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ENHANCING CONSUMER CONFIDENCE BY CLARIFYING CONSUMER LAW – CONSULTATION OF THE SUPPLY OF GOODS, SERVICES AND DIGITAL CONTENT

About the RMI

The Retail Motor Industry Federation (RMI) is the UK's leading automotive trade body, representing franchised car and commercial vehicle dealers, independent garages, bodyshops, motorcycle dealers, petrol retailers, auction houses and cherished number plate dealers, who provide sales and services to motorists and businesses across the UK.

Introduction

The following submission is in response to the consultation paper put forward by BIS in relation to consumer rights and consumer law. The following is to be read in accordance with the consultation paper and endeavours to answer succinctly the questions put forward within the consultation. The answers that follow do not run in chronological order as set out in the paper but rather cover the key areas of reform under headings with the appropriate questions listed below. The RMI look forward to reading the delivered response.

It is clear the aims of the proposed reforms are to clarify and simplify consumer rights for the benefit of consumers and businesses. The European Consumer Rights Directive (CRD) was openly reformed in order to narrow the scope of its legal width, and as such it is worth questioning to what extent the Government will be able to successfully develop a piece of legislation to be all encompassing as proposed. The weight of the legislation alone will be dense due to the scale of reform proposed, irrespective of the complex nature of the content of consumer law. As such, it must be considered at length if simplification can be truly achieved from such a project.

It is worth noting within each of the three reform areas; supply of goods, supply of services and digital content, huge differences can be found in how each are practised by businesses. The differences can be attributed to the nature of each area. For example, when considering business methods involved in the supply of goods, the very cost of a good can have a huge impact upon consumer’s expectations. This affects how sub-standards should be rectified, which is not often the case in terms of the supply of services. It is to be submitted that the three areas are to be tackled separately, even if placed in one piece of legislation and as such, any section within the act should direct a consumer or trader specifically to the legislative guideline regulating the supply of goods, services or digital content. Any cross over or repetition should be repeated again within the appropriate statutory section. The importance of creating clearly separate guidelines is to ensure clarity is achieved in a complex area of law.

As heavy emphasis is placed throughout the consultation paper on the need for consumer confidence, the RMI is concerned as to the neutrality of the finalised statute if many of the proposals are adopted. It is important not to alienate businesses and ensure an impartial piece of legislation is achieved, to certify businesses do not suffer from an increase in consumers seeking costly and unnecessary redress, ultimately leading to the increased purchase price of goods and services to cover profit deficits and an increase in insurance policies.

The RMI will answers questions concerning the supply of goods and the supply of services.

Formation

Question 1. Do you agree that all businesses should be subject to the same framework of consumer protection for the sale and supply of goods, services and digital content, or

Do you consider that micro-businesses should be exempt from any or all of the new proposals and remain subject to the current framework? (4.21-22)

Whilst all businesses working in the same sector should arguably be subject to the same legal framework, this is not necessarily appropriate across the market as a whole. Differences, for example between liability for goods and liability for services should remain different. A degree of flexibility needs to be ensured within the legal frameworks for each area of trade (goods, services, digital content) to account for the different types of goods and services that are available and the unforeseen circumstances that may be a hindrance to one but not the other.

The result of creating a long, lengthy and restrictive piece of legislation is far from simplicity and clarity but further confusion and legal cost. Ultimately any additionally incurred costs will be burdened upon consumers as businesses find alternatives to account for profit deficits – often through increasing purchase prices. It must not be disregarded through providing over expansive rights to consumers, businesses will be left in a restricted and vulnerable position due to the consumer’s ability to manipulate their rights over the business. This is dangerous as exampled above; a high turnover in consumer redress will result in increased purchase prices for goods and services.

Micro businesses

The RMI feel it is important to hold accountable micro businesses under the same statutory instruments as other businesses. Micro businesses thus should not be exempt from the reforms. This will allow for market access and development – encouraging consumers to use businesses not necessarily part of a known brand or franchise – feeling safe in the knowledge their rights are protected. This enables the removal of market manipulation and provides equal market opportunities for businesses.

Definitions

Throughout the consultation paper, a proposal has been submitted to unify the definitions of key terms. The position of the RMI in respect of doing so will be answered in one response. The following questions will be considered in this response:

- Question 2 - Question 3 - Question 24 - Question 16

The RMI does not see any potential problem occurring from providing unified definitions for ‘consumer’ or ‘trader’, nor with the proposed definition for ‘goods’ or the divisions of services.

The RMI’s National Association of Motor Auctions (NAMA) is keen to enforce the importance of maintaining auctions beyond the remit of consumer and agrees strongly with the government proposition to be exempt from this.

