Law Guide

New Year- New Law

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This Article is a more detialed version of the article produced for the December 2015 issue of Fine Magazine

    At the start of the new year we need to take a look back to the dog days of the last to see some changes in Consumer Protection Legislation that underpin a less well publicised new requirement introduced from 9 January 2016.
    The 1 October 2015 brought in, under the new Consumer Rights Act a number of extensions and clarifications to the rights of consumers when dealing with goods and service providers- SME’s need to know the extent of these changes- and understand some new concepts, in order to comply with the other new law introduced on 9 January 2016.

The 2 Important changes on 1 October 2015:

    1. The New Consumer Rights Act updated and extended existing rights and provided 2 important “new” rights:
  • An explicit right to repair or replacement of faulty digital content (such as an online film or music download). Legislation wasn’t clear previously but those rights are now explicitly stated. For the first time rights on digital content have been set out in legislation.
  • Clear rules for a deficient service. Where a service isn’t provided with reasonable care and skill the service provider now needs to take steps to bring the service up to the expected standard or return the payment.
      • 2. A Requirement for all businesses which are unable to resolve a dispute with a consumer to point that consumer to a provider of alternative dispute resolution services.


    The Rights Extensions & Clarifications are significant-

      1. The rights to a full refund within “a reasonable period of time” for Faulty c=goods is now guaranteed in the first 30 days.

      2. Goods that are found faulty between 30 days and six months have to be repaired or replaced by the Store- not the manufacturer- so retailers will need to check there contracts with wholesalers and suppliers to ensure they are updated.

      3. After 6 months consumers will need to show that a product was faulty from the start but products must last a reasonable period of time.

      4. Customers only need to accept one repair or replacement and accepting one doesn’t invalidate the right to a refund.

      5. Different rules apply for goods and services.

      A Failure to comply with the new rights can result in prosecution so it is important to make sure staff are adequately trained. The Citizen’s Advice Bureaux who provide information aimed at consumers have some useful printable charts with summaries of the new legislation that might be useful for staff.
      What is all this about Alternative Dispute Resolution?

      Alternative Dispute Resolution (ADR) is any means of resolving a dispute between parties without having to go to court- it can include Mediation- where a neutral person helps the parties to reach a settlement through negotiation, Arbitration- where a person employed by the parties makes a decision much like a judge would and expert determination- where an expert makes a decision- like under a party wall act dispute . There are also combination processes allowing for mediation and arbitration to be fused to avoid the problems with being unable to guarantee settlement in mediation.

    What do I have to do?

      under Regulation 19(1) a trader who is required by law or its trade association rules or the terms of a contract to use ADR services, must make the name and address of the relevant ADR entity available on its website and in its general terms and conditions of sales or service contracts between the trader and consumer.

    So I can avoid it?

      Well- sort of- Regulation 19(2) provides that any trader who has received a complaint form a consumer relating to a sale or service contract and who has been unable to resolve the complaint with them by using its own internal complaints handling procedure, must inform the consumer, on a durable medium, that it cannot settle the complaint, provide the name and website address of a competent ADR provider which would be able to deal with the complaint should the consumer wish to use alternative dispute resolution and also state whether the trader is obliged or prepared to submit to an alternative dispute resolution procedure operated by that ADR entity.

    But would you want to?

      ADR is often a really good alternative to court- it can be much quicker and cheaper and it is easier for businesses to keep the agreement confidential which is very important for trade reputations. A trader who chooses court rather than ADR also risk the court making a damaging costs finding against them if the court feels they have been unreasonable.

    So what’s happened from 9 January 2016

      As if small businesses didn’t have enough to worry about the new year brings another new requirement for SME’s offering their goods, services and digital content in “cross Border” trade throughout Europe. From January 2016 all businesses engaged in such trade will need to comply with the Online Dispute Resolution Directive.

      ODR is simply ADR online and the European innovation is really little more than a clearing house that allows consumers to make a complaint on one website and have the complaint filtered through to whatever national agency deals with ADR in the businesses home country. The website is effectively a portal in all major European languages allowing a single point of contact for the consumer.
      All businesses who sell goods or services online or provide a way for businesses to trade online, will have to provide a link to the ODR site on their website and say whether they are obliged to use ADR by trade association law or terms of business.

    Will people use it?

