#19849 - Consumer Rights Act 2015 - Contract Law

The Consumer Rights Act 2015

This governs only consumer contracts, not business to business contracts which is the realm of the Unfair Contract Terms Act 1977.

The Scope of CRA

Part 2 deals with unfair terms. A ‘consumer contract’ is one between a trader and consumer: s.61.

Trader. A person acting for purposes relating to that person’s trade, business, craft, or profession. s.2(2)
Consumer. An individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession. s.2(3).

s.2(4) places the burden of proof on the trader to prove the person they are dealing with is not a consumer.

Part 2 of the CRA also applies to ‘consumer notices’ (s.61(7)) relating to rights or obligations as between a trader and consumer which try to exclude/restrict trader’s liability to a consumer (s.61(4)). This includes oral announcements (s.61(8)). The same principles apply to consumer contracts as consumer notices, but they are different things.

Liability Which Can’t Be Restricted or Excluded

Most terms are governed by a test of fairness, but some things can’t be restricted. When selling goods, a trader can’t avoid their implied promise that the goods are of satisfactory quality, fit for a particular purpose, or as described (s.31). s.47 extends this to cover contracts to supply digital content.

For contracts to supply services, a trader can’t restrict their liability to a consumer with respect to the trader’s obligation to use reasonable skill and care in providing services (s.57). The consumer doesn’t have to prove these terms are unfair: they are simply not enforced. This is easy protection for the consumer. It is also impossible for a trader to exclude liability for death or personal injury arising from negligence: s.65.

The Fairness Test

s.62(2): if a term is unfair, it will not bind a consumer. The court even has a duty to consider whether a term is fair even if neither party contest the fairness of the term: s.71.

s.62 provides the fairness test:

Controversially, this covers terms the consumer has individually negotiated with the trader.

Director General of Fair Trading v First National Bank

This was about standard terms of a lending agreement used by the bank. There was a standard term that if someone defaulted, the bank could demand repayment of the sum and interest, whether or not it had obtained a judgment against the borrower. HL said this ain’t unfair. There was no ‘significant imbalance’ – it’s not unfair to ask the consumer to pay the agreed rate of interest on a debt they owe. Lord Bingham flipped it, saying the absence of such a term would unbalance the contract to the detriment of the lender.

The ‘significant imbalance’ bit is important and requires an assessment of the actual contract terms. However, it’s not clear what the requirement of good faith under s.62(4) adds. It could be procedural or substantive – i.e. way the contract was formed or way the obligations were executed. Bingham thought the former but Steyn thought the latter too, saying there is overlap between good faith and significant imbalance.

The author prefers Steyn’s view. Lord Millett said it’s important to decide whether if the term were drawn to his attention the consumer would be surprised by it. This explains why terms concerning the main subject matter of the contract are not tested for fairness as long as they are transparent and understandable – if these were unfair it would indicate a bad bargain, not an unpleasant surprise.

European Guidance

The Court of Justice of the European Union’s leading case is Aziz v Caixa d’Estalvis de Catalunya, Tarragona i Manresa. The court held the significance, purpose and practical effect of the term is important, and the term must be proportionate to the reasonable objectives the term wants tot protect. The Court also held whether or not a term is unfair and contrary to the requirement of good faith will depend on whether the seller or supplier dealing fairly and equitably with the consumer could reasonably assume the consumer would have agreed to such a term in individual contractual negotiations. It’s important to look at whether the term is common, or surprising, or objectively justified. Terms might be unfair if disproportionate to achieve a reasonable aim.

ParkingEye v Beavis

Aziz v Caixa was fully endorsed by UKSC in ParkingEye v Beavis. However, it is a very flexible test, and does not guarantee judicial agreement. This was a case where ParkingEye ran retail car parks. 2 hours free, but if you overstay it’s 85. Beavis overstayed but refused to pay. He argued the clause was unfair under the statutory regime. UKSC said this is not unfair: even though it is artificial to spin a car park as a negotiated agreement to park a car, the exercise is an objective one. A reasonable motorist would have agreed to a term imposing the charge because they had the ability to park 2 hours free. Toulson dissented, citing the need for special consumer protection as per the Directive, which is in contrast to the common law position that parties should be held to their bargains. He thought the burden was on ParkingEye to show the consumer would’ve individually negotiated, agreed to the term and that it had not done so. He also thought the case watered down the Aziz test because the majority substituted their judgment of reasonableness of the clause for the question of whether the supplier could reasonably have assumed the customer would’ve agreed to the term. This would indicate a weaker test than the CJEU. The author disputes Toulson: the hypothetical negotiations are objective.

The statutory regime does not allow consumers to escape what is just a bad bargain. In Bankers Insurance v South a group booked a holiday and had an accident on a jet ski. Insurance refused to pay because there was a term saying it wouldn’t pay out for accidents involving ‘motorised waterborne craft’. Court said this isn’t unfair –...