Dangerous Goods

In defining ‘dangerous’, the consultation paper has suggested using the General Product Safety Regulations 2005 (GPSR 2005) as the model for which the definition will be taken. However, the requirements and definition of ‘dangerous’ provided by the regulation is simplistic in approach:

General Safety Requirement

5(1) No producer shall place a product on the market unless the product is a safe product.

As such, all reference is made towards a product being ‘safe’ as opposed to defining what dangerous is. Neither ‘safe’ nor ‘dangerous’ are accompanied by criteria. Therefore, in order for simplification and to ensure traders and consumers can determine the status of a product correctly (preventing/minimising legal costs through dispute), a test or full bodied definition must be drafted and implemented into the revised statutory instrument.

Terms and creating a contractual relationship

A heavy focus has been placed on moving away from implied terms and towards the creation of statutory guarantees. The following submission is in response to:

- Question 4- Question 5- Question 25 - Question 27- Question 33- Question 34- Question 39

Implied Terms – statutory guarantees

The RMI can see both positives and negatives to the introduction of statutory guarantees in replacement of implied terms. Objectively, the Government’s reasoning behind proposing to adopt statutory guarantees is stated within the word itself. Guarantees enable a guaranteed set of rights and standards that consumers are entitled to receive and traders must provide. The result of this is proposed to eliminate costly disputes arising as to whether an implied term is present or has been adhered too. However, the RMI feel that the benefits of statutory guarantees are not necessarily as clear cut as presented in the reform package.

Moving away from a model of implied terms may cause restraints on businesses and as such any restraint will be felt to the detriment of consumers. Implied terms enable businesses to account for individual contracts. For example, a term can be implied for one consumer that may not necessarily be needed for another, without causing significant changes to a traders’ business practice. Furthermore, implied terms account for the reality that both traders and consumers (both agreeing to the terms) may not contemplate all contingencies that could arise. However, with the ability of interpretation and flexibility accessible through implied terms, these can be accounted for. As contracting parties, consumers and traders have a desire to create contracts which will work to achieve the needs they require of it and as such the specific requirements of the contract. The

inference of creating a contract is it is ‘willed’ by the parties, ‘as part of their contract...implied terms can all, therefore, be imputed to the will of the parties’1.

Goods

It is acknowledged within the consultation paper, in relation to goods, the terms presented as the statutory guarantees would not be far removed from the current implied terms. Therefore, it is questionable what beneficial changes to the current system of implied terms would practically generate. Whilst undoubtedly a set of statutory guarantees would provide an element of clarity, in so far as the terms could be accessed from one piece of legislation, the element of subjectivity within the guarantees is not necessarily set to be eliminated. ‘Goods’ themselves are a vast range of commodities and as such cannot necessarily be compared. The needs, requirements and expectations of a car cannot be compared to that of a cosmetic product, however, these are both ‘goods’ and will fall under the definition of ‘goods’.

In response to this, the proposed statutory guarantees will have to be both flexible and adaptable to account for the differences in traders supplying different goods. Therefore, an element of subjectivism would still be required in terms of whether it was reasonable to impose a guarantee to a specific good. It is thus arguable that the legal uncertainties of these statutory guarantees will be the same, if not intensified, with the removal of implied terms. Flexibility for businesses to adapt contracts to the needs of goods will be compromised and with set standards visible, goods may be subjected to conditions that are unreasonable to that specific product.

In addition, it is widely recognised the ‘courts do not imply terms where it would be reasonable to do so but only where it is necessary to give business efficiency to the contract2’. Therefore it can be stated implied terms, whilst remaining flexible, are not detrimental to consumers or abused in favour of either party, hinging on the principle the law should be certain over fair. In terms of higher value goods, contracts (and thus the implied terms that compromise the contract) will be examined by a consumer to a greater degree and any uncertainties that may be found confusing can be queried by the consumer and answered by the trader during negotiations. It is common practice for traders to disclose and clarify contractual terms and the conditions of products when questioned so as to avoid a later challenge of misrepresentation.

Services

The restrictions that would be felt for the supply of goods through the implementation of statutory guarantees will also be faced by those traders providing services.

The RMI thus directs thought as to the consequence of statutory guarantees. If the former are to be adopted for the benefit of consumer simplicity, weighty consideration must be given to the flexibility that will be required to enable concessions, amendments and flexibility to accommodate the differences within goods and within services. Arguably, this will compromise the simplicity of the proposal as a result. A trader or service provider must still be provided with flexibility to account for varying circumstances. For example, a consumer may want a good replaced when economically it would be more cost effective to repair the good and the discretion and expertise of the trader must be accounted for in such circumstances. Flexibility is especially required when a trader is dealing with consumers holding emotional attachment to products. Ultimately guarantees would require extensively accurate drafting and be subject to regular review to ensure they remain functional within changing markets and economic climates.