      Certainly some people will- normally no case can be brought about a faulty good or service after 6 years from the date sold or provided- for complaints failing within the ODR remit that time is extended to 6years and 8 weeks- meaning that some consumers will only be able to use the ODR procedure.

    Know Your Limited

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    This article is a more detailed version of the article taht appeared in the October Issue of Fine Magazine.

    Know Your Limited!

      There are, at least unless some proposed changes to the tax regime are pushed through for the financial year starting in April, significant tax and other financial advantages for relatively high earning single person businesses to run as a limited company. The benefits of protecting your personal property if the business fails and tax advantages may, however, be at risk if the directors of the company don’t fulfil their duties.

    What is a Company?

      It seems like a silly question but lawyers are often surprised by the failure of directors of even large-medium firms to understand the difference between them as individuals and the company. A company is not the director, it is a completely different Legal Person, imagine it as a separate actual person that the director controls the movements and actions of. The Directors are in charge, but have to act in the company’s best interests like the parent of a child, they are not the company which is why if the company goes bust the directors are protected if they have done their duties.

    Directors Responsibilities

      Directors have to follow the rules in the articles of association and act in the company’s best interests, using their skills experience and judgment making decision for the benefit of the company not themselves and need to tell other shareholders if they are going to benefit personally from a transaction the company is involved in. Directors also need to ensure that the company keeps proper records and compiles with legal requirements and files true and fair accounts. Most of these duties are fairly clear if the Directors understand that they are not actually the company but the duty of acting in the company’s best interests can sometimes present difficulties:

      Acting in the company’s best interests is a not the same as simply having permission to act. A director may, for example, have the permission of the board to offer a guarantee from the company for a loan to another company (which the director is also director of) or individual (the director or another person associated with them or the company) but may not be acting in the company’s interest if the director gives the guarantee. If the action isn’t in the company’s best interest in the opinion of that director then, even if the director has permission to take that action they shouldn’t.

      In Practical terms it would be a good idea for directors, even of same shareholder/ director companies to keep a record of the commercial benefit they see in every transaction the company undertakes and note that they have authority to take that action, in larger companies a meeting should take place where that benefit is discussed or recorded. If a company is getting the benefit of a guarantee provided by another related company it should probably check that the authority of the other company’s board has been properly given.


    Entering contracts

      The general rule with contracts is that the contract is between the people who have signed it. A Limited company needs, however, somebody to sign for it as its agent, which is usually the company director. For the Director to be signing for the company, rather than themselves and risking liability for the contract, either:
      1. The Contract needs to make clear that the person signing is a director of the company and clearly identify the company or
      2. There should be clear evidence that both parties knew the signature was for the company.
      It is self-evidently safer to have contract make the matter clear than have to argue what each party knew on the evidence.


    In practice what this means is that:
    1)

      A contract which has beneath the signature “A.N Other, Director of A.N Others Ltd” will be signed by the director on behalf of A.N.Others Ltd.
      2) An error doesn’t necessarily invalidate this, so long as it remains clear who the contract is with, for example if the wording was “A N Other, Director of A.N Otherwise Ltd” and A.N. Otherwise Ltd does not exist but A N Other does and the signature is from a director of the company that exists that would be a contract with the company that exists. [Dr Muneer Hamid (t/a Hamid Properties) v Francis Bradshaw Partnership [2013] EWCA Civ 470.]
      3) In the example in 2 if A.N. Otherwise Ltd also existed then the contract would be with them (unless both parties knew it was a mistake). Where the companies operate as part of a group any court might need substantial evidence of the interactions between the parties in the time leading up to the contract to establish who the contract is between. [Estor Ltd v Multifit (UK) Ltd [2009] EWHC 2565 (TCC)]
      4) Where the contract is entered into on the basis of an exchange of letters or emails then so long as the correspondence states the company registered office and company number and place of registration the contract will be with the company.
      5) It is also possible for the contract itself to make clear, perhaps by reference to the trading name of the company in the body of the contract, that the contract is with the company but there would need to be some evidence of the fact that both parties knew the contract would be with a limited company.
      Trading online and running a company website:
      A company’s website needs to contain the following information:
      It’s registered name (not just the trading style)
      An email address
      The Registered office address
      Any VAT number
      Distance and Online selling are both regulated and have specific requirements for traders and companies but a good basic overview is available at: https://www.gov.uk/online-and-distance-selling-for-businesses/overview