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The impact of new consumer protection on dealer and gallery sales

New regulations aimed at protecting consumers come into force in the UK on 13 June 2014.  The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 apply to sales between traders and consumers.  Sales amongst professionals are not caught by the regulations.

The regulations consider different types of trader-to-consumer sales: on-premises sales, distance sales and off-premises sales.  Each category of sale is subject to its own regulations.

The main issues for dealers and galleries selling art, antiques and collectibles are the consumer’s right to cancel the sale without giving any reason or incurring any costs (other than those specified in the regulations), and the obligation on the dealer selling on consignment for another dealer to provide the consumer- buyer with the identity and address of the consigning dealer.

The regulations are aimed at high street consumer goods such as household goods and clothes.  Whilst buildings, food and package holidays (for example) are excluded from the scope of the regulations, art, antiques and collectibles are not.  This is an aberration.  But for now, dealers and galleries should consider adjusting their way of doing business to comply with the regulations.  Violation of certain provisions is an offence, particularly the obligation to give consumers buying off-premises information on their right to cancel.

The regulations are complex and open to interpretation.  This is only a brief outline.

On-premises sales

Dealers and galleries selling on their own premises are required to provide the consumer‑buyer certain information listed in Schedule 1 of the regulations.  When a dealer or a gallery sells on-premises, they do not have to offer consumers the right to cancel, nor must they disclose information on the consignor if they sell on behalf of another dealer or gallery.

Distance sales

The regulations define ‘distance contract’ as a contract concluded without the simultaneous physical presence of the trader and the consumer, with the exclusive use of one or more means of distance communication (e.g. email, telephone).

To qualify as ‘distance contract’, it must also be concluded ‘under an organised distance sales or service-provision scheme’.  The meaning of that phrase is not explained.  Whilst there is no doubt that sales on online platforms provided by third parties qualify as distance sales because they are concluded under an organised scheme, one-off sales concluded by email or telephone probably do not (but this is not free from doubt).  If the dealer or gallery displays art on its own website, and offers consumers an automated or semi-automated arrangement to negotiate and conclude a sale by means of distance communications, such sale is likely to qualify as a distance sale.  If however, the dealer or gallery merely displays on its website art available to view at the dealer’s office or in the gallery, and a consumer happens to agree to buy the artwork on the strength of the image after an exchange of emails, that sale may well not qualify as a distance sale.  In the absence of clearer guidance on the meaning of ‘distance sale’, each sale or method of sale should be examined on its own merit.

If the sale qualifies as a distance sale, the dealer or gallery must offer the consumer-buyer the right to cancel the sale within a period of 14 days commencing after the day on which the property comes into the physical possession of the consumer or their agent.  The consumer can cancel the sale without giving reasons, and the dealer or gallery must give the consumer a full refund (including the cost of delivery to the consumer unless the consumer selected a particularly expensive method of delivery).  The contract may specifically provide that the consumer is liable to pay the cost of returning the property if the sale is cancelled.  If the contract is silent, the cost must be borne by the dealer or gallery.

Dealers and galleries must provide consumer-buyers with written information on the right to cancel and how to exercise it.  If they do not, the buyer has an additional period of 12 months (after the end of the standard 14 days period) within which to cancel the sale.

The cancellation right should prompt dealers and galleries selling on consignment to reconsider their payment terms, to avoid being under an obligation to pay the consignor before the expiry of the period during which the consumer may exercise the cancellation right.

The other unattractive consequence of selling at a distance is the obligation to disclose ‘the geographical address and identity of [the] other trader’ where the dealer or gallery sells on consignment for another dealer or gallery.  Bizarrely, auctioneers selling by public auction are exempt from that obligation (but not when they sell by private treaty).  Failure to provide that information amounts to a breach of contract by the dealer or gallery.

Schedule 2 of the regulations sets out additional information that must be provided to consumers before the distance contract is concluded.

Off-premises sales

The definition of ‘off-premises contract’ is not straightforward but in essence, an off‑premises sale is a sale concluded face-to-face by the trader and the consumer in a place that is not the business premises of the trader, or a sale concluded by any means of distance communication ‘immediately after’ the sale was discussed between trader and consumer in a place that is not the business premises of the trader.  For example, if the dealer or gallery staff visits the consumer-buyer at home, or the consumer is visiting town and they meet at her hotel, or a transaction is discussed over a business lunch, and the sale is concluded there and then (a shake of hand may suffice) or immediately thereafter, the sale will qualify as an ‘off-premises sale’.

Similar rules apply to distance sales and off-premises sales.  If the sale is off-premises, the dealer or gallery must offer the consumer-buyer the right to cancel, provide details of the consignor if the dealer or gallery sells as agent for another dealer or gallery, and more generally give the information set out in Schedule 2 of the regulations.  There are some bizarre quirks, for example, in the case of an off-premises sale (but not a distance sale), if the dealer or gallery staff visits the consumer at home, agrees a sale there and then and leaves the artwork with the consumer, the dealer or gallery is responsible for collecting the artwork (at their cost unless expressly agreed otherwise) if the consumer exercises his right to cancel and the artwork cannot ‘by [its] nature, normally be returned by post’.

Sales at art fairs

Do sales at art fairs qualify as off-premises sales?  In the definition of ‘off-premises contract’, the regulations provide that this includes ‘a contract concluded during an excursion organised by the trader with the aim or effect of promoting or selling goods or services to the consumer’.  Does an art fair amount to an ‘excursion’ away from the dealer or gallery’s premises?  There is no guidance on this point.

The regulations define ‘business premises’ as (amongst other things) ‘any movable retail premises where the activity of the trader is carried out on a usual basis’.  It is arguable that dealers and galleries conduct their business at art fairs on a usual basis.  If so, the argument would run that a sale conducted at an art fair in concluded ‘on-premises’, not ‘off-premises’.  The EU Directive on consumer protection (from which the regulations are derived) seems to support that argument.  It provides that ‘market stalls and fair stands should be treated as business premises if they [serve as a permanent or usual place of business for the trader].  Retail premises where the trader carries out his activity on a seasonal basis, for instance during the tourist season at a ski or beach resort, should be considered as business premises as the trader carries out his activity in those premises on a usual basis (our emphasis)’.  In light of these remarks, one may assume (but this point is undecided) that provided that the dealer or gallery usually participates in art fairs, sales by them at art fairs qualify as on-premises sales.

Cross-border sales

The question is whether the rights given to consumers under the regulations apply if the consumer is outside the UK, or the dealer or gallery is based outside the UK.

First, as noted, the regulations derive from an EU Directive.  Accordingly, consumers in other EU countries must be expected to benefit from the same protection as UK consumers.

Secondly, agreeing that the sale contract with the consumer will be subject to the law of a country outside the EU will not have the effect of depriving EU consumers of the protection afforded by EU and national law.

Thirdly, the courts in EU Member States will enforce their own consumer protection laws if the consumer resides in the EU, even if the dealer or gallery is based outside the EU.  This means that non-EU dealers and galleries should not assume that they are immune from EU consumer protection.  In fact, if they conduct business in the EU or direct their activity to consumers in one or more EU countries, they are bound to comply with the consumer protection laws of these countries.

Pierre Valentin