UK: The Distance Selling Regulations

Last Updated: 12 April 2001
Article by Jonathon Little

Increasingly customers do not meet their suppliers. Mail order, call centres and e-commerce all involve contracts made at a distance. New regulations covering these agreements1 came into force on 31 October 2000.

The regulations [1] require specific information to be given to consumers before a contract is made, [2] oblige the supplier to give further information within a set time in a specific form and [3] allow customers a period to cancel many types of agreement. They also [4] set a deadline for performance and [5] protect consumers paying with cards. The Director General of Fair Trading can apply for an injunction to enforce the new rules.

Distance Contracts

The new rules apply to consumer distance contracts (consumer contracts are made by individuals acting outside their business). An agreement is a distance contract if it is made under an organised distance selling scheme that makes exclusive use of distance communication to make an agreement. This covers all contracts made without the parties' simultaneous physical presence and includes contracts made by mail, leaflet, an advertisement with order form, catalogue, telephone call, radio, fax, teleshopping, email or over the Internet.

The rules will not apply if the scheme is not "organised". The scope of this is unclear and the DTI has given guidance station that genuine "one-off" requests are not covered unless there is an organised facility to respond (eg an established mail order facility) where the rules will apply2 . An interactive website will be caught in any event.

Some contracts are exempted (land and construction agreements, auctions, automated vending machines and contracts made with telcos from call boxes). Financial services are also exempt but will be subject to similar rules under a separate regime introduced later3. Other agreements (for accommodation, transport, catering, or leisure services that have a set time for performance, timeshare agreements or contracts for food or drink supplied by roundsmen) are exempt from most of the regulations (primarily point [5] still applies).

Information Requirements

The regulations oblige suppliers to give set information to their customers at different points in the contracting process. Suppliers must give customers information before any contract is made. This is listed4 and includes the supplier's identity, description of the goods, price, taxes, any available right to cancel, any communication charges not at a basic rate, the period for any offer and the minimum contract duration. If the supplier wants to be able to supply substitute goods, this must also be made clear. Finally, the consumer must be told that the costs of returning goods on cancellation (if this applies) will be met by the supplier.

This initial information must be given in a 'clear and comprehensible manner', appropriate to the method of communication used and following principles of commercial good faith and the need to protect children. Suppliers must make their commercial purpose (and in calls their identity) clear when they do this.

Except for one-off services agreements that are both performed and invoiced using distance communication, further information must be provided (a) before the contract or (b) 'in good time' afterwards but during performance (for services) or before delivery (for goods).

This information repeats most of the initial details and also requires conditions for any possible cancellation and return of goods, an address for complaints, after-sales and guarantee information, any restriction on termination for partially completed services and information on ending long contracts (over a year or with no duration). This must be supplied in a 'durable medium, that is 'available and accessible to the consumer'.

'Durable Medium' is not defined but it seems that where a consumer order is made by email, the information can be sent back in this form. In contrast, the distance selling directive for financial services specifically indicates information sent to a consumer's hard drive is sufficient. It is unlikely that information held on a website would meet this requirement.

Right To Cancel

A consumer can cancel a distance contract for goods within 7 working days of the earlier of (i) delivery of goods provided that the supplier has sent all required information, (ii) delivery and receipt of all required information or (iii) 3 months and 7 working days from delivery. For services, these periods are measured from the contract date rather than delivery.

The regulations give no right to cancel where services have begun with the customer's agreement (provided the customer has been informed of this), where price depends on financial prices beyond the supplier's control or where goods are customised, personalised or of a type that cannot be returned or will deteriorate or expire rapidly. Audio and video products and software cannot be cancelled once 'unsealed' (it is unclear how this applies to on-line supply but would probably cover acceptance of a 'click wrap' agreement). Finally, no right of cancellation exists for periodicals or gambling services.

A cancelled contract is treated as if it never existed. The supplier must return any payment but may charge for direct costs of recovering goods if the consumer was obliged to return them under the contract (provided that this obligation is not 'unfair' and that the customer could not have rejected the goods for example because of defects). Repayment must be made as soon as possible and no more than 30 days from cancellation. Related credit agreements are also cancelled. The supplier is responsible for passing the cancellation notice on to the creditor.

The customer must retain and take reasonable care of the goods until they are collected or delivered to the supplier. At the supplier's request, the customer must make the goods available at the customer's premises (otherwise these duties continue). Unfortunately the regulations do not expressly allow the Supplier to dictate the time and which goods are made available for collection.

If no request for collection is made by the consumer within 21 days of cancellation, their duty to take reasonable care ends. However, if the agreement obliges the consumer to return the goods on cancellation but they do not do so, this period extends to 6 months.

Time For Performance

Unless the contract states otherwise, the supplier must perform the contract within 30 days of the customer's order. If goods or services are not available, the supplier must inform the customer and reimburse any sums paid within this same period.

Card Payments

Consumers may recover payment made where a card (whether a credit, charge, debit or store card) is used fraudulently by a third party. In any claim, the card issuer must prove that use was authorised.

Conclusions

The regulations impose new obligations on suppliers and are particularly relevant to Internet based trading. Distance selling promotional materials (including web sites) must give consumers the required information before a contract is made and systems must ensure that further information is delivered as necessary (failure to do so will greatly extend the cancellation period). Terms should be checked against the new rules and cancellation obligations and procedures considered in advance.

Finally, back office systems need to track any cancellations (this is particularly important where sites are hosted by third parties). The new rules apply where the parties are at a distance but should be at the front of traders' minds.

Footnotes

1 The Consumer Protection (Distance Selling) Regulations 2000

2 http://www.dti.gov.uk/CACP/ca/dsdbulletin.htm

3 97/7/EC and 98/27/EC

4 Regulation 7

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.

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