173 4â Distance selling
contract.31 It remains open to the court, on an application by the service provider, to render the contract valid and hence enforceable.32
(f)â Remedies
Remedies are provided for breaches of the various requirements referred to above, as the recipient of the service may make a claim for damages for breach of statutory duty against the service provider in respect of any such breach.33 This applies to breaches of regulations 6 (general information to be provided), 7 (commercial communications), 8 (unsolicited commercial communications), 9(1) (information to be provided when concluding a contract) and 11(1)(a) (acknowledging receipt of an order). When a breach of regulation 9(3) of the 2002 Regulations has occurred (the requirement that the service provider will provide the recipient with the terms and conditions of the contract in a way that he can store and reproduce), the recipient may seek an order from the court requiring the service provider to comply with the statutory requirement and provide the recipient of the service with the contractual terms and conditions in the appropriate format.34
(g)â Electronic signatures
The parties to the contract may wish to enhance the security of the contract by using an electronic signature, which authenticates the identity of the person using it. In the United Kingdom, electronic signatures are subject to the provisions of the Electronic Communications Act 2000 and the Electronic Signatures Regulations 2002.35 The need to provide the three digit security number from the reverse of a credit card when using the card to place an order on the Internet would be deemed to be confirmation that the person placing the order has access to the card. One of the most significant uses of electronic signatures in commercial law is to be found in the Consumer Credit Act 1974 (Electronic
Communications) Order 2004,36 which now facilitates the making of consumer credit agreements by electronic means.
Q3 Do the Electronic Commerce (EC Directive) Regulations 2002 ensure that, when contracting online, both parties have sufficient information to know both whether a contract has been concluded and, if so, upon what terms and conditions?
4â Distance selling
Distance selling, by which the seller or supplier and the buyer transact at a distance, encompasses not merely Internet trading but also includes other
31 |
Ibid. reg. 15.â |
32â Ibid. |
33 |
Ibid. reg. 13.â |
34â Ibid. reg. 14.â 35â SI 2002/318. |
36 |
SI 2004/3236, which was made under the Electronic Communications Act 2000, s.8. |
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174 E-commerce and distance selling
situations such as buying from catalogues or newspapers and contracting by phone. The common factor in these situations is, of course, that the contracting parties never meet. Where the parties are both acting in the course of a business, normal contractual principles such as caveat emptor and freedom of contract apply and the parties have the flexibility to decide what information they need about each other and about the subject matter of the contract, including the contractual terms and conditions. If contracting via the Internet, traders will need to comply with the Electronic Commerce (EC Directive) Regulations 2002 as set out above, although, where the purchaser is a non-consumer, the parties can agree to set aside some of the provisions37 if they so choose. Apart from these controls regarding Internet sales, the parties in a business-to-business contract are free to contract as they see fit.
Consumers present a different case, however, because in the majority of such trading situations there is no equality of bargaining power between the business supplier and the consumer buyer. As a result, consumers are perceived as being vulnerable, this being particularly true when they are contracting at a distance. Consequently, additional protection for the consumer in business-to- consumer distance contracts38 is provided through the Consumer Protection (Distance Selling) Regulations 2000,39 which specify information requirements in distance contracts and legislate for cancellation periods. When purchasing goods or services via the Internet, the protection for consumers under these Regulations will be in addition to that provided by the Electronic Commerce (EC Directive) Regulations 2002. The Consumer Protection (Distance Selling) Regulations 2000 apply to all distance contracts other than those which are excepted contracts under regulation 540 and those in respect of which the Regulations only apply in part.41
37See SI 2002/2013, regs. 9(1), (2) and 11(1).
38The Consumer Protection (Distance Selling) Regulations 2000, SI 2000/2334, do not extend to consumer contracts. Hence, a consumer buying goods from another consumer whether via the Internet or through the small ads in a paper or magazine, would not be protected and the normal principle of caveat emptor would apply.
39SI 2000/2334. These Regulations give effect to Directive 97/7/EC on the protection of consumers in respect of distance contracts. For a discussion of the background to this Directive, see Lodder and Kaspersen, above n. 1 at 11.
40The excepted contracts are those for the sale or other disposition of an interest in land, except for rental agreements; the construction of a building where the contract provides for the sale or other disposition of the land on which the building is constructed, except for rental agreements; contracts relating to financial services; contracts concluded
via vending machines or automated commercial premises; contracts concluded with a telecommunications operator through the use of a public pay-phone; and contracts concluded at an auction.