Statutory guarantees and pre-contractual descriptions

1 Richard Austen-Baker, Implied terms in English Contract Law, Edware Elgar Publishing Inc (Cheltenham: 2011) page 29, para 2.26 2 Anson J. Beatson, Anson's Law of Contract, Ed 28, Oxford University Press (Oxford: 2002) page 145

Providing a statutory guarantee that a service will meet the description given pre-contractually is again too restrictive and falls heavily against traders. Whilst the RMI firmly believes that any information given by a consumer in advance should be clearly linked to the outcome of the service provided and any trader should perform to the aim of fulfilling contractual standards, a statutory guarantee does not provide for the inevitability of additional information acquired after contracts are completed. Additionally, in terms of services, to enforce a policy whereby a contract can be rescinded because of a failure on the part of the servicer to meet pre-contractual information does not provide for unforeseeable obstructions that may permit a service being carried to the pre-contractual agreement. There must be flexibility within any tier two remedy to provide for the unforeseeable whilst still giving a consumer access to seek redress without termination of the contract being unduly accessible.

For example, in terms of the motor industry and repair services as a whole, initial assessments are based on traders relying on information provided by a consumer when assessing the likely time frame and costs of a service. Therefore, the statutory guarantee would not allow for further development of the requirements of a service which may need to be extended or limited on further analysis of the work required. If a statutory guarantee would not allow for additions to the original time frames or costs a trader will incur, traders will attempt to protect themselves against unforeseen additional costs and as such extend the purchase price or time given. This will ultimately be at the detriment of the consumer.

Remedies and implied terms

In terms of whether remedies for a breach of contract are compromised at the expense of implied terms, it is to be submitted that, providing remedies are clearly understood, remedies are accessible. To comprehend the former does not require statutory guidance. It can be objectively assessed as to whether a good is fit for purpose and thus used for what is required of it or not. As a contract is entered in to for a specific purpose, it can be inferred in most cases both parties wish for the contract to hold and thus will fulfil any remedial obligation and/or endeavour to implement the most practical remedy.

The measurement of 30 days

Throughout the consultation paper, a requirement of 30 day’s as a length of time for consumers to assess or return goods or seek redress for services is deliberated. This concerns subjects such as the designated period for which a consumer has a right to reject substandard goods and repair times, as well as whether a default period of 30 days is appropriate to carry out services.

The following submission is in response to:

- Question 6- Question 11 - Question 14 - Question 35

The RMI moots that a 30 day period is a reasonable amount of time to ascertain whether a good fits the standard required of it. As such this would, for simplicity purposes, be the logical period provided for a consumer to assess whether a good matches its description. If a good can be assessed to work in terms of the purposes it was bought for, the same would be expected in terms of description.

The RMI endorses the necessity of a set time period for ‘reasonable’ time in terms of assessing the quality of a good. However, this same period cannot be extended to the repair and replacement process, or in relation to the period for which a service must be carried out. The RMI fully agrees that an extension to the period available for repair and replacement should be extended providing that a replacement good is given for the interim period. This is of the upmost importance in areas of high value goods whereby the standards expected

of a product are higher and often the higher the value of the product; the more complicated the functions of the good and the repair procedure. For example, where having to repair products such as cars and laptops, often a third party will have to provide specific parts to repair a problem, namely a manufacturer. A trader or service provider cannot guarantee a manufacturer will provide the replacement needed within the 30 day period suggested. If the 30 day period is to be sustained, then this must be dated from the date the replacement fixture is obtained or the requirements to provide a service have been obtained. This could be provided for by evidence of receipt or delivery. This argument also applies in terms of providing services. Furthermore, if it is unclear as to whether the breach is one of service or of good, this will extend the time period the servicer will require in order to perform the service. In relation to the above points, it is to be submitted, a statutory provision must allow for the fair and reasonable amendment of such a time frame in cases mutually recognised and agreed by both parties.

Thirdly, while the RMI welcomes the advantages of providing a replacement product to ensure significant inconvenience is not suffered by the consumer, the concession that the replacement must be of equal or higher quality to the original product is a heavy concern. This may provide for a costly burden upon some businesses. Whilst it is often general practice in many industries to provide a replacement, this is not necessarily to the same or higher standard of the original product. For example within the motor industry, a large luxury car, such as a new Range Rover Sport may be temporarily replaced with a Nissan Micra. The RMI therefore submits that providing the replacement is sufficient for the purpose of the product and it is reasonable to provide a replacement product of a less quality this should be acceptable. The product must be of sufficient use for the primary purpose and use of the product.

