An increasing number of dealers in art and antiques are making sales online. Whilst legal principles relevant to the sale of goods in person apply to sales on the Internet, consumers buying online are offered an additional protection. In particular, they have the unconditional right to cancel online purchases for any reason within a ‘cooling off period’. The right to cancel is particularly draconian for dealers and is set to get worse.
These additional rights are available only to consumers. This means that if a dealer sells online to another dealer acting in the course of business, the buying dealer cannot rely on these rights. Similarly, if a dealer buys online, he cannot enforce these rights against his seller, unless the seller is a dealer himself and the buyer buys online in a private capacity.
Art and antique dealers should be aware of consumers’ rights and should ensure that their online terms and conditions of sale are drafted so that they do not give away more than they need to.
The right to cancel
A consumer buying online has the unconditional right to cancel the contract for the supply of goods within a period starting on the date of conclusion of the contract, and ending 7 working days beginning on the day after the day on which the consumer receives the goods. This period is called the ‘cooling off period’. This means that the consumer can return the goods for any reason and demand a full refund of the amount paid. It is not possible to exclude the right to cancel by way of contract.
The right to cancel the contract, and effectively reject the goods for any reason, is enshrined in the Consumer Protection (Distance Selling) Regulations 2000/2334, which implement the EU-wide Distance Selling Directive. To exercise the right to cancel, the consumer must have bought under a ‘distance contract’. A distance contract makes exclusive use of one or more means of distance communications, up to and including the moment at which the contract is concluded. If the buyer inspects the property at the dealer’s premises and a sale is subsequently concluded by email, the sale contract will, in principle, not qualify as a ‘distance contract’. If however, the dealer sells property on an online platform such as, say, 1stdibs, to a buyer, say, in Germany, that sale contract will qualify as a distance contract.
Certain types of contract fall outside the scope of the Consumer Protection (Distance Selling) Regulations. Examples are contracts for the sale of land, contracts related to financial services and contracts concluded at auction. This means that if a dealer sells online by private treaty, he must cancel the contract if so requested by the consumer during the cooling off period, but if he sells by auction on an online auction platform, he is not required to do so (provided that the auction sale was effected exclusively online).
The obligation to provide information
The Consumer Protection (Distance Selling) Regulations require dealers selling online to provide certain information to consumers ‘in good time prior to the conclusion of the contract’. Such information includes the dealer’s contact details, the price of the property including all taxes, the costs of delivery if the consumer is contractually liable to pay such costs, and information on the exercise of the right to cancel the contract.
Importantly, some of that information must be provided to the consumer in writing, in a form that cannot be edited and that the consumer can keep for future reference. For example, it is not sufficient to simply publish information on the right to cancel on the dealer’s website. The dealer should provide that information in a paper document or in an email, either before the purchase or, at the latest, at the time of delivery of the property to the consumer. He should also specify:
- whether the consumer must deliver the property back to the dealer if the consumer rejects it, or if the dealer will arrange collection from the consumer; and
- who will pay for delivery or collection.
If the dealer does not provide the relevant information on the right to cancel to the consumer within the specified period, the consequences are severe. The cooling off period will extend to as much as three months plus 7 working days beginning with the day after the day on which the consumer receives the goods. If the dealer intended that the buyer should pay the cost of delivery or collection if he rejects the goods, the dealer may not be able to recover such cost.
We recommend that the relevant information is included in the dealer’s terms and conditions of sale. To ensure that the consumer is aware of the terms and conditions, and is therefore obliged to comply with them, his attention should be drawn to them, and the dealer should obtain