CONSUMER CONTRACTS REGULATIONS: DISTANCE CONTRACTS – THE NEW LAW

This bulletin examines the new distance selling regulations which came into force on 31 October 2000. While these regulations have substantial implications for any business supplying goods or services to consumers by “distance” (meaning by such as mail order, via the internet or through telesales), they seem to have slipped in almost unnoticed. A review of a large number of websites selling goods to consumers revealed that the vast majority of websites have still not modified their contract conditions to reflect the new laws. This is worrying. The financial position of the supplier can be much enhanced by modifications to contract terms. Most importantly, the new regulations allow consumers to change their minds – they give a right to cancel. A contract is already made but the consumer can have a change of heart: so much for the age-old sanctity of the English law contract. The right to cancel is within seven days of delivery but is extended to three months if the supplier does not tell the consumer about it. All those suppliers who have not yet modified their contracts will find they have extensive cancellation periods which they could easily have avoided.

This bulletin seeks to provide a thorough examination of the new legislation. In addition, the DTI has published a detailed booklet: The consumer protection (distance selling) regulations 2000: A Guide for Business, October 2000.

Readers unsure of whether the regulations apply to them need to ask themselves two simple questions:

1. Does our business supply goods or services to consumers direct rather than just to other businesses? If no, then the regulations do not apply. If yes,

2. Does our business supply to consumers by distance methods? If yes, the regulations apply. Distance methods are defined below but are essentially most selling methods which are not face-to-face. E-commerce, telesales and mail order come within the regulations.

Timing
The regulations have applied since 31 October 2000. Businesses should therefore have already modified their contract terms to comply with the regulations. If they have not, then they should do so right away.

Background
Like most UK commercial laws, the regulations implement an EU Directive (Directive 97/7 on distance selling). The Directive will result in all 15 EU states having very similar laws in this field. They are a consumer protection measure designed to protect consumers.

They ensure consumers are given basic information such as the name of the seller, which sensible sellers already provide. They also give a new right to cancel contracts.

Key Features
In their guide to the regulations for businesses the DTI summarise the key features as:

(a) the consumer must be given clear information about the goods or services offered;
(b) after making a purchase the consumer must be sent confirmation;
(c) the consumer has a cooling off period of seven working days; and
(d) the new powers for local Trading Standards Department and the OFT.

The regulations do not apply to all distance contracts; the most important exception is for financial services (a separate proposed Directive on the distance marketing of financial services is currently being discussed).

What is a distance contract
The following is a list of means of distance communications covered by the Directive:

• Unaddressed printed matter. (The Mail Order Transactions (Information) Order 1976 is replaced by these new regulations.)
• Addressed printed matter.
• Letter.
• Press advertising with order form.
• Catalogue.
• Telephone with human intervention.
• Telephone without human intervention (automatic calling machine, audiotext).
• Radio.
• Videophone (telephone with screen).
• Videotext (microcomputer and television screen) with keyboard or touch screen.
• Electronic mail.
• Facsimile machine (fax).
• Television (shopping).

  Exclusions
  Exclusions include any contract:

  (a) for the sale or other disposition of an interest in land except for a rental agreement;

  (b) for the construction of a building where the contract also provides for a sale or other disposition of an interest in land on which the building is constructed, except for a rental agreement;

  (c) relating to financial services, a non-exhaustive list of which is contained in Schedule 2 of the regulations and includes:

  (i) investment services;
  (ii) insurance and reinsurance operations;
  (iii) banking services;
  (iv) services relating to dealings in futures or options;

  (d) concluded by means of an automated vending machine or automated commercial premises (if this has not been included then every time someone buys a bar of chocolate from a machine selling chocolate at a railway station a “distance contract” would have been formed);

  (e) concluded with a telecommunications operator through the use of a public payphone;

  (f) concluded at an auction including internet auctions. The major provisions of the Directive (relating to compulsory information to be given to consumers and the right to cancel) do not apply to contracts for the provisions of accommodation, transport, catering or leisure services, where the supplier undertakes, when the contract is concluded, to provide these services on a specific date or within a specific period.

  Changes to unsolicited goods law
  The regulations also make changes to the Unsolicited Goods and Services Act 1971. The 1971 Act is amended slightly by the new regulations, but only in relation to goods sent after 31 October 2000 (see regulation 22(4) of the Regulations.

  The 1971 Act makes it an offence to demand payment for goods known to be unsolicited. The person receiving the goods does not have to pay for or return goods if he does not want them. Until October 2000 the law contained particular periods after which the goods could be kept by the recipient. Article 9 of the EC Distance Selling Directive (97/8/EC) bans the supply of unsolicited goods and services where supply involves a demand for payment (free samples etc. are unaffected).

  The new rules provide for unsolicited goods (meaning those where the recipient has no reasonable cause to believe that they were sent with a view to their being acquired for the purposes of a business and where the recipient has not agreed to acquire or return them). The recipient may, as between himself and the sender, “use, deal with or dispose of the goods as if they were unconditional gift to him…. The rights of the sender to the goods are extinguished”.

  The Directive also exempts the consumer from the “provision of any consideration” in cases of unsolicited supply. In this context, in their 1999 consultation the DT1 said that they considered this to mean that the consumer is under no obligation to enable the supplier to retrieve the goods and services but can treat them as his or her own property from the time of receipt. That is what the new regulations now provide.

  The DTI considered this area in 1999 when revised proposals, including the removal of these requirements, were set out in a consultation paper dated December 1999 (reference URN:99/1257).

  Action for companies

  • Check if the regulations apply to the particular business.
  • Are the goods or services excluded?
  • Are the sales to consumers rather than businesses?
  • Assuming the regulations apply, check that the correct information is given to consumers.
  • Check compliance with other requirements such as 30-day delivery dates.
  • Ensure the right to cancel is implemented.
  • Take legal advice in cases of doubt.

    “Company Procedures and Precedents” Sue Singleton March 2000