Exemptions to the 30 day rule

There is also a focus within the paper concerning the need for exemptions. The key question discussed here is to what extent an exemption should be allowed to the 30 day return policy when there is a clear understanding between the trader and consumer - or it is common practice there will be a delay - in using the purchased good after the purchase date. It has been mooted that delay before use of goods must be considered in terms of remedial policy for goods.

The following will cover the following questions:

- Question 7 - Question 8 - Question 9

Delay before use is a key question in terms of policy development. Whilst an exception to the 30 day rule for which a consumer must return to a trader is not necessarily too devastating to businesses, it is important to assess the possibility of complications arising from such an exemption. There is clearly a factual argument for extending the 30 day period in appropriate cases where there will be a significant delay before use of purchased goods. Arguably, if this is communicated between the consumer and trader difficulty should not arise. It may be suggested that providing documentation of the agreement in delay of the 30 day rule, or suspension of the 30 day period and then commencing this from the known date of use of the product will not present complications for traders and consumers. There is undoubtedly a factual argument for extending any period from the date of first usage.

However, complications may arise when one party feels as though an agreement has been reached, or a consumer believes a policy of expected delay for the use of a product is universal, when in practice this is specific to one business. It is not unreasonable to expect consumers to test/examine goods on purchase/arrival and thus it may be stated that complications can be avoided. Moreover, there may be a concern for traders

who manage a frequent changeover of stock, and would be unable to provide repair or replacement support for faulty goods once an extended period of time has passed.

Alternatively, in terms of consumer benefit, it may be presented that a onetime inspection of goods would not be sufficient to uncover any fault or substandard that may develop later or be uncovered with use of the product. Therefore, it would be seen as inadequate on the part of traders not to provide such remedial possibility to the consumer in the light of substandard performance.

With such a proposal, it is arguable that one party to the transaction may face a detriment or unwarranted complication in result of an exemption to the 30 day rule. Therefore, if the policy is to be implemented (in favour of consumers) rules determining the length of the extension – stating the commencement of when the 30 day rule should begin and end, predicting a date from which the product will be used – as well as stating the remedies that will be available to the consumer at that time if the likelihood or repair or replacement is unattainable due to the period of time passed. It is further suggested the requirement of specific paperwork documenting the understanding of the exemption must be provided and signed by both parties and evidence provided or legitimate explanation provided for the need for the exemption so as to mitigate any potential consumer abuses in the exemption. Alternatively, a more simplistic method would be to employ no exemption and simply make the need for inspection or use upon obtainment of the product clear to consumers prior to purchase, especially in circumstances whereby a delay may be commonly expected.

‘First Tier’ - repair or replacement

As part of reforming consumer rights legislation, the ability for consumers to be offered repair or replacements by traders for substandard goods is paramount. However, it is also crucial to ensure that any policy implemented will not hinder the ability of traders to carry out business in a profitable manner. If the latter is curtailed to such a great extent due to overzealous consumer rights policy, consumers will feel the brunt of this, as a result traders will increase the purchase cost of goods to account for deficits caused through harsh remedial penalties.

The following points of discussion are in relation to:

- Question 12 - Question 13- Question 14- Question 15- Question 16

It is important to assess the proposals in relation to repair or replacement with caution and in conjunction with the European criteria of ‘reasonable time’ and avoidance of ‘significant inconvenience’.

The RMI has analysed each of the four proposals in turn and believes that in terms of creating equilibrium between consumer rights and business profitability option 3 would be the most beneficial. This is based on an analysis of high-value goods. High-value goods are more likely to be subjected to repair and replacement as they are less likely to be easily replaced by a consumer. As such, it is arguable that when assessing which of the proposals to enforce greater weight should be given to the affect that each will have on the abilities of traders providing high-value goods. Therefore, when working with high-value goods, such as within the automotive industry, it is common practice to provide temporary replacements for the sub-standard good when repair or replacement is taking place. As such, enforcing option 3 should not cause concern to both ‘reasonable time’ or ‘significant inconvenience’ and the minor repairs, costing 5% or below of the purchase price of the product are often covered under a warranty and thus easy to accommodate.

However, it may be worth taking note of the Court of Appeal holding in Bernstein v Pamson Motors (Golders Green) Ltd 3. The Court of Appeal held three repair attempts is appropriate before rejection is permitted. Although the case was decided prior to the implementation of the European criteria, it can be inferred that the need for flexibility is paramount as smaller defects can link or be mistaken for other/larger defects, or those which are easily fixable but may require more than one attempt. Therefore, it is restrictive to have two repair attempts only before the right to rejection. Furthermore, the RMI does not feel that extending the attempts of repair to three or four would hinder the consumer or breach ‘reasonable time’ or ‘significant inconvenience’ due to the ability of temporary replacements. Furthermore; within the considerations of ‘reasonable time’ and ‘significant inconvenience’ the following is stated:

‘Reasonable time’ and ‘significant inconvenience’ are to be determined by reference to the nature of the goods and the purpose for which they were acquired.

What can be inferred from the above is the criteria are subjective and thus should be subjectively applied to goods which are acknowledged to be inherently different. Therefore, the standards of repair for a high-value good and the complexities of the goods will often be higher than those of a lower-standard good and as such the policy, if it must be unified in approach, should accommodate the high-value products in order to minimise damage to businesses who would suffer from the frequent return of sub-standard goods.

As has been previously stated, if this were to occur, consumers would feel the brunt of the effects through higher purchase prices. Option 3 would also avoid the complications that may occur under option 4 which may be more susceptible to breaching ‘reasonable time’ and ‘significant inconvenience’ unless a replacement is provided whilst a number of repairs are attempted. Whilst 14 days appears to be a reasonable period in which a number of repairs could be achieved, this does not take into account the problems that may occur due to suppliers and manufacturers who may not be able to provide specific parts within 14 days. Therefore, it would be advisable the period be extended to 30 days. Although this does not necessarily ensure the arrival of parts if a temporary is provided will not breach ‘reasonable time’ or ‘inconvenience’.

Dangerous Goods

When looking at the appropriate remedial action for dangerous goods, again this should be looked at subjectively. The severity of danger needed to warrant immediate replacement will be dependent on the definition provided for ‘dangerous’ goods, as well as assessing the use and purpose of the good. It is the definition provided that will allow for a full assessment of the effects of this proposal upon traders. The point of consideration is one of context. A fault may have caused a good to be dangerous however this does not account for the ease at which the danger may be repaired and there after continued to be used safely and productively. For example, faulty brake pads can cause a vehicle to be extremely dangerous however this can easily be fixed and as such it seems disproportionate for consumers to have an automatic right to move directly to a tier two remedy. The result of such a proposal will again result in the increase of purchase price as potentially dangerous goods will be treated over cautiously by traders.

‘Second tier’ refund – Deduction for use

The remedial action of deduction for use is a key ability for traders that must be maintained. As has been previously stated, the removal of such ability would cause significant cost increases in the purchase price of products. The significance of this remedy will also be dependent upon the choice of proposal adopted concerning repair and replacement. If a hard-line approach against traders is taken and option 1 of the proposals adopted, traders will need to rely heavily on a generous second tier remedy to ensure mitigation of losses.

3 [1987] 2 All ER

The following submission is in regards to the following questions:

- Question 17 - Question 18 - Question 19 - Question 20

It must be stated, not only in terms of the retail motor industry but for traders as a whole, especially those providing high-value products, option 1 to remove the right of deduction for use would be wholly detrimental to the process of business and would place a heavy burden and unreasonable cost upon traders. The rapid depreciation in value incurred by vehicles is felt across many high-value products, such as electronic goods and brand associated products and this must be acknowledged when assessing which proposal to adopt.

Outright, it is felt by the RMI that option 4 is a necessity to maintain and ensure fair commercial practice and market access for businesses within each sector. In terms of the motor industry, Option 4 is the most appropriate. Option 4 allows for the continuation of business practice, providing consistency across all motor retailers and providing a clear framework of expectation for consumers, taking into consideration the economic environment and the effects of this on the market and market values of which vehicle sales and valuation are highly susceptible to. Option 4 will enable the industry to regulate itself and sustain current practice.

The RMI proposes the data for which option 4 would be based upon would arguably need to be industry specific and thus, in terms of the retail motor industry, CAP Automotive Ltd or Glasses Guide would be most suitable to; monitor, provide and regulate the data from which the value of the vehicle will be measured and the calculation of deduction can be made.

In terms of which option we would employ with option 4, it is mooted option 2 is most appropriate. Option 2 provides flexibility in simply providing a minimum standard with which a deduction will be based. This allows consumers to have clear guidelines (which are currently commonly established) and traders the ability to develop their own policies, adapting for various consumers.

