeat performance? And how does it differ from specific performance, which is also made available by way of s.54(7)(c)?

The Explanatory Notes at para 263 state that repeat performance can require the service provider to properly perform the service by doing it again, or part of it. It also states repeat performance is in addition to specific performance. Thus repeat performance, to be available, would seemingly require the service complained of to have already been carried out, otherwise literally repeat performance will not be possible since it is yet to have been done. In such instances, where the consumer requires performance and it has not been done at all they would have to rely on specific performance.

Why such a distinction is made is unclear and appears unnecessary and complex, the exact thing the Act was trying to remedy. The Explanatory Notes, para 263, 273 make it clear why repeat performance is provided for as an additional remedy since specific performance is an equitable remedy and not a right, and will only be provided for at the court's discretion. If that is the case why not simply make specific performance simpler by catching specific and repeat performance in section 55 rather than some elaborate and somewhat arbitrary distinction?

6: Acceptance
Consumer protected under the Sale of Goods Act 1979, ss.34-35 could lose their right to reject where they accept a breach of condition. In such instances their claim would be reduced to a breach of warranty and their claim would be in damages only.

These sections no longer apply to consumers, yet the CRA 2015 makes no corresponding provisions about acceptance. The point of acceptance is to balance the consumer's need to inspect the goods to check whether they comply with the contract against the seller's need for finality.

Yet, with no provisions on acceptance, barring any statutory limitations, it seems the buyer cannot lose the right to reject if they can establish a breach of contract. This raises a question of why there is a need for a 30 day short term right to reject and a final right to reject if a consumer cannot lose the right to reject through acceptance. The only plausible reason is that after 30 days a consumer cannot use their final right to reject or a price reduction until the seller has had a chance to repair where this is possible, s.24(5).

The lack of acceptance may also be detrimental to the seller but this is offset by s. 24(8), which allows a deduction from any refund due to the consumer based on any use the consumer has enjoyed since the goods were delivered, but this is only available after 6 months has passed, s.24(10).

Overall, the lack of acceptance may swing the balance of power too much in favour of consumers who may use products for up to 6 months and return them on the basis of a breach of contract, which sellers may have difficulty demonstrating otherwise.

7: Unfair Terms
One thing to note about unfair terms is that the law was supposedly consolidated. Well, it consolidates the legislation but not common law. The rules on incorporation and interpretation are still found there and so the consolidation is only partial.

8: Remedies for Digital Content
The consumer is entitled to compensation for damage caused to a device or to other digital content, where digital content is supplied, CRA 2015, s.46. Therefore, remedies for damage to other digital content or device is one of compensation and not damages. Thus, you are compensated for the loss suffered. This is not available though where the supplier exercised reasonable care and skill.

Alternatively the consumer can require the trader to repair the damage within a reasonable time if this is possible. However, it seems the consumer can only have one or the other. There is no provision for compensation to be given where the repair fails. This seems highly unsatisfactory if correct, since the consumer would be left without a remedy for the damaged device or other digital content. The remedy left would be the ones for the faulty digital content supplied, which may be insignificant compared to the value of the device itself, i.e. a mobile phone or a computer.

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