February 24, 2021
Contracting fairly with consumers can be a bit of a minefield – contract terms must be timely, fair and transparent (for some more pointers, take a look at our Quick Guide to Unfair Contract Terms here).
As businesses have sought to navigate the disruption caused by COVID-19, we’ve seen some particular contractual pressure points arise.
Existing Contracts – Variation Clauses
Many consumer contracts contain terms which give businesses the right to change the terms of the contract after it has been agreed with the consumer – these are known as “variation clauses”. More than ever, businesses are seeking to rely on variation clauses to change the terms of contracts in order to cover previously unanticipated issues arising from the pandemic.
The problem is that variation clauses are “grey-listed” under the Consumer Rights Act 2015. This means that they are likely to be unfair and therefore unenforceable against consumers, especially if:
- they have the effect of giving the business a ‘blank cheque’ to change important aspects of the contract at will;
- the business is not required to give the consumer reasonable notice of any changes; and
- the consumer does not have a right to freely cancel the contract without being left worse off.
However, the consumer regulator, the CMA, has said that it is “unlikely to object” to voluntary arrangements entered into between businesses and consumers provided they are fairly agreed and the business does not pressurise or mislead the consumer in any way to accept the new arrangement.
So, if you want to change the terms of a consumer contract, the takeaways are:
- give reasonable advance notice of the changes and allow the consumer to get out of the contract, without penalty, if they don’t agree to the new terms;
- don’t cajole or mislead consumers; and
- don’t leave consumers in a worse position than they were in before.
New Contracts – Terms Specifically Relating to COVID-19
Many businesses will want to redraft their standard contract terms for new customers to include new, specific provisions relating to COVID-19. Chief among these new provisions will be those that relate to cancellations and refunds.
Whilst there are nuances and every case will depend on its specific circumstances, contract terms are likely to be unfair and therefore unenforceable if they prevent consumers from obtaining a refund in circumstances where they would otherwise be entitled to one, for example where a contract cannot go ahead because of lockdown laws – see our Guide to Cancellations and Refunds here.
Any terms and conditions relating to refunds and COVID-19, as well as provisions relating to cancellation and refunds more generally, must be clearly and prominently set out in the contract (no hiding them down in the footnotes on page 65) and must be appropriately and clearly brought to the consumer’s attention before they enter into the contract.
If you need help updating your consumer contracts, please do to get in touch.