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Covid-19 and commercial contracts: Traders selling to consumers

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The Covid-19 pandemic is likely to lead to a wave of disputes as to which party bears the risks of non-performance.  There are some key principles which commercial parties should consider in order to assess the likely outcome of any dispute before risking litigation, as highlighted in this series of blogs.

What if I am a trader dealing with consumers?

Unlike with business relationships, the ability to exclude or limit liability for breach of commitment as to time for performance is strictly controlled when servicing consumers. Terms governing when goods, digital content and services must be delivered will generally form part of the contract, under the Consumer Rights Act 2015 (CRA) and the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (SI 2013/3134) (CCRs). The CRA provides remedies for breach of these terms and a trader cannot exclude and, save in the case of services, cannot limit its liability for such a breach.  Any contract terms which attempt to prevent or discourage a consumer from exercising their statutory rights are also void.

However, the CMA Unfair Terms Guidance suggests that it may be considered fair to include a provision which seeks to limit liability for delays unavoidably caused by circumstances outside its control (but not events such as shortage of stock, strikes by trader’s staff, non-performance by trader’s contractors etc).  The CMA Unfair Terms Guidance states that clauses excluding liability for delay are more likely to be regarded as fair and thus to be enforceable where:

  1. The trader takes reasonable steps to prevent or minimise delay.
  2. If there is a risk of substantial delay, the consumer is given a penalty-free right to terminate.

Note that:

  • Changing Delivery Dates: Under the CCRs a delivery or performance date, as notified to the consumer, can only be varied with the customer’s express agreement.  Of course the parties could expressly agree, by exchanging emails, on a different time of delivery of the goods than the one agreed but a term in the contract which allowed the trader to make changes unilaterally would not be sufficient.
  • Rescheduling Goods: Unless delivery of goods by the initial deadline was “essential”, then the consumer’s remedy for non-delivery is to set a new deadline for delivery (which, if missed, will give the consumer the right to treat the contract as at an end). Any new deadline must be “appropriate in the circumstances”.
  • Rescheduling Services:  A consumer’s initial remedy where the deadline for performance of services is missed is to ask for repeat performance. If repeat performance is impossible or the trader is in breach of the requirement to do it within a reasonable time and without significant inconvenience to the consumer, then the consumer can move to the remedy of a price reduction.  However, where a service is ‘time-specific’, repeat performance is deemed not possible.
  • Consumer’s Right to Cancel:  If there is a delay in performing the contract, a consumer may simply exercise their cancellation right and seek a full refund.  Under the CCRs, a consumer who has bought online or otherwise at a distance or off-premises can cancel most contracts. The cancellation period runs from the time of the consumer’s order to 14 days from delivery of goods or from contract conclusion for digital content or services.  Special rules govern the supply of digital content and services during the cancellation period and the delivery of multiple lots of goods or goods which are regularly delivered.
  • Frustration: A consumer contract may be frustrated in the same way as a business-to-business contract. Broadly, if the contract is frustrated, the consumer could recover any money paid in advance for products not received, subject to the trader’s right to retain expenses. Note that if the consumer has received an unpaid-for benefit under the contract it may have to pay a “just” amount for it.

Therefore, as a  trader, if you anticipate missing a deadline, you should therefore promptly notify the consumer, propose a new delivery date range, citing any reasonable circumstances which are affecting you and seek the consumer’s acceptance of it. Generally good communication with consumers is likely to reduce disputes. However, be careful not to mislead the consumer about any right they may have to treat the contract as at an end, as this is an unfair commercial practice.