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Defining distance contracts 2002 (3) 34

1 March 02

Implications for the profession of the Consumer Credit (Distance Selling) Regulations 2000

by MacDonald, Marjory

Marjory MacDonald examines the implications for the profession of the Consumer Protection (Distance Selling) Regulations 2000

Under the Consumer Protection (Distance Selling) Regulations 2000, which came into force on 31st October, 2000, a distance contract is defined as “any contract concerning goods or services concluded between a supplier and a consumer under an organised distance sales or service provision scheme run by the supplier who, for the purpose of the contract, makes exclusive use of one or more means of distance communication, up to and including the moment at which the contract is concluded;” (reg.3)

The first point to note is that the Regulations apply only to contracts with consumers (B2C contracts) and so all business to business (B2B) contracts fall outwith their scope.

Secondly, the definition of “means of distance communication” is given in the Regulations as “any means which, without the simultaneous physical presence of the supplier and  the consumer, may for the conclusion of a contract between those parties” and an indicative list is given in Schedule 1 – this includes telephone, fax, e-mail and such devices as videophone, videotext, and television (teleshopping). The list also includes communication by letter.

Crucial to the application of the Regulations is the timing of the conclusion of the contract with the consumer. For the purpose of considering the implications of the Regulations, this is taken to be the point at which the client, having received a firm’s Business Terms, indicates, tacitly or otherwise, that the practitioner should proceed on the basis stated in such terms.

Recent Articles in both the Law Gazette (10th August, 2001) and Computers & Law (July, 2001) have suggested that practitioners dealing with the public will fall within the scope of the Regulations when they carry out work for clients without a meeting at the outset.

Such interpretations seemed, initially, to be at odds with the underlying purpose of the Regulations, which were stated, informally, at any rate, as being to give the consumer confidence to trade online. By allowing the consumer to reject goods after having had the opportunity to sample their quality, the Regulations gave the consumer the same opportunity to judge the quality and suitability of the goods as he would have if making a shop purchase. It is clear, however, that, dating back to the Directive, it was intended that not only goods, but services sold from a distance should be covered. Nevertheless, given that the word “Selling” is central to the title of the Statutory Instrument, it is hard to accept that the Regulations should encompass what, for solicitors, is really just a method of conducting business rather than a sales scheme.

This point was recently put on behalf of the E-Commerce Law Committee to the Office of Fair Trading in a letter, seeking clarification of the view that they would take in relation to the profession in light of the Guidelines published by the DTI  at the time of the introduction of the Regulations. The Guidelines state that “if, for example, you do not usually supply consumers by distance means, but you agree to do so in response to a one-off request, you do not need to comply with the Regulations. However, if your business regularly handles ‘one-off’ requests and is organised so that it can deal with such requests (ie. there is a mail order facility) you do need to ensure that you fulfil the Regulations”.

The point made to the OFT was that it appeared that there is nothing specific needing to be done for a law firm to be “organised so that it can deal with such requests”. All that would in fact be used are its normal means of communication, - telephone, letter, fax and possibly e-mail. No additional organisation would seem to be necessary, whereas such seems to be suggested by the reference to a mail order facility.

The OFT responded promptly and, whilst making the point that the view expressed is of no weight, and that ultimately the final interpretation is for the courts, have commented that “whether such a scheme exists will have to be decided on a case by case basis.” It is worth noting that the OFT also state that they have taken the view that provided an organised distance scheme exists and does supply consumers from time to time, it should comply with the Regulations, even if a majority of the clients under the scheme are business clients.

To look at each case on its merits is certainly the point – in, for example, the instance of the preparation of Wills, there is a wide spectrum of methods of conducting business at a distance available to the profession, ranging from the firms whose websites are set up to provide Wills on-line to a partner taking urgent instructions by telephone and sending out a document by post without a client meeting.

As the OFT points out, the EC Injunctions Directive, from which the phrase “organised distance selling sales or service provision scheme” is taken does not give a definition to provide guidance as to its intended meaning. Accordingly each firm will have to decide whether the process that it operates to contract with clients falls within the scope of this wording. The OFT suggests that “if, for instance, there are standard letters sent out to potential consumer clients which they then return by post, without a meeting taking place, then it is likely that this will fall within the definition.”

Standard letters, certainly, are frequently used as a means of initial contact following an enquiry, and firms conscious of the cost of time may well wish to ensure that meetings are planned to be conducted at the most cost-effective opportunity, rather than necessarily at the outset. So it would seem that technology, whilst appearing to make life more manageable by offering a letter at the touch of a key, does by the same stroke take the sender into the realms of more red tape and regulation.

Some firms may adopt the attitude that it is safe enough to wait until case law has firmed up a little, but clearly prudence dictates that heed should be paid to the requirements of the Regulations, with best practice being for firms to adapt their Business Terms to cover the suituation.

Service providers, as the Regulations would define solicitors, can use reg.8(3) to avoid the seven day cooling off period by including in Business Terms sent to “consumer” clients a clause to the effect that “You should be aware that you have a right to withdraw your instructions, should you decide not to proceed, without any charge, by writing or e-mailing us to instruct us of this within seven working days from when you receive this. However, unless you instruct us straight away to wait for the seven day period to elapse before we start working for you, this will not apply, and you will be taken to consent to our starting to work for you immediately”.

The need to ensure that Business Terms are sent out at the first opportunity is self evident – otherwise, to return to the case of a firm producing a Will, the document in question could be produced, validly signed and in the hands of the client before he/she decides to exercise the right to cancel.

The Business Terms should embody the prior information required by reg 7, such as a postal address, and arrangements for payment. Regulation 7 also requires that the price of services should be stated, so, if an estimate is not being supplied at the same time, the Business Terms should state an hourly rate.

Regulation 8 adds further information that is to be provided to the consumer client, and includes  an address to which the client may address any complaints, and “information about any after-sales services and guarantees”. Perhaps by highlighting the Law Society’s role in safeguarding the interest of clients, this could turn the exercise into a publicity vehicle for the Profession!

Marjory MacDonald is a member of the Society’s Electronic Commerce Committee