The cooling-off catch
The full version of the article on extended cooling-off periods and prescriptive information requirements for private clients engaged “off-premises”
Heard about the scam companies or individuals who cold call customers at their homes? Nothing to do with you or your practice? Well, if you engage with private clients out of the office or using distance communication (even if invited to do so), then under new extended rules those clients may have similar rights as if you were doorstop calling.
The new Consumer Contract (Information, Cancellation and Additional Charges) Regulations 2013, which came into force on 14 June 2014, allow a private client a right to cancel (or “cool off”) for an extended period of 14 days, and you should not start work during this period unless specifically requested to do so. Solicitors must inform their clients of the right to cancel, or they (and their firm) may face potential criminal sanctions and find that the cancellation period extends to up to one year. There are, additionally, a host of other information requirements, and a model cancellation form, which solicitors should provide to their clients.
Even if you engage with private clients on your business premises, you should ensure that you give your clients the appropriate prescribed information when you engage with them.
The regulations also provide new rules relating to the provision of digital content, which is broadly defined and may catch provision to your clients of electronic agreements or other documents.
Although it possibly may come as a surprise to you, these regulations are not new, but extend and replace the existing rules relating to distance selling and doorstep selling, the Consumer Protection (Distance Selling) Regulations 2000 and the Cancellation of Contracts made in a Consumer's Home or Place of Work etc Regulations 2008. Legal practitioners and their client practice managers may wish to review the new regulations and update their office practices and engagement letters, as required.
This note considers when and how these Regulations apply in the solicitor/ client context.
When do the regulations apply?
The regulations apply when you, as a professional (and trader), engage a consumer, defined as a person acting wholly or mainly for purposes outwith their trade, business, craft or profession (broadening the previous definition). In most cases, it will be clear that you should treat your private clients as consumers. However, for other individual clients, you may need to look at the purpose of the service, which may not be clear, or may be mixed business and personal (such as the purchase of a building for mixed office and residential use). Further enquiries may be needed to see whether these regulations might apply.
The rules differ depending on how the contract with the client is made. Contracts are categorised into:
- off-premises; and
- distance selling.
Certain contracts are excluded, such as financial services (banking, credit, insurance, personal pension investment or investment), and creating or granting rights in immovable property. These exceptions are unlikely to exclude most solicitor/client contracts, but it is worth checking the full list of excluded contracts in case any might apply.
On-premises contracts are contracts with consumers which are not distance contracts or off premises contracts, and are likely to constitute the vast majority of private client retainers.
Off-premises contracts have been clarified under the new regulations, and will typically cover where you conclude a contract with your client out of your office, for example at their home, or workplace, police station, hospital or hospice, or during a marketing event or an excursion.
A distance selling contract might be more unusual in the solicitor/client context, but might catch websites providing, for example, conveyancing, will writing, personal injury or payment protection insurance services, if the contract with the client is concluded entirely at a distance. Provision of contact details or a contact form on a website would not, in itself, consist of an organised distance selling scheme.
Information requirements for on-premises contracts
Even if you engage your client “on-premises”, private clients are entitled to receive certain information (see below) in a clear and comprehensible form. This information must be provided or made available to the client before the contract is concluded. Most firms are likely to provide this information in their client care letters or terms of business. However, care should be taken, as simply providing a client with a link to the page on a website may not be sufficiently making information available to that client.
Off-premises contracts and distance contracts
You must provide clients with prescribed information, similar to the information for on-premises contracts, plus further information, including, essentially, the right to cancel. You must also provide a cancellation form – the regulations provide a model. This information must be provided before the contract and then confirmed before performance begins.
Rights to cancel
Except in limited circumstances, private clients engaged in an off-premises or distance contract will have a right to cancel the contract. This is to allow clients to consider whether they really wish to be bound by the contract, or “cool off”. The period of cancellation depends on whether they have adequately been informed of this right, and is now 14 days from conclusion of the contract (extended from seven working days under the old rules). This is not a significant extension; however, if the client is informed late or not at all, then the cancellation period is 14 days from when they are informed, up to one year.
