As the online sale of vehicles becomes more prevalent, more and more consumers are looking to buy a vehicle further from home. As more sales are started at a distance it is important to know what the legal obligations are on businesses as well as the risks and costs of doing business at a distance.
Selling at a Distance
The current regulations governing distance sales are the Consumer Contracts Regulations 2013 (Consumer Contracts Regulations) which came into force 13 June 2014. If you have not amended your terms and conditions recently you need to make sure that they represent the current legal protections as a number of things changed.
What types of contract
One very important difference between these and the previous distance selling regulations is that they incorporate both distance contracts as well as those contracts previously covered by the doorstep selling regulations.
The Consumer Contracts Regulations therefore define 3 different types of contract between a Trader and a Consumer. These are important because they define what your duties as a trader are in each situation :-
- Distance contract
- Off-premises Contract
- On-premises contract
A distance contract is a contract concluded between a trader and a consumer under an organised distance sales or service-provision scheme without the simultaneous physical presence of the trader and the consumer. A distance contract must be concluded exclusively through one or more means of distance communication.
Any face to face contact will prevent a contract being a distance contract. It is not a distance contract to take a deposit over the phone provided the consumer can change their mind and get their money back in full upon attending your premises.
An off-premises contract is a contract between a trader and a consumer which is :-
(a) concluded in the simultaneous physical presence of the trader and the consumer, in a place which is not the business premises of the trader;
(b) where an offer was made by the consumer in the simultaneous physical presence of the trader and the consumer, in a place which is not the business premises of the trader;
(c) concluded on the business premises of the trader or through any means of distance communication immediately after the consumer was personally and individually addressed in a place which is not the business premises of the trader in the simultaneous physical presence of the trader and the consumer;
(d) concluded during an excursion organised by the trader with the aim or effect of promoting and selling goods or services to the consumer;
An on-premises contract is a contract between a trader and a consumer which is neither a distance contract nor an off-premises contract. Whilst many consumer protections still apply, there is no automatic right of cancellation under the Consumer Contracts Regulations.
It is very important to know which of the 3 above contract types you have entered into as many traders have entered into an off-premises contract believing that as there is face to face contact these regulations do not apply.
Now that you know the type of contract entered into, what are the requirements of the Consumer Contracts Regulation.
Where you entered into a Distance of Off-premises contract you must prior to entering into the contract provide the consumer with certain information in a ‘durable format’ and confirm this information at the time of delivery of the goods. This information includes:-
- the main characteristics of the goods or services being sold;
- your business details including any trading name, your address, your telephone number, fax number and e-mail address;
- if you are acting on behalf of another trader, their details as above;
- you need to state that you are under a legal duty to supply goods that are as described;
- full financial information including:-
- the total cost of the goods or services inclusive of taxes;
- all additional delivery charges and any other costs;
- if it is an ongoing contract or subscription service, the total costs per billing period or the total monthly costs;
- if there are charges that are not incurred in a face to face contract, e.g. handling charges, you have to highlight these additional costs.
- if applicable, how long will the contract last, and the conditions for terminating the contract;
- how the goods or services are to be paid for;
- the terms and conditions relating to any deposits or guarantees paid by the consumer;
- delivery details and process, including :-
- how and when they are to be delivered;
- by whom.
- confirmation of either :-
- the right to cancel, including the conditions, time limit and procedures (see example terms and conditions); or
- if your goods are bespoke or customized, you need to clearly state that there is no right of cancellation.
- that a charge will be made in the event of cancellation for any reduction in value of any goods (see example terms and conditions);
- whether the consumer will have to bear the cost of returning the goods in case of cancellation;
- any details of after-sale customer assistance, after-sales services and commercial guarantees, e.g. warranties;
- where applicable, any complaint handling policy.
You can provide this by email when the order is placed and through a hard copy on delivery.
Where you entered into a Distance or Off-premises contract, the Consumer Contracts Regulations provide a consumer with 14 days to change their mind. The cancellation period starts when the consumer has received both the goods and written confirmation of their rights.
If the consumer is not provided with a written confirmation of their cancellation rights, then then this is extended by 12 months. Furthermore, if you have not notified the consumer of the charges that will apply on cancellation, such as delivery and usage charges, they are not enforceable.
Get this wrong and you will be required to reimburse a consumer 100% of the monies paid for any goods up to 12 months and 14 days from delivery without any ability to deduct an amount for use.
Cancellation charges and procedures.
The consumer is entitled to a refund within 14 days of cancellation. They have a further 14 days from any cancellation to return the goods.
Upon cancellation a consumer is entitled:-
- to 100% of the amount paid for any goods, less any amount for the reduction in value of the goods over and above that necessary to test them;
- to 100% of the costs paid for delivery at the least expensive common and generally acceptable kind of delivery offered by the trader.
No ‘restocking fee’ of any kind can be charged.
Where you have entered into a distance contract you can require the consumer to return the goods without undue delay to any address specified within the contract.
Where you have an Off-premises contract and deliver the goods to the consumers home you must collect them at your own cost.
There are some exemptions to the regulations.
These regulations will not apply where the sale is truly a one-off made in response to a customer request. This will be a question of fact for a judge to decide on a case by case basis.
These regulations will not apply where the goods are made to the consumer’s specifications or are clearly personalised. This is intended to cover goods that would be difficult to sell to anyone else, e.g. a bespoke tailored suit. It is unclear how far a vehicle must be tailored to come under this exemption. Guidance from Trading Standards is clear that selecting from pre-arrange options will not be sufficient. The more extreme the bespoke nature of the goods the more likely this will apply.
These regulations will not apply to goods sold at Public Auction. For this exemption to apply the auction must be a transparent and competitive bidding process, to which the consumers have the option of attending in person and the successful bidder must be bound to purchase the goods.
Whilst the consumer does not have to attend the auction they must have been able to should they wish. This is expressly designed to exclude eBay type auctions.
This is a general guide to the Consumer Contracts Regulations and main aspects of how they affect the sale of goods at a distance. This advice is general in nature and will need to be tailored to any one particular situation. Should you regularly enter into contracts at a distance or off-premises you should consider tailored legal advice to ensure you fully understand the risks to your particular business practices.
Remember, where you are member of an industry body you may have access to legal advice and assistance.
Motor Industry Legal Services
Motor Industry Legal Services (MILS Solicitors) provides fully comprehensive legal advice and representation to UK motor retailers for one annual fee. It is the only law firm in the UK which specialises in motor law and motor trade law. MILS currently advise over 1,000 individual businesses within the sector as well as the Retail Motor Industry Federation (RMI) and its members.