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Covid and Cancelling Consumer Contracts

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On 28 August 2020, the Competition and Markets Authority (CMA) published an updated version of its "Statement on coronavirus (COVID-19), consumer contracts, cancellation and refunds" which was first published on 30 April 2020.

The statement now addresses consumers' rights where lockdown laws do not prevent a trader providing a service but change how it can be provided:

  • If the service which can be provided is radically different to what was agreed the consumer would normally be able to cancel and receive a full refund.  
  • If the differences in the service that can be provided are only minor a consumer should be able to choose between cancelling on the trader's standard terms (provided these are fair) or going ahead and receiving a proportionate discount.

The CMA also discusses the position where compliance with COVID-19 restrictions imposed as a matter of Government guidance (rather than legislation) would prevent a consumer receiving a service. The CMA considers that in these circumstances a contract is less likely to be frustrated and the consumer would have to cancel on the trader's standard terms, provided these are fair. However, the statement stresses the importance of encouraging compliance with such guidance and urges traders to treat consumers fairly.

Other revisions to the CMA's statement flag that consumers should not be required to take unreasonable or unnecessary steps in order to obtain refunds and that a formal claim is not required in order for a refund to be due.  

Amendments to the section dealing with the timing of repayments suggest that disruption caused by COVID-19 is now less likely to be an acceptable excuse for late payment.  

A new section reminds traders that their standard terms should set out clearly and prominently what sums they will retain or charge on consumer cancellation and that such sums must reflect what they are actually losing and not be excessive.

Further guidance is set out at https://www.gov.uk/government/publications/cma-to-investigate-concerns-about-cancellation-policies-during-the-coronavirus-covid-19-pandemic/the-coronavirus-covid-19-pandemic-consumer-contracts-cancellation-and-refunds