Technology &
Internet Law

Review of the Distance Selling Regulation 2000

The Regulation 

The law applying to all B2C transactions over the Internet has been beefed up with the passing of the UK Consumer Protection (Distance) Selling Regulation 2000 SI 2334 ('the Regulations'), which implements the European Directive 97/7/EC on the protection of consumers in respect of distance contracts and came into effect on 31 October 2000. 

The consequences to those involved in ecommerce are many and it would be the foolhardy who would not give careful attention to the demands of the Regulations. A failure to comply would not only result in being imposed with unfavourable terms in respect of transactions but also lead to the appearance that ecommerce is not credible and indeed dubious. However, compliance would create an air of credibility, confidence and trust: all important ingredients in ensuring that transactions over the Internet grow larger and larger. 

Application 

The Regulations apply to all ecommerce sale of goods or services contracts with consumers and indeed go beyond the Internet to include fax, telephone, television and conventional mail order transactions. To be precise the Regulations apply to "distance communications" which are defined as 'any means which, without the simultaneous physical presence of the supplier and the consumer, may be used for the conclusion of a contract between those parties'. 

However, they do not apply to contracts relating to the supply of financial services, the sale of land, vending machines and auctions. Furthermore, there is only limited application to contracts for the supply of groceries by regular delivery and contracts for the provision of accommodation, transport, catering and leisure services. 

Prior Information & The 'Cooling-Off' Period 

At the nub of the Regulations - which apply only to B2C and not B2B distance contracts - is the introduction of a 'cooling off' period within which consumers are given the right to pull out of a distance contract. The purpose of this 'cooling off' period is ostensibly to give consumers the opportunity to examine the goods or services in the same way as they would have had they purchased it over the counter in a shop. 

Regulation 8 obliges the supplier to provide certain 'prior' specific information to the consumer in writing before the transaction is entered. These include informing the consumer that he has the right to pull out of the contract within seven (7) working days from the date after the date of the contract in the case of services or seven (7) working days from the date after the date of the receipt of goods. Where the consumer exercises this right within the 'cooling off' period, the contract is avoided altogether: as if the contract had never been made (or in technical jargon void ab initio). The notice must be provided at the latest by the time the goods are delivered or, in the case of services, during the performance of the contract. 

A supplier of services, however, is exempted under Regulation 8(3) provided the supplier, prior to the conclusion of a contract, informs the consumer in writing (unless the parties agree otherwise) that the latter will not be able to cancel the contract 'once the performance of the services has begun with his agreement'. It is extremely important, therefore, that appropriate terms are always included in website terms in this respect. Otherwise you may actually have completed the service and the consumer will have had the benefit and yet the contract can still be cancelled - i.e., they get the service for nothing! 

The detail of the information which must be given is: 

• The supplier's name and address
• A description of goods and services
• The price including taxes
• Delivery cost
• Arrangements for payment
• The right to the 'cooling off' period
• The cost of any premium rate calls
• Time frame of the offer
• Minimum duration of the contract (where applicable)
• Details regarding substitute goods (if the seller reserves the right to substitute other goods if the ones ordered are not available. 

Moreover, in addition to the 'prior' information to be given before sale, the supplier must (after the purchase has been made by the consumer) send a confirmation in writing of the main items of the 'prior' information. 

The Regulations do not prescribe how this notice of cancellation right should be given by the supplier. However, it seems eminently sensible in the circumstances to provide it on a website by employing a simple 'pop-up' window clearly timed to pop up prior to the sale with a statement that set out the information required prior to sale. The window could state: 

'It is the requirement of the law that the following information is conveyed to all customers and that it is confirmed as acknowledged. Please click the "Information Acknowledged" button after carefully reading the following information.'

Such a notice will indicate to the consumer that is website is in full compliance with the law and that could create a positive public relations face.  Alternatively, it could just read: 

'IMPORTANT NOTICE: Please click the "Information Acknowledged" button after carefully reading the following information.'

Of course it is possible to send the information via e-mail, fax and/or even 'snail mail' at the point of sale. Where notice of cancellation has been given, any related credit agreement is also automatically cancelled. 

It must be noted that the right does not apply to the supply of goods or services the price of which depend on fluctuations in the financial market which cannot be controlled by the supplier nor to customised goods. Into this category also fall audio or video recordings or computer programs which are 'unsealed' by the consumer as do supply of magazines, periodicals and newspapers and gaming, betting or lottery services. 

However, woe betide the supplier who fails to provide notice of the right to cancel to the consumer, for he will find that he has now allowed the short 'cooling off' period to be extended by an additional three (3) months. It is also necessary that the consumer is told when and how the contract can be cancelled and the name and address of the person to whom notice of cancellation must be given. 

Cancellation, Refund & Recovery 

The consumer must, if he wishes to cancel, send the cancellation notice in writing to the location indicated on the website within the 'cooling-off' period. Once the contract is cancelled the supplier must be reimbursed as soon as possible and in any event within thirty (30) days. The refund should include the cost of delivery if the customer was charged for it. However, it is clear that if the cost of delivery was borne by the supplier, matters end there. The consumer is under a duty to restore goods to the supplier and in the mean time to take reasonable care of them. The obligation to return the goods is not on the consumer but if he has agreed to do so and does not, the cost of the supplier recovering the goods would fall on the consumer. 

Clearly, consumers who use or damage goods will not be allowed to cancel the sale. It does become prudent, therefore, for suppliers to include a term in the contract stipulating that if the customer wishes to cancel he/she must return goods at his/her expense. The supplier must also notify the consumer within twenty-one (21) days of when the supplier expects to collect the goods. Where the consumer fails to make the goods available for collection the supplier can recover the cost of recovering the goods. 

Where goods are given in part-exchange and the consumer cancels the contract, the consumer is entitled to recover from the supplier a sum equal to the part-exchange allowance unless 'the part exchanged goods are returned to the consumer in a condition substantially as good as when they were delivered to the supplier' before the end of the period of ten (10) days beginning with the date of cancellation. 

Performance 

As a general rule, the supplier must perform the contract within a maximum of thirty (30) days from the day after the day the consumer sent his order to the supplier, unless of course it was agreed otherwise. Where the supplier is unable to do this, the consumer must informed and any money paid reimbursed. Such reimbursement must be made by the day after the expiration of the thirty (30) day period. A contract which has not been performed within the thirty (30) days period is treated as if it was never made. 

The Sale of Goods Act 1979 

It might be of interest to note that the Sale of Goods Act 1979 ('the Act') - which primarily governs conventional contracts of sale of goods and services - continues to apply along side the Regulations. This means that in respect of the question of passing of risk and property in goods in transit from the seller to the buyer the normal rules under section 18 of the Act would be overturned, were the contract to be silent on this question. Under the Act if the contract is silent, as a general rule risk and property pass to the buyer at the time of the contract. However, under the Regulations because of the 'cooling off' period, risk and property remain on the supplier until the expiration of the 'cooling off' period and pass to the consumer only if that period comes to an end without the consumer exercising his cancellation option. 

This would therefore have ramifications on the question of insurance. Whereas under the Act the burden of insurance would prima facie fall on the consumer, under the Regulations it now falls squarely on the supplier. 

Jurisdiction 

One issue of more than moot interest is the question of whether 'e-tailing' websites outside the UK are caught in any way, shape or form by the Regulations (and if they are, whether the Regulations can be enforce against them). In order to answer this question we need to look at the provisions of the EU Regulation on Jurisdiction and Recognition and Enforcement of Judgments in Civil and Commercial Matters (44/2001). As a general rule, in respect of consumer contracts - and the Regulations deal exclusively with them - consumers can sue suppliers, immaterial of their location, at a court in their own country. This even if a jurisdictional clause in the contract nominates another country's court as having jurisdiction. Thus, if a foreign website supplies goods to a UK consumer, the latter could claim that UK courts have jurisdiction and that the Regulations apply. However, it is difficult to see how these can be enforced against foreign websites, especially if they are outside the EU: where at least each state has to have similar laws like the Regulations. 

Contracting Out, Fraud & Unsolicited Goods and Services 

Suppliers cannot contract out of the provisions of the Regulations and thereby deny consumers their rights under the Regulations. In other words, you cannot contract out of the right to cancel. 

Where there has been fraudulent use of credit or debit cards, the consumer can cancel such fraudulent payments and become entitled to a full reimbursement  by the card-issuer. Obviously the card-issuer will require indemnity from the supplier and this even if goods had been delivered. Accordingly, website owners need to look very carefully at the question of insuring against this risk. 

Where unsolicited goods are sent to consumers by way of 'inertia selling', the Regulations entitle the consumer - and thereby punish the inertia seller - to retain or dispose of the goods as if they were an unconditional gift. And where the inertia seller dares to demand payment for the unsolicited goods or services, he may find himself guilty of committing a criminal offence. 

Enforcement 

New enforcement powers have been given under the Regulations to the Office of Fair Trading, Local Authority Trading Standards Departments and the Department of Trade, Enterprise and Investment in Northern Ireland. Where complaints are made to them, they could apply to the court for an injunction against any person who is in breach of the Regulations if such breaches persist despite prior warnings from the authorities. Moreover, the Director General of Fair Trading is empowered to publish any undertakings or agreements made by offending e-suppliers to ensure that they comply with them by the use of the often effective tactic of 'name and shame'. 

These powers are in addition to the individual consumer's right to cancel and, if necessary, sue for their refund.

NEED TO KNOW MORE?

For further information on the distance selling regulations, contact Maitland Kalton.  Should you prefer to telephone, call us on +44 (0)207 278 1817.

Kaltons Solicitors, Suite 302, Spitfire Studios, 63-71 Collier Street, London, N1 9BE. Telephone +44 (0)20 7278 1817; Fax: +44 (0)207 278 1835.

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