Consumer protection hits small business

Posted: 18th January 2013

In ruling that a removals firm was not entitled to charge a cancellation fee to a householder who terminated a contract at short notice, the Court of Appeal has expressed concerns about the harsh impact consumer protection laws can have on small businesses. The firm had incurred substantial costs in furtherance of the contract prior to the home owner’s withdrawal on receiving a lower offer.

The firm had refused to return the householder’s £1,000 deposit and demanded a £2,450 cancellation fee. However, the court ruled that the fee was not payable because the contract had been cancelled within the seven-day ‘cooling off period’ laid down by the Cancellation of Contracts made in a Consumer’s Home or Place of Work Regulations 2008. Those regulations were introduced to protect the public against a variety of unfair commercial practices which may occur when a trader visits a consumer at his home.

The firm successfully argued at first instance that the regulations did not apply to the contract as the firm’s representative had made two, rather than one, visit to the consumer’s home prior to completion of the contract. However, in overturning that decision, the court ruled that, on a correct interpretation of the regulations, the home owner was entitled to cancel without charge.House

The court reached its decision ‘with regret’ after the firm argued ‘with some force’ that such an interpretation would lead to absurd results. It pointed out that the householder, an intelligent man well able to negotiate contracts, had specifically invited the firm’s representative into his home. It was argued that, if removal contracts can be cancelled at will during a seven-day cooling off period, it will be impossible for removal firms to carry on their business.

The home owner had put the firm to a great deal of work and expense before seeking to resile from his obligations at one day’s notice in reliance on consumer protection legislation. The result of the case was, the court acknowledged, ‘harsh indeed for small businesses, especially in the present economic climate’

The court also noted that the protections afforded by the regulations, which embrace visits made to homes by traders at a consumer’s request, go beyond those laid down in EU Council Directive 85/577/EEC which they were designed to transcribe into domestic law. The wider drafting was adopted to promote simplicity and clarity in the law and was motivated by a perception that consumers are vulnerable in their own homes, even if they have requested a trader to visit.

Observing that the regulations were not designed to deal with the factual circumstances that had arisen in the particular case, Lord Justice Jackson concluded: ‘I express the hope that the Department for Business, Innovation and Skills will review the 2008 regulations in the light of this case and consider whether any amendments are appropriate’.