It is estimated that £43.8 billion was spent online in the UK in 2008. This was an increase of nearly 45 per cent since 2006. The online retail market is clearly going from strength to strength and according to some reports outstripping high street retail sales. With the Government's latest pledge to ensure that all households have a minimum speed of 2Mbps for broadband by 2012 the market can only grow. As the pool of potential consumers widens it is important to educate consumers about their rights when shopping online. This article recaps on the key terms and issues to remember for the purpose of selling goods or services on line.
Contracting At A Distance
One of the main sources of regulation governing internet sales is the Distance Selling Regulations 2000. Sales between businesses are outside the scope of these Regulations. However, when contracting online it is generally safer for suppliers to assume all customers will be acting as consumers in order to ensure compliance with the Regulations, as when contracting at a distance it may not be clear whether the customer is a business or not.
Any entity which supplies goods or services to a consumer where the supplier makes exclusive use of one or more means of distance communications eg email or website must provide the following information in good time prior to the conclusion of the contract:
- the identity of the supplier, and if payment is required in advance, the supplier's address;
- a description of the main characteristics of the goods;
- the price of the goods or services including all taxes;
- delivery costs where appropriate;
- the arrangements for payment, delivery or performance;
- the existence of the right of cancellation where relevant;
- the cost of using the means of distance communication where it is calculated other than at a basic rate, eg the price of the premium rate telephone line;
- the period for which the offer price remains valid;
- where appropriate, the minimum duration of the contract, in the case of permanent or recurrent supplies of products or services;
- in the event of the goods or services being unavailable, if the supplier will offer substitute goods or services of equivalent quality or price; and
- that the cost of returning any such substitute goods in the event of cancellation would be met by the supplier.
This information does not have to be provided in writing but it must be provided in a clear and comprehensible manner. However it is strongly recommended that suppliers set out such information in the terms and conditions of sale. The consumer should have to scroll through the terms and conditions and then should be made to click to accept before moving to the next stage.
The Regulations also provide that certain other information must be provided in writing (or some other durable form) to the consumer, prior to the conclusion of the contract or (in the case of the supply of services) during the performance of the contract and at the latest at the time of delivery of goods: This information is:
- the conditions and procedures for exercising the right to cancel, including where a term of the contract requires or the supplier intends that the consumer should return the goods after cancellation;
- where the goods are to be returned after cancellation, whether the consumer or the supplier will be responsible for the cost of returning the goods, or the cost of the supplier recovering the goods;
- the geographical address of the supplier to which the customer can address any complaints;
- details of any guarantees or after sales service;
- the conditions for cancelling the contract, where it is of an unspecified duration or a duration exceeding one year; and
- prior to the conclusion of a contract for the supply of services, the fact that the consumer that he will not be able to cancel the contract once the performance of services has begun.
Right To Cancel
Goods
Where the supplier provides the information set out above, the consumer may by giving notice to the supplier cancel the contract for any reason within 7 working days beginning with the day after the day on which the consumer receives the goods.
Where the supplier does not provide the information in good time but does so within the period of 3 months beginning on the day after the day on which the consumer receives the goods, the cancellation period ends on the expiry of the period of 7 working days beginning with the day after the day on which the consumer receives the information.
Where the information is not provided at all the cancellation period ends on the expiry of the period of 3 months and 7 working days beginning with the day on which the consumer receives the goods.
Services
Where the supplier provides the information on or before the day on which the contract is concluded, the cancellation period ends on the expiry of the period of 7 working days beginning with the day after the day on which the contract is concluded.
Where the supplier does not provide the information at all, the cancellation period ends on the expiry of the period of 3 months and 7 working days beginning with the day after the day on which the contract is concluded.
Therefore to save confusion and to ensure that the period of cancellation is limited to 7 working days, it is important to ensure that all of the information listed above is provided to the consumer at the outset and prior to the conclusion of the contract.
Exceptions To The Right To Cancel
There are certain situations when the consumer will not have the right to cancel the contract including:
- where the required information has been supplied and the supplier has commenced the performance of services before the end of the cancellation period;
- contracts for the supply of goods or services, the price of which is dependent on fluctuations in the financial market which cannot be controlled by the supplier;
- goods which due to their nature can not be returned easily such as bespoke goods or goods which deteriorate easily eg food products;
- supply of audio or video recordings or computer software if they are unsealed by the consumer;
- newspapers, periodicals or magazines; and
- gaming, betting or lottery services.
In each of these situations the consumer must be made aware in advance that they will not have a right to cancel.
Consequences Of Cancellation
In the event that the consumer does cancel the contract, then the supplier must reimburse any sum paid by the customer under or in relation to the contract (including delivery costs and any deposit) within 30 days of the notice of cancellation being given. Where notice of cancellation is given it also cancels any related credit agreement.
If the consumer has received the goods they will be under a duty throughout the period prior to cancellation to retain possession of the goods and to take reasonable care of them. On cancellation the consumer is under a duty to return the goods to the supplier. The terms may be open to objection if they allow the supplier to make a refund conditional on the customer returning the goods. Often in practice the supplier requires the goods to be returned before a refund will be processed, which is contrary to the Regulations.
If the supplier wants the customer to pay for returning the goods then this must be clearly stated in the contract (unless they are substitute goods in which case the supplier must always be responsible for the cost of returns). Where the contract requires a customer to return cancelled goods at their own costs and the customer fails to do so, the supplier can charge them the direct cost of recovering the goods.
Suppliers cannot insist that goods are returned as new or in original packaging as customers must be entitled to inspect the goods. Suppliers can only request that original packaging is returned with the goods and that customers exercise reasonable care when examining them. If customer fails to returns goods then the supplier has a claim against the customer for damages.
Exempt Contracts
Not all business to consumer contracts are regulated by the Distance Selling Regulations. Those which are exempt are: contracts for the sale of land, contracts for the construction of a building where the contract also provides for sale of land, financial services agreements, contracts concluded by means of an automated vending machine or automated commercial premises, contracts concluded with a telecommunications operator through the use of a public pay phone and auctions.
Enforcement
The OFT and the Local Authority Trading Standards Services have the powers to take enforcement orders (or "Stop Now Orders") through the court to ensure that businesses comply with the Regulations. There are a number of actions which are undertaken by the OFT. Following its "Scams Awareness" campaign started in February 2009, along with its new powers under the Consumer Protection from Unfair Trading Regulations 2008, we can be sure that the OFT will seek to enforce the Regulations to protect consumers and to regain their confidence in online retail sales.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
