Giving notice of cancellation of a consumer contract: the form and the effect on refunds
About this series of articles
This article is the fifth in a series about the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, often abbreviated to CC (ICAC). This law came into effect from 13 June 2014, replacing older “Doorstep selling” and “Distance selling” law.
The series explains the law, and how to apply it to your business so that you remain compliant.
Unfortunately, like most European law, the Regulations are anything but clear and practical. We hope that our information articles are thorough and easy to digest and make understanding the implications for your business easier.
If your business already compliant with distance selling rules, the changes represent evolution rather than a revolution. However, there are some important changes.
An automatic right to a 14-day cancellation period for a consumer contract formed off-premises or at a distance
When you sell goods, services or digital content then your client or customer has the automatic right to cancel the order within the cancellation period of 14 days. He can exercise it just by informing you that he wishes to do so, and he doesn’t have to give you a reason for doing so.
But this is only the case when the contract is formed off-premises (for example, at the customer’s house) or at a distance (such as by mail order or through the Internet). Your customer does not have this right by law when sales are made at your shop or office, or other business premises.
You can extend the number of days beyond 14 to offer a better incentive to prospective customers, but you can’t reduce it.
Giving notice to cancel a consumer contract
There is no specific requirement as to how notification to cancel a contract should be given but in the event of a dispute the burden falls upon the consumer to prove that he did cancel within the cancellation period. So, for example, if he rings you but calls the wrong number, he will have failed to cancel.
As a trader, you have an obligation to provide information about how to cancel as well as the means to do so (a form in a prescribed format that your customer can use to give you notice).
But whilst you must provide the model cancellation form in your system or process, the consumer is not obliged to use it. He can notify you in any way he likes, and in hard or soft copy. That includes, by letter or written note, by e-mail, or even by an SMS text message.
If you offer an online cancellation form on your website then your customer may use that, but if he does, then you must acknowledge receipt of that notice without delay through what the Regulations call a durable medium - e-mail message, written letter, or text message.
Of course, the cancellation is effective only if the communication is sent to you before the end of the cancellation period.
To emphasise, the key time is when the communication was sent, not when you received it.
Effects of cancellation
If the cancellation right is exercised, the contract is terminated immediately with the following effects:
If you sell goods
Goods undelivered will remain undelivered.
Goods delivered should be returned by the customer. Only when you receive the goods back must you refund the customer. The repayment must include the original cost of sending. However, if customer has expressly requested a delivery method that is more expensive than your basic cost, you are only obliged to refund your basic delivery cost, not the cost of the more expensive delivery method. For example, if a consumer has chosen a next day delivery service over a standard 3 day delivery period, and next day delivery costs more, you only need to refund your standard delivery cost.
You must also refund the customer’s cost of returning the goods to you - unless your contract terms make him liable in these circumstances.
You must reimburse the consumer without undue delay and within 14 days from the day after the consumer informs you of his decision.
If you provide a service
If you provide a service, you should stop providing it when the client cancels.
No money will be due to you by your client.
All money paid will be returned to the client without deduction.
If the client has requested that the service be performed urgently, you may deduct the value of services to the date of cancellation. In our opinion you may not charge for work done which has not yet been delivered to the client.
Because these rules are fairly draconian, you might want either to start your service after the cancellation period has ended, or if the service if urgently required, write into your terms that the work is to be performed urgently, so that you can deduct a fee for services delivered to date.
Note: this is not the same situation as when your client specifically opts out of the cancellation period.
When you do not need to make full repayment
This applies only to the sale of goods
You may deduct an amount from the reimbursement (or charge your customer if he has not yet paid) if he has “diminished the value of the goods by handling them beyond what is necessary to establish their nature, characteristics and function”.
The Regulations establish a test as to whether consumers have handled the goods in a way beyond what might reasonably be allowed in a shop. This is likely to be a controversial area of the Regulations for both consumers and traders.
What it amounts to is that the regulations permit the customer to check the item in the same way that he might in a shop to ensure it is as described. As a result, you cannot deduct for the wrapping and outer box since it would have been reasonable for the customer to remove these to see the item in the way he would in a shop.
Here are some examples to illustrate this concept:
Your customer returns a shirt that comes in a presentation box. He has opened the box and removed all the packaging to try it on. It is reasonable to expect a customer to remove packaging to try on or examine an item, so you should make no deduction for this.
Your customer returns a shirt, which you can see has clearly been worn. Here the customer has not acted reasonably and you can make a deduction for diminishing the value. The second hand value of the might justify a large deduction – we think 90% might be reasonable for clothing.
Your customer returns flat pack furniture, which he has clearly attempted to assemble by opening packs of screws and trying to put parts together. You can make a deduction for diminishing the value. But since you can still sell the product provided the pieces are all present, a lesser percentage deduction would be appropriate compared to that for clothing – perhaps 50%.
How to comply most easily
The best way to comply is simply to offer a no questions money back guarantee if the goods are returned in a re-saleable condition. This is probably what you have been offering for the last 20 years.
We recommend that you read about exemptions from the regulations next.
If you haven’t already read it, we also recommend reading about your customers' cancellation rights.
Unless you are exempt from the Regulations or are already compliant, you are likely to need to update your customer contract templates. These are likely to include your the terms and conditions on your website if you sell online and your offline customer contract if you sell offline.
All Net Lawman documents have been updated to comply, if required, with the Regulations. We think that it will be much easier to edit one of our templates, than make changes to your existing documents.
If you have any questions about the Consumer Contract Regulations 2013, or would like help updating your contracts to comply, please ask us. We’d be delighted to help.
Please note that the information provided on this page:
- Does not provide a complete or authoritative statement of the law;
- Does not constitute legal advice by Net Lawman;
- Does not create a contractual relationship;
- Does not form part of any other advice, whether paid or free.
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