The impact on a firm's business is that they should not commence work until the end of this period unless specifically requested by the client. It might come as a surprise to some clients, who would ordinarily expect their solicitor to start work within this timeframe, so it is likely that in most cases they will wish to waive their cancellation right. If specific consent is not obtained, firms may not be able to recover their fees for services, if cancelled within this period.
Although widely defined as data provided and supplied in digital form, guidance indicates that firms would provide digital content if the main purpose of the contract is to provide streaming or downloading of legal materials, and possibly if supplied by other means, for example email.
If the contract is for digital content, then further information is needed on functionality and compatibility, and content should not be provided during the cooling off period, unless the customer specifically acknowledges that they will lose their right to cancel.
Failure to inform of the right to cancel, where it arises, is a criminal offence. Partners of LLPs or Scottish partners and their LLP or firm will be liable if the offence was committed:
- with their consent or connivance; or
- due to the partner's negligence.
Failure to provide appropriate information will also be deemed to be a breach of the solicitor/client contract.
Enforcement and practicalities
The various trading standards departments of local councils primarily carry out enforcement of consumer protection measures. A recent report, the Scottish Trading Standards Internet Project 2012-13, revealed disappointingly high levels of non-compliance with regulations relating to internet sales (under the previous Distance Selling Regulations). For example, 43% of sites failed to provide information on the right to cancel. Trading standards have a variety of enforcement options available, with prosecution and other court action being the ultimate sanction. However, with a largely reputable trade, normally informal and collaborative solutions are preferred.
Firms may wish to consider the following action points:
- Consider when the regulations will apply – in particular, which clients might be considered “consumers” under the regulations, and when contracts might qualify as distance or off-premises contracts – this may be broader than you think.
- Check that your engagement letters contain the prescribed information required for all (qualifying) contracts.
- Ensure that when you engage a private client out of the office, you have clear procedures to ensure correct information is provided, in particular, the right to cancel.
- Obtain clear written instructions if private clients have a right to cancel and if they wish you to start work before the end of the 14 day cooling off period.
- Check the impact of cancellation on any legal aid contract.
Kerry Trewern, deputy director of the Edinburgh Centre for Professional Legal Studies, University of Edinburgh says: “It seems important that firms provide robust training for staff to ensure compliance with these new regulations.”
The author invited the Law Society of Scotland for comment on these regulations but had not received a comment at the date of submission. The Law Society of England & Wales provides guidance on the regulations.
Hermione Hague, e-commerce and consumer law specialist and tutor at the University of Edinburgh
Information requirements for all contracts
- Main characteristics of goods/services
- Identity and contact details
- Price or how it will be calculated
- Delivery or performance arrangements
- Complaint handling policy
- Duration of contract or how it can be cancelled
Tessa Till, senior tutor, private client on the Diploma in Professional Legal Practice at the Edinburgh Centre for Professional Legal Studies
I regularly offer to go and see clients in their home to discuss their affairs. This is especially important when dealing with elderly clients who may not have the mobility to come to the office, and generally clients are more open when you go to them, especially when you are discussing very personal matters.
I think that there will be very few lawyers in the private client field who will be actively aware of the client's right to cancel, or indeed the new “cooling off” period of 14 days. I anticipate the compliance required will start the process of many firms reviewing their policy on home visits to clients, and also reviewing their existing compliance procedures and terms of engagement.
The practical issues surrounding the “cooling off” period may cause some difficulties for private client practitioners. Frequently you are faced with an urgent matter that needs to be dealt with for a client, which due to ill health may involve a home visit or visit to a hospital or nursing home. There may be a need for a will to be updated due to a terminal illness, and timescales may not allow for a 14 day “cooling off” period to be an option for the client.