What are the current consumer rights for services?
When buying services, consumers have rights under a number of cross cutting pieces of legislation. This consultation is focusing on the consumer’s rights when buying services which are faulty or substandard.
There are other pieces of legislation which protect consumers – for example from misleading or aggressive practices and unfair contract terms but they are covered the government’s wider consumer law reform proposals and not this particular consultation.
When a person buys a service this creates a contract – whether verbal or in writing. In the course of the purchase the two parties may discuss the terms of the contract agreeing any specific provisions. Other terms may not have been specifically agreed but will still form part of the contract because the law (either legislation or case law) says so.
The legislation says that services must be provided with reasonable care and skill for England and Wales (for Scotland the Scottish common law implies a very similar term). It also says that the service must be supplied within a reasonable time frame and that where the price of the service is not discussed and agreed before it is carried out, the consumer will pay a reasonable price (what is reasonable will depend on the circumstances and the type of service being supplied).
What currently happens if something goes wrong?
The rights of the consumer and the liabilities of the business are not always clear when something goes wrong
Firstly, if a consumer purchases a service and it is not supplied with reasonable care and skill, in England and Wales a court is unlikely to let the consumer terminate the contract but could make the service provider pay the consumer an appropriate amount of money to make good any problems. In practice this means, for example, that the consumer would still be required to pay for the service of decorating of her living room but could receive money (damages) to replace the carpet where the decorator splashed paint. The onus is on the consumer to prove the decorator had not provided the service with reasonable care and skill.
Secondly, there is nothing in legislation which would force service providers to take action themselves to make good any problems ie there are no existing statutory remedies. For example, there is no requirement for the service provider to re-paint parts of the consumer’s living room if the consumer is not happy that they had reached all the corners.
Thirdly, service providers may include in the contract a term either limiting the amount of financial compensation they would be liable to pay if something did go wrong or completely excluding liability. The law allows the service provider to limit or avoid liability, as long as it is reasonable. For example, it may cost £500 to replace the consumer’s carpet with one exactly the same, but the decorator has limited his liability to £300 in the contract. This may be reasonable if for example the service provider is a sole trader who can only get affordable insurance up to £300. Service providers could not limit their liability if the breach caused physical injury or death.
The statutory guarantee that the service will be carried out with reasonable care and skill
The government proposes to introduce into law a statutory guarantee which gives consumers a right for the service they are purchasing to be carried out with reasonable care and skill. It is not intended that this proposal will change the substance of the law in terms of the standard that the service provider must meet but will be clearer for the business and consumer to understand.
The proposal will not prevent the two parties from agreeing to go further than the statutory guarantee should they wish. It will have some implications, however – notably that the guarantee will mean that the service provider will have to offer the ‘statutory remedies’ of repair or reperformance or a reduction in price. The business will not be able to limit its liability to offer such redress if it fails to exercise reasonable care and skill.
Performance and consideration
The soon to be implemented Consumer Rights Directive will require all businesses to provide consumers with information on the service before a contract is entered into. The information will include the “main characteristics” of the service, the price or a breakdown of how the price will be calculated and the time period for which the service will be carried out.
In our view, this information will be incorporated into all types of contract, unless the parties expressly agree otherwise (ie if as part of the agreement an engineer states he will visit your home between 1pm and 4pm to repair your washing machine and fails to turn up without further agreement, he would be in breach of contract).
We are proposing that there should be a statutory guarantee that the service will meet the information provided pre-contractually relating to the service. Again we do not think this will change the substance of the law (except in respect of the remedies that can be expected).
Where the time for performance is not agreed we think that there should be a default period of 30 days.
We will continue to ensure that there is an obligation on a consumer to pay a reasonable charge where the price of this service is not expressly agreed.
Basic statutory remedies
The current legislation does not lay down any specific remedies to address disputes between consumers and businesses should there be a problem with a service. Currently the consumer and business must either jointly agree a solution, or, if this is not possible, consumers can take the case to a court where, if they are successful, the court will award an appropriate remedy (which is usually damages).
By setting remedies in legislation, we believe consumers should have greater confidence in asserting their rights and business should be better able to defend themselves against consumers attempting to claim more than their entitlement.
The proposals described below will be a step towards aligning the remedies available when purchasing goods and digital content.
The government proposes to introduce the following remedies where any service has not been provided with reasonable skill and care:
- the supplier should either repair the fault (ie re-do the element of the service which is inadequate) or re-perform the whole service
- the service provider should give a reduction in the price of the service to cover the element which has not been performed with reasonable care and skill
Under these proposals a consumer would generally be obliged to allow the service provider to rectify or re-perform the service (for free) before insisting on a price reduction.
In some circumstances the tier 1 remedies could be skipped if it is not practical – if, for example, a repair cannot be carried out within a reasonable timeframe or without significant inconvenience to the consumer; or where repairing the fault or re-performing the service would not benefit the consumer. Re-establishing a broadband service which had not worked for three months and extending the contract, for example, would not on its own address the inconvenience to the consumer. In such instances it would be acceptable to move straight to the tier two remedy.
These remedies are designed to be in line with the remedies available for the supply of faulty goods, so will bring a degree of clarity and consistency for both the consumer and the business.
An outcome based standard?
The above proposals go only so far in addressing the complexity of the existing legal position, particularly when goods and services are purchased together.
An additional option is also being considered to bring equal rights and remedies to the consumer when buying goods and when buying services. Under this option a service should not only be supplied with reasonable care and skill but should also be of satisfactory quality.
Under this option consumers would have a claim against the service provider if the service was not of a satisfactory quality. A service would be of a satisfactory quality if it is of the standard a reasonable person would regard as satisfactory, taking into account:
- the description of the service - this would include any advice given by the service provider as to the limits of what can be achieved
- the price
- all other relevant circumstances, which would include (in appropriate cases):
- fitness for purpose (either the usual common purpose of the service, or a particular purpose made known to the service provider)
- appearance and finish of the final product
- durability of the final produce
The government is attracted to making the law similar across goods and services, but has some concerns that a “satisfactory quality” standard for services might constitute a major new cost for businesses in those service sub-sectors where “fitness for purpose” is a matter of opinion and the outcome of the service is hard to determine in advance.
However, where services and goods are supplied together or services are applied to a consumer’s goods, there is probably already a consumer expectation that such a “satisfactory quality” standard be met. For these services at least, the cost of such a change might be modest and the benefits substantial in terms of simplification and consumer empowerment.