Radar - September 2020 – 2 / 2 观点
When normal life was interrupted In March, events, holidays and all manner of services came to an abrupt halt leaving consumers and businesses struggling to know how to deal with the fallout regarding contracts which could no longer be performed as intended. The Competition and Markets Authority (CMA) set up a taskforce to tackle negative impacts of COVID-19 on consumers. In April, it launched an investigation into complaints about cancellation and refunds, focusing on holiday bookings, events (wedding) bookings and nursery and childcare providers. At the same time, it published a statement on consumer rights in relation to consumer contracts impacted by the pandemic to help businesses apply the law to the then current situation.
Now that full lockdown has ended and a more complex regime of COVID-related laws and guidelines is in place, the CMA has updated its guidance on consumer contracts, cancellations and refunds during COVID-19. The revised version takes into account some of the issues which have arisen since the outbreak of the pandemic and those which have come into focus as the original lockdown is eased. It applies existing law to the current situation. It does not create new law.
One significant change is that the pandemic is less likely to be seen as a valid reason for delaying payment of refunds than it was in the early stages of lockdown. Now, the timeframes for providing refunds must be made clear to consumers and refunds should be given "promptly and without delay".
The guidance also distinguishes between contracts being impacted by government guidance as opposed to legally binding legislation (lockdown laws). Restrictions resulting from lockdown laws include those imposed under the original lockdown laws, those imposed by local lockdown laws, restrictions imposed by local authorities under their legal powers and mandatory self-isolation following a direction from a public health officer or when returning to the UK from countries on the UK's quarantine list. The CMA comments that situations which may have been clear cut under the initial set of lockdown laws, may now be more fact-specific and in some cases, only a court will be able to decide how the law applies.
In most cases, the CMA says the consumer and business are free to agree on a solution provided the consumer is not pressured into doing so or left worse off as a result. Crucially, a consumer does not need to contact the trader in order to receive a refund to which it is entitled.
Contracts which cannot go ahead due to lockdown laws
These contracts will be frustrated. The consumer will generally have the right to a full refund where a trader is prevented from providing a service or supplying goods due to lockdown laws. This will also be the case if a consumer cancels a service or cannot receive it because lockdown laws in the UK or abroad have made it illegal to receive or use the goods or services.
Where a consumer is entitled to a refund as a result of a frustrated contract, they are not required to contact the business to ask for it. Businesses should not require consumers to take unreasonable or unnecessary steps in order to obtain refunds and risk breaching consumer protection laws if they do.
Limited exceptions to full refunds
Consumers are expected to pay for anything of value that they have received. This means that where they have already received some services paid for in advance, they will not usually be entitled to get their money back for them but will only get a refund for the services not provided. A business may also be able to deduct a contribution to costs already incurred from a consumer refund where those costs cannot be recovered elsewhere, however, the CMA suggests these cases will be relatively rare and the deductible amount limited. Whether or not such a deduction can be made will depend on the circumstances and would ultimately have to be decided by the courts.
Where a consumer receives regular services in exchange for a regular payment as part of an ongoing contract, the consumer will normally be entitled to a refund for any services they have already paid for but which are not provided or which the consumer may not use due to lockdown laws. The refund may be partial if part of the services has been provided. Consumers will normally be entitled to withhold payment for services which are not provided, or which cannot be received due to lockdown laws. A business may be able to require a consumer to pay a small contribution to its costs until services are resumed but only where this is clearly set out in the contract terms and conditions, and provided the consumer is free to terminate if they do not want to pay. Consumers must be treated fairly and must not be misled about their rights.
Non-refundable payments and fees
The CMA says rights to refunds where a contract is frustrated will usually apply even where a contract stipulates that a payment is part of a non-refundable deposit. Terms which purport to allow a business not to provide a service but to keep a consumer's money, are likely to be unfair and unenforceable under Part 2 of the Consumer Rights Act 2015 (CRA). In addition, there should be no administrative charge for processing a refund.
Credits and re-booking
As stated in the earlier guidance, traders can offer consumers alternatives to cash refunds including credit vouchers or re-booking. However, they must not mislead or pressure consumers into accepting them or lead them to believe they are not entitled to a cash refund if they are. The cash refund should be just as easily available. Any restrictions to refunds of vouchers must be fair and transparent.
Timing of refunds
The CMA accepts that in the early stages of the pandemic, there may have been a delay to processing refunds. Now, however, the timeframes for providing refunds must be made clear to consumers and refunds should be given "promptly and without delay". The CMA notes statutory deadlines will apply in some cases.
Payments for future services
A business should not seek advance payments for services it knows it will not be able to provide in future, for example because relevant lockdown laws will still be in place when the contract is due to be performed. The contract is likely to be frustrated at the point this becomes clear.
Consumers may be willing to reach an agreement over what should happen if the lockdown laws change and the contract could be performed in future but they are not required to do so and should not be left worse off if they do.
Where it is reasonably likely that the business will be able to provide services as agreed, it can require consumers to carry on making contractual payments in advance of performance.
Contracts partially affected by lockdown laws
As lockdown laws ease, it may be the case that a business is no longer completely prevented from providing services but where the service would be radically different to what was agreed, the consumer would, in most cases, be entitled to a full refund. If only minor differences remain, the consumer would be entitled to, at most, an appropriate price reduction with respect to the differences. This would be in addition to any available contractual cancellation rights.
Changing terms in existing contracts during the pandemic
Variation clauses are likely to be unfair and unenforceable under Part 2 CRA if:
Terms in new contracts relating to coronavirus
For businesses looking to include terms specifically relating to the pandemic in their consumer contracts, the CMA cautions that terms are likely to be unfair and unenforceable if they prevent consumers from obtaining a refund where lockdown laws mean a contract cannot be performed as agreed. Terms dealing with COVID-related refunds as well as refund and cancellation terms more generally, should be clearly brought to the consumer's attention prior to their entering into the contract. The terms are more likely to be fair and enforceable where they:
All cases will need to be assessed on the facts.
Cancellation in response to government guidance
The CMA notes that the situation is more complex where a business or consumer does not want to go ahead with a contract as a result of government guidance (rather than due to lockdown laws). Examples of this kind of guidance are FCO travel advice (although package holidays are protected under specific laws under these circumstances), and self-isolation after contact by NHS test and trace. In these cases, a contract is less likely to be considered as frustrated. Frustration is more likely where the advice or guidance means a consumer would be at serious risk if the contract went ahead as agreed. If the contract is not frustrated, normal cancellation and refund terms will apply. In all cases, the CMA says businesses must treat consumers fairly and responsibly and this may include trying to find a mutually acceptable solution.
Cancellation under standard terms and conditions
The CMA reminds businesses about the kinds of terms that are or are not likely to be fair when relying on standard terms and conditions.
The CMA says that in most cases, in order to be fair: