Is your contract up to scratch?
The Cancellation of Contracts made in a Consumer’s Home or Place of Work etc. Regulations 2008 (the Regulations) came into force on 1 October 2008. Many businesses are still unaware of the purpose or effect of the Regulations. Ed Holmes explains more.
As the name suggests, the Regulations govern contracts made “between a trader and a consumer…for the supply of goods or services to the consumer” and which is made away from the trader’s premises (Reg.5).
It should be noted that the Regulations do not cover contracts made during a solicited visit by the trader, or during an excursion from the trader’s premises arranged by the consumer. Generally however, the Regulations will apply when a contract is entered into away from your office or place of work and you should be aware of the requirements and the consequences if the Regulations are not followed.
The requirements
In simple terms, the Regulations require that the consumer be given notice of their right to cancel the contract. Reg.7 lays down the requirements for the notice, which must be in writing. The notice has to contain information prescribed by the Regulations, most importantly, the consumer’s right to cancel the contract within a stated period, being 7 days from the day the consumer receives the notice.
The cancellation notice must also be provided to the consumer, by way of a tear-off slip on the contract. The form of the notice appears at the end of this article. It is very important to note that the notice must specify that the cancellation notice can be sent by electronic mail and provide an email address to which the notice can be sent. Failure to provide the option to cancel by email will mean that the contract does not comply with the Regulations.
It is in order to make the consumer aware that they may be liable to pay for the goods or services supplied if the performance of the contract has begun with the consumer’s written agreement before the end of the cancellation period.
Where the cancellation notice is served in accordance with the consumer’s right to cancel, the contract is treated as if it had never been entered into (subject to the trader’s right to charge for work already done).
Consequences of failure to comply with the Regulations
Reg.7(6) provides that a contract which does not comply with the requirements shall not be enforceable against the consumer. This means that the trader will not be able to sue on any invoice or take action to enforce payment of fees.
Rather worryingly, from the trader’s point of view, the contract does not actually become void. It is still enforceable against the trader, meaning that the consumer can still require the trader to perform his obligations under the contract, even though he cannot then be required to pay for the goods or services provided.
Traders and professionals alike should be aware of the Regulations and the very adverse consequences of not giving their customers the right to cancel a contract made at the customer’s home or place of work. Standard form contracts should be amended to include the form of notice, including all of the information required. As can be seen from the consequences of non-compliance described above, the likely alternative for the trader is to end up doing a great deal of work for free.
For further information, please contact Edward Holmes on 01905 723131