It must be stated however, that as seen from option 3, option 2 is also set very highly and is a heavy price for traders. This will be of greatest concern to those traders supplying products which suffer from rapid depreciation values. As such, it is submitted by the RMI that in such cases the trader should be provided with an option when calculating the deduction for use. This will consist of allowing the trader to either calculate the deduction from the use of option 4 or option 2. This will ensure businesses can mitigate their losses and ensure market sustainability, however still providing consumers with redress and consistency. Furthermore, the RMI feel if the option of using option 4 over option 2 cannot be ensured each of the options must be reassessed, redrafted and republished for debate to ensure the consultation is a neutral legislative exercise.

Remedial consistency

The following questions will be considered:

- Question 21- Question 22- Question 23

In relation to the questions concerning remedial consistency across all transaction types, the RMI agrees with the proposal in terms of simplicity and endorses the alternative solution for hire purchase. It is undoubted that any benefit in aligning the transaction types will be a consumer benefit.

Mixed Services

It can be stated that in terms of addressing mixed services, the consultation paper appears to be thin in reform and addressing the issues it has raised. It remains unclear as to how a consumer is to ascertain whether a fault it caused due to the good itself or the service employed on the good.

The following is in response to:

- Question 28- Question 29

The RMI feels the distinctions provided for supply of goods and services are adequate and simplistic. However, in terms of mixed services, theory seems to be the only comment for mixed services. Any problems within the current law will be based, as stated, with the interaction between goods and services. This can be identified in cases of repair. In terms of the motor industry, consumers are advised to approach any dispute as both service and good (where appropriate). Consumers within the motor retail industry are thus not hindered by this area of consumer law as may be the case for installation services. However, it is advisable that any complications found within mixed services, in terms of repair, should firstly be received as a service and then assessed secondly as a goods problem. This takes into consideration the level of care and skill required for services in so far as it would be expected that if a specific part (which commonly will have been ordered specifically) is faulty, as part of a service, it would be reasonable to expect this to be detected and rectified before returning back to the consumer. As such, it is recommended that services are to be assessed before goods.

Remedies for supply of services

The following will address the proposals put forward relating to the remedies available for consumers which have received a sub-standard service. It is clear there is a focus to provide a statutory instrument for which the supply of services will be provided to account for the lacking statutory implements under the current legal jurisdiction. There is clearly an objective to align the regulations and rights surrounding the supply of goods with the supply of services, however, it must be stressed the differences between supplying goods and supplying services must not be compromised in order to provide simplicity for consumers.

The questions to be addressed:

- Questions 29 – 38 - Questions 41 – 49- Questions 54 – 58 - Question 64

When assessing the benefits of aligning the statutory remedies for “faulty” or sub-standard services with those proposed for sub-standard goods, simplicity and consistency would certainly be achieved. In terms of pure services, the RMI feel an alignment will ensure goods and services reach the same standards and businesses operate at the same level. However, as adjustments have been made to the tier two remedies in order to accommodate the nature of services, the RMI is concerned that unless the process for consumers to handle mixed services is clarified, this could cause confusion as to what remedial action a consumer should take and when. Moreover, a consumer or business may attempt to manipulate which remedy to follow – tier two for goods or tier two for services – depending on which would be more economically advantageous to that party. This could cause potential for legal dispute. Nevertheless, this problem will be clearly avoided with the creation of a parallel policy for accessing a tier one remedy for both goods and services and suggested.

In terms of explicitly prescribing reduction prices to be in line to cover the element not performed with reasonable skill and care, it is submitted this could cause possible complications in assessing reasonable skill and care. Arguably, knowledge of the reasonable skill and care a service provider would have needed to execute to perform the service would be needed and this may not be understood by the consumer. Therefore, by incorporating the same wording provided for goods “an appropriate amount”, this arguably would be easier to quantify. By using this wording, the consumer can express their expectations of the service and the service provider can account for the loss obtained by the sub-standard service and make an appropriate reduction in price without the consumer being required to hold knowledge of the required care and skill needed to complete the service sufficiently. This will prevent either the consumer or the trader manipulating the standard.

A general point the RMI wishes to raise in relation to services and remedial action is any amendments to tier two must not undermine the traders ability to attempt to correct the service under tier one. The opportunity must be provided for the servicer to redo the service and only if this is refused should the consumer be able to move up the redress ladder. The service provider must have the discretion to redo the service at first instance if possible.

The above point thus leads to the proposition made in question 38. The addition to tier two remedies will move directly away from creating a piece of neutral legislation and fall directly in favour of consumers. If tier two will always provide the ability for a contract to be rescinded consumers may pursue a tier two remedy without allowing a tier one attempt, claiming ‘significant inconvenience’ is caused or the service was not being done within a ‘reasonable time’. If this is considered, heavy articulation must be given within the statute as to what will constitute fraudulent intent of the trader and thus warrant the rescission of the contract. Furthermore, this does not account for longer term contracts whereby one error on the behalf of the service provider does not reflect the average standards of the service, nor the reliance from the business upon that contract.

Codifying contractual remedies

In terms of the effect of codifying contractual remedies which go beyond recession and 100 per cent return of the original purchase price, the RMI agrees these should be left uncodified for simplicity and business confidence.

However, often confusion can be presented in terms of whether a consumer is to follow the tier remedies or general contract law remedies. Therefore, the RMI feel that it must be stated within the statutory instrument the remedial process provided for sub-standard goods and services must be exhausted before a consumer can then attempt to seek further redress from general contract law. This should be subject to the inadequacy of the remedies provided by the trader in response to their breach of contract.

In terms of providing equilibrium, if a business is to be subject to this statutory provision a consumer must also be subject to the same process, preventing alienation of businesses.

Limiting Liability

The third proposal from Part A of the services reforms provides that a trader will no longer be able to limit its core contractual liability. The RMI does not believe this will be wholly detrimental to traders as currently (as stated above) courts imply terms for business fluidity and not fairness. As such, the inference of reasonable is not centred on fairness but simply producing a result that enables the function of the contract to continue. Therefore, it is rare total exclusion of liability will be found under the current system and thus codifying this principle will not be detrimental. However, one concession to be made to the former point is again relating to pre-contractual information. Service contracts, as stated previously, are often created on information provided

by a consumer and as such, it may be necessary for a trader to be able to exclude liability for unforeseen obstructions and this should not be prevented under core contractual liability.

Strict liability standard for services

The proposal to change the liability standard for services from one of fault based assessment to one of strict liability is complicated and arguably unnecessary. Whilst for simplicity and consumer understanding it may appear at first instance appropriate to align the liability standard to that of goods and change the standard to one of strict liability, this does not take consideration of the complicated nature in assessing services , especially in relation to goods whereby it is easy to assess whether a product objectively performs its required function or does not.

As stated within the consultation paper, objectively assessing the strict liability of servicers providing services is complicated for a numerous reasons:

The gap between the consumer expectation and what is delivered could be dependent on a number of factors, for example the nature of the service; the degree of specialist knowledge or skill that the service provider deploys; the consumer’s understanding of what the service entails and the risks that things may not always work out the way the consumer thinks they should... [I]n supply of professional services there is likely to be a gap between the knowledge and expertise of the service provider and the understanding of the risks involved in the service by the customer.

Furthermore, a strict liability assessment will issue those traders providing services with a high risk of failing expectations, such as the exampled medical profession, with an unduly burdensome complication. This may affect a business’s ability to provide a service or may ensure a business incurs severe costs in terms of insurance companies as businesses attempt to protect themselves in a high risk trade whereby complaint will be high and thus so will the need and cost of protection.

It is the RMI’s judgement that the current system should be maintained and clarification or providing a test to asses ‘reasonable skill and care’ should be provided to eliminate the subjective element and need for knowledge of what the service entails. Providing the test is broad, this should be sufficient to encompass the diverse range of services. Ultimately, in cases where a business would continue to operate under these conditions, any additional cost that would be incurred due to the businesses high insurance policy will be reflected within the purchase price of the service and will become burdensome to the consumer.

Satisfactory quality and ‘fit for purpose’

In terms of enforcing a satisfactory quality standard with strict liability for services, this would undoubtedly affect current practice. Under the current system, a service is to be provided with a reasonable level of care and skill, and for goods a criterion of ‘fit for purpose’. By introducing a satisfactory quality element to services, this does not take into consideration unforeseeable events. For example, in terms of car repairs, a service may be carried out to a level of reasonable care and skill however the fault with the car is not fixed and thus satisfactory quality would not be reached in terms of ‘fit for purpose’. The fault is being caused by another part of the car however it was reasonable for the mistake to be made. Therefore, where a development occurs and the fault is more severe than first assessed, the simplistic approach of quality and a consumer expectation of ‘my car should be fixed’ places heavy burdens on traders. Thus an outcome based process would require the trader to evidence that the outcome obtained was the correct one, shifting the burden and the risk of such situations to the trader. This is the direct problem of a universal fit for purpose test for services. It would be difficult to draft a piece of legislation that was all encompassing and could accurately cater for unforeseen consequences and obstructions. This is something that will greatly hinder those businesses providing repair and diagnostic services.