41SI 2000/2334, reg. 6 provides that the Regulations only apply in part to timeshare agreements under the Timeshare Act 1992 and contracts for a ‘package’ holiday under the Package Travel, Package Holidays and Package Tours Regulations 1992, SI 1992/3288.
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(a)â Information requirements
Regulations 7 and 8 detail the information requirements, the time within which the information must be provided and the format in which some of it must be provided. In a provision not dissimilar to provisions under the Electronic Commerce (EC Directive) Regulations 2002, regulation 7(1) of the Consumer Protection (Distance Selling) Regulations 2000 requires that a supplier must provide the following information to a consumer ‘in good time prior to the conclusion of the contract’. The provision of the information at this point ensures that the consumer can make an informed decision about whether to contract with the identified supplier for the particular goods or services.
The first required information is the identity of the supplier and, where payment in advance is required, his geographic address.42 This requirement to specify the address where prior payment is intended ensures that the buyer can contact the supplier in the event of the goods or services not arriving when they should or not complying in some way with the contract, e.g., not being of satisfactory quality. Arguably, the need to specify the supplier’s address is less urgent when the consumer is not due to pay for the goods or services until after he has received them and has had the opportunity to inspect them to ensure compliance with the contract.43
The next five information requirements relate to aspects of the goods or services, delivery and cancellation.44 They require a description of the main characteristics of the goods or services;45 the price of the goods or services, including all taxes and delivery costs where appropriate;46 arrangements for payment, delivery or performance; and the existence of a right of cancellation, except for those cases referred to in regulation 13 of the 2000 Regulations.47 The net effect of these provisions is to ensure that the buyer has a comprehensive understanding of the goods or services that he will be acquiring and the contractual rights and liabilities that accompany the purchase. The underlying importance of this is demonstrated by the requirement in regulation 8 that this information must be provided to the consumer in writing or in some other durable medium that is available and accessible to the consumer, either prior to the conclusion of the contract or thereafter in good time or, in any event, during the performance of any contract for services, or no later than the time of delivery for goods where
42SI 2000/2334, reg. 7(1)(a)(i).
43For a discussion of the buyer’s right to a reasonable examination of the goods see Part 2 Chapter 2.
44SI 2000/2334, reg. 7(1)(a)(ii)–(vi).
45For a non-exhaustive list of the ‘main characteristics of the product’ under criminal trading law, see the Consumer Protection from Unfair Trading Regulations 2008, (SI 2008/1277) reg. 5(5). See also Part 4 Chapter 2 of this text.
46A supplier may make delivery charges for delivering goods to the buyer’s home, as the Sale of Goods Act 1979, s.28 provides that, in the absence of any express of implied term in the contract, the normal place of delivery is the seller’s place of business or, failing that, his residence. See Part 2 Chapter 3 for a full discussion of the law relating to delivery of goods.
47These exceptions will be dealt with below when looking in detail at cancellation rights in distance contracts.
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the goods are not for delivery to a third party.48 However, it should be noted that this requirement does not apply where any contract for services are performed through the use of distance communication49 and are either only supplied once or are invoiced by the operator through distance communication.50
While the information requirements of regulation 7(1)(a)(i)–(vi) of the 2000 Regulations are of primary importance such as to justify them being provided to the consumer in a durable form, regulation 7(1) also specifies three other pieces of information that must be provided prior to the conclusion of the contract but which do not have to be provided in a durable form. These are the cost of using the means of distance communication if it is to be charged at other than the basic rate;51 the period for which the offer remains valid; and, where appropriate, the minimum duration of the contract where the contract in question provides for the supply of goods and services which are to be provided either permanently or recurrently.52 Thus, for example, if a consumer contracted over the Internet or by phone for the provision of a new mobile phone service, he would be entitled to be told if the contract of supply for the phone service was subject to a minimum duration, e.g., twelve months.
Ordering goods by distance contract without any direct contact between supplier and buyer may result in the prospective buyer making a contractual offer for goods that the supplier is no longer able to supply because, for example, he has run out of stock. In that situation, the supplier could simply reject the contractual offer but it may be that he would prefer to supply an alternative product that may prove acceptable to the prospective buyer, although the latter would not be obliged to accept the alternative goods as they are not the ones which he offered to buy. If the supplier intends to offer alternative goods or services or ones of equivalent quality and price to those ordered, he must inform the consumer of that fact and make clear that the supplier would bear the cost of returning the substitute goods to the supplier if the consumer chose to reject them.53
When providing any of the information required by regulation 7(1), the supplier is under a duty to make clear his commercial purpose54 which, in the case of a telephone conversation, will be satisfied by the supplier identifying himself and the commercial nature of the call at the outset of the conversation.55 Whatever the nature of the distance communication used in the making of the contract, the supplier must ensure that all of the information required under regulation 7(1) is provided in a clear and comprehensible manner appropriate to the distance communication being used and with due regard to the principles
48SI 2000/2334, reg. 8(1).
49This would include, e.g., the provision by the supplier of a computer program.
50SI 2000/2334, reg. 9(1).
51This would include, e.g., the cost of premium phone lines or any additional cost attached to using a mobile phone.
52 |
SI 2000/2334, reg. 7(1)(a)(vii)–(ix).â 53â Ibid. reg. 7(1)(b) and (c). |
54 |
Ibid. reg. 7(3).â 55â Ibid. reg. 7(4). |
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of good faith56 in commercial transactions and protection of those unable to give consent for themselves,57 e.g., minors or vulnerable adults.
In addition to providing the information required by regulation 7(1) in a durable medium, regulation 8(2)(b) of the 2000 Regulations details other information that must be supplied to the consumer either in writing or in another durable medium available and accessible to the consumer. This includes information about the buyer’s cancellation rights under regulation 10;58 the geographical address of the supplier’s business;59 information about any after-sales services and guarantees;60 and the conditions under which the buyer can exercise any cancellation rights if the contract either exceeds one year in duration or is of an unspecified duration.61 With respect to cancellation rights under regulation 10 of the 2000 Regulations, the information that must be provided is whether the consumer must return the goods to the supplier when cancelling the order; whether it is the supplier or the consumer who must pay the cost of returning the goods; and, in the case of a contract of services, the effect of the consumer agreeing to allow performance to begin before the expiry of the cancellation period.62
Q4 Consider whether the information requirements of the Consumer Protection (Distance Selling) Regulations 2000 are sufficiently comprehensive to allow the consumer to contract with confidence.
(b)â Cancellation rights
Regulation 10 of the 2000 Regulations details cancellation rights, with regulations 11 and 12 prescribing the relevant cancellation periods within which those rights may be exercised. Essentially, the consumer can validly cancel the contract by giving a notice in writing or in some other accessible and durable medium, either to the supplier or to any other person that the supplier has indicated is able to receive such notification on his behalf. There is no specific requirement as to the content of the cancellation notice other than that it must make clear the intention of the consumer to cancel. When validly served, the effect of the notice is to render the contract as if it had never existed. Valid service requires that the notification has been left or posted to the supplier at his last known address, or faxed to the supplier’s business fax number, or sent to him via electronic mail at his last known email address.63 It follows that, in an
56 The statutory use of the concept of ‘good faith’ on the part of the trader when protecting consumers is becoming more common in legislation that gives effect to EU Directives. See the definition of ‘professional diligence’ in SI 2008/1277, reg. 2, which depends on the ‘general
principles of good faith in the trader’s field of activity’. Those Regulations give effect to Directive 2005/29/EC concerning unfair business-to-consumer commercial practices in the internal market. See also Part 4 Chapter 2 of this text.
57 |
SI 2000/2334, reg. 7(2).â 58â Ibid. reg. 8(2)(b). |
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59 |
Ibid. reg. 8(2)(c).â |
60â Ibid. reg. 8(2)(d). |
61 |
Ibid. reg. 8(2)(e).â |
62â Ibid. reg. 8(2)(b).â 63â Ibid. reg. 10. |
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Internet-based contract, valid cancellation could take place by the consumer sending an email to the trader.
However, not all distance contracts include cancellation rights. Regulation 13(1)(b)–(f) of the 2000 Regulations provides some straight-forward exceptions to the provisions of regulation 10. These excepted contracts comprise contracts for the supply of goods and services, the price for which depends on fluctuations in financial markets that cannot be controlled by the supplier; for the supply of goods which have been made to the consumer’s specifications or are personalised; for the supply of goods that cannot be returned because they will deteriorate or perish rapidly; for the supply of audio and video recordings and computer software when the consumer has broken the seal on the goods concerned; for the supply of newspapers, periodicals or magazines; and contracts for betting or lottery services. All of these contracts are easily identifiable, dealing as they do with very specific situations and creating reasonable exceptions to the regulation 10 rights.
The remaining exception is under regulation 13(1)(a) and is of more general effect. It relates to contracts for the supply of services, which may be many and varied. The exception deals with the situation where the performance of the contract has begun before the end of the relevant expiry period for notice and, further, where the supplier has supplied the relevant information under regulation 8(2) to the consumer. Given the range of potential service contracts, covering everything from hiring a car to downloading computer programs to having double glazing installed, it is very important for the consumer to be aware that allowing performance to start may affect his cancellation rights. If it does, the consumer will be bound by the contract.
(c)â Cancellation periods
The period during which cancellation can occur is dependent upon whether the supplier has provided the information required under regulation 8. In practice, prolonging cancellation periods can be a very effective way of encouraging suppliers to provide the requisite information at the correct time. Cancellation periods for goods and services do vary although there is a commonality of approach in setting them. For both goods and services, the cancellation period starts on the day that the contract is concluded.64 Thereafter, in respect of contracts for goods, the cancellation period expires seven days after the consumer receives the goods on condition that the supplier has complied with the regulation 8 information requirements.65 However, if the supplier is late in providing the relevant information, but nonetheless does so within three months of the contract being concluded, the cancellation period expires after seven working days beginning with the day after the one on which the consumer received the information.66 Finally, if the supplier does not supply the requisite information
64 |
Ibid. regs.11(1) and 12(1), respectively. |
65 |
Ibid. reg. 11(2).â 66â Ibid. reg. 11(3). |
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at all, the cancellation period will expire after three months and seven days |
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beginning with the day after which the consumer received the goods.67 |
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The cancellation periods for contracts for services are the same as those |
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for goods, when the regulation 8 information was provided either when the |
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was concluded or within a period of three months thereafter or, alter- |
natively, was never provided at all.68 The difference in respect of contracts for services comes when performance of the contract has started, because, at that point, the consumer will have derived some benefit from the contract, which, unlike goods, cannot be returned following cancellation. Once performance has started, it is impossible for the contracting parties to return to the prior status quo. This necessarily places a duty on the consumer to consider his position carefully before allowing performance of the contract to start. It is, of course, possible for performance to begin before the supplier has provided the relevant regulation 8 information, so the consumer should be wary. Regulation 12(3A) of the 2000 Regulations covers the situation where performance has started with the consent of the consumer within seven working days starting with the day after the one on which the contract was concluded and the supplier has provided the regulation 8 information in good time during performance, though not necessarily before performance started. In that situation, the cancellation period expires after seven working days beginning the day after the consumer receives the information or, alternatively, if the performance finishes before that period has expired, then on the day that the performance is completed.
The right to cancel a contract for goods or services brings with it other rights and obligations. The supplier must reimburse any money that he has received under the contract69 together with any part-exchange goods,70 while the consumer is under a duty to take care of any goods that he has received under the contract and return them to the supplier.71 Further, cancellation of the contract will also bring about the automatic cancellation of any related credit agreement,72 with regulation 16 of the 2000 Regulations stipulating the method for concluding the financial arrangements.
The Directive underpinning these Regulations73 has been replaced along with three other Directives with the passage of the Consumer Rights Directive.74 This Directive will introduce maximum harmonisation provisions for distance contracts75 and hence it is hoped will promote cross-border trading, particularly via the Internet.
67 Ibid. reg. 11(4).â 68â Ibid. reg. 12(2), (3) and (4).â 69â Ibid. reg. 14
70Ibid. reg. 18(1). If, however, the supplier cannot return the part-exchange goods because he no longer has them, he must pay the consumer a sum equal to the part-exchange allowance. This would be a typical situation in respect of cars provided in part-exchange, as the supplier is likely to dispose of the part-exchange vehicle through the trade very soon after receiving it.
71Ibid. reg. 17.â 72â Ibid. reg. 15.
73Directive 97/7/EC on the protection of consumers in respect of distance contracts.
74See above n. 3.
75As opposed to the minimum harmonisation provisions that exist currently.