Whether it be cancelled holidays, caravan park bookings or fees paid for schools that have been closed, consumers who have entered into contracts for services have certain statutory protection. So what happens if the outbreak of Coronavirus means that services are not provided?
What types of contract are we talking about?
Contracts for services, in this context, are agreements between a trader and a consumer. A trader can be, for these purposes, an individual, a company or a public body; the key factor is that the trader is acting for purposes relating to a business or profession. Conversely, a consumer is someone acting for purposes that are outside that individual’s trade or business.
What are the statutory terms?
When bookings are made, there may often be a long list of terms and conditions which are accepted as part of the process. Those are referred to as the express terms of the contract.
In consumer contracts, some terms are implied by law even if they are not in written terms and conditions. Usually, the important one is that the trader has to perform the services with reasonable care and skill. Although there are other implied terms, it is relevant to the current situation that the law also says that a trader must carry out the service within a reasonable time if, in fact, the contract does not expressly either fix the time for the service to be performed or say how it is to be fixed.
Of course, using the examples in the introduction above, it is likely to be the case that the contract sets out specifically when the service is to be provided. A holiday home is usually booked for a particular week, or a child’s dance lesson fees will generally relate to sessions on specific dates and times. It is for precisely that reason that the trader may now be saying that the COVID-19 pandemic means that it cannot provide the services contracted for.
Importantly, though, the law also prevents the trader from trying to exclude the statutory rights, in particular, if it would prevent the consumer in an appropriate case from recovering the price paid.
What are the consumer’s rights?
If the time for provision of the service is missed, the starting point is that the consumer is entitled to what is referred to as repeat performance. If the trader cannot perform the service another time, for example, because it is time-specific, or cannot provide the service within a reasonable time avoiding significant inconvenience to the consumer, it will then usually be possible to demand a price reduction.
To take the holiday home booking as an example, in practice the trader may try to reschedule but, if the consumer cannot take up the new booking date, a refund is made available.
What a price reduction is may vary depending on the situation. In some cases, it can mean a full refund. However, in others, it may not. If it is available at all, the price reduction for a private school that closes for two weeks may, for example, equate to 20% of the termly fee.
With the Coronavirus outbreak in mind, clauses which limit a trader’s liability for delays caused by circumstances outside its control may not be unfair, despite the anti-avoidance provisions in the legislation. These types of clause are sometimes called “force majeure” provisions, and, effectively, they suspend the trader’s obligations to perform the services as originally envisaged. How the trader gives notice to the consumer is important. Each situation in which a trader relies on a force majeure clause is likely to be nuanced according to its own facts.
Consumers may also have rights to cancel altogether, in particular for internet purchases or other distance selling contracts, or agreements made away from the trader’s premises. Time limits apply to the exercise of those rights. Again, precisely what refund can be anticipated will depend on the type of service involved.
Because the position will change from situation to situation, and as official advice about Coronavirus changes, if you have queries, please contact our experienced dispute resolution & commercial litigation solicitors on 01202 786340 or email firstname.lastname@example.org