Single questions

Question 10. Do you agree that the consumer should be allowed 7 days to examine the goods after any repair has been carried out, before losing the right to reject?

A defined period of 7 days after a repair has been carried out will help to clarify the law and generate a generic policy practice among all traders. However, in line with proposed reforms, it is desirable to ensure that one repair or replacement attempt is not the only chance a trader is given to repair the goods. The right to reject should be used in connection with the European standard of ‘significant inconvenience’ and ‘reasonable time’. Providing that neither of the above are breached, the right to reject can be postponed to accommodate whichever proposal is adopted in relation to attempted repair or replacements. Once the maximum attempts have been reached, the period of 7 days after the repair has been carried out should be implemented before losing the right to reject the good.

Question 11. Do you consider that there is a need for the remedies for sale by description and for misleading practices to be aligned? If yes, do you think that they should both have a period of 30 days or 90 days?

The answer to the above question is dependent on the key aim of the consultation paper. If the proposals are to ensure clarity and simplicity for consumers, then the adoption of a 30 day period would allow consistency in line with other time periods rather than creating two regimes by implementing a 90 day period, which ultimately, would risk undermining the exercise of ensuring a simplistic and clear set of rules.

However, it must be stated that the level of misleading practice implemented by a trader may vary and as such the penalty for varying degrees of misconduct must be implemented and alignment here will disintegrate. As such it is to be recommended any remedy is to apply equally to both sale by description and misleading practices, however, law surrounding contractual misrepresentation should be used a guideline for remedial action depending on the degree of malpractice and whether this was innocent, negligent or fraudulent. In turning to misrepresentation, case law, the Misrepresentation Act 1967 (namely s2(1)) and s8 Unfair Contract Terms Act 1977 can be used as the guiding principles for which to base the remedies upon and to calculate the severity of malpractice.

Concluding remarks

The following will include:

- Question 60

Throughout the consultation paper, the element of clearer law, ultimately designed for consumer benefits, often compromises the position of traders and creates a heavy imbalance within the legislation. It does not take account of the differences often between services and goods and does not allow for unforeseen circumstances. Ultimately, this will be at the detriment of the consumer as businesses will increase purchase prices to accommodate the increase in claims or additional costs of insurance policies. Undoubtedly, a clearer law and thus legal process, which are easily followed, will enhance markets through easier dispute resolution – preventing legal costs – as well as consumer confidence, not only in industries as a whole, but when using small and micro businesses. However, the legislation does not take account of the realities that most disputes turn on ‘complex and unforeseen facts’. Therefore, it is important to maintain flexibility and impartiality to ensure consumer rights are not extended to cover every possible case, hindering the majority to account for the minority.

As the aim of the proposals is to enhance consumer confidence through clarifying consumer rights, the purpose of this must be considered. The enhancing of rights is proposed to endorse consumer spending and ultimately aid the economy. The RMI is in full support of any reforms that will achieve this and feel the consultation paper is an excellent opportunity to develop this area of law and assist consumers in dealing with the confusing and piecemeal legislation currently available. Whilst the RMI fully endorses the benefits these reforms will bring to consumers, we are concerned as to the benefits traders will receive from the proposals. The costly impacts that many of these reforms will have on businesses must be of paramount concern when drafting any piece of consumer legislation. For example, when responding to the legislative proposals surrounding dangerous goods simply because consumer confidence may have initially been lost in the product does not suffice to allow automatic termination of a contract and/or damages. Policies such as this will create heavy costs for businesses in terms of insurance policies as well as ensure profit deficits and will be transferred to consumers through increased purchase prices.

It is undeniable consumer law due to its piecemeal nature is complex and thus is in need of reform. Therefore, the exercise must remain neutral and flexible and must ensure that unforeseen circumstances outside of the control of traders are not punishable through zealous consumer rights. The RMI is concerned through the introduction of statutory guarantees in replacement of implied terms there will be a heavy restriction upon traders that is not required. The RMI feel that changes should be made to consumer law where changes are necessary to ensure the reform process is manageable.

Furthermore, it must be considered that the complex nature of consumer law is inherent due to the complexities and differences between goods and services within their individual sectors. Therefore, while alignment of remedies and processes across the supply of goods and the supply of services undoubtedly has some advantages, the RMI feel that this alignment must avoid going too far. In terms of assessment of repaired goods and services it is important to ensure the distinct nature of these is not compromised. An example of this can be seen within the proposed development of an outcomes based focused scheme for services. This is in danger of placing an unreasonable burden on those traders whose work involves complex fault diagnosis.

If you require any clarification or further information from the RMI please contact Louise Wallis on 01788 538336 or email louisewallis@rmif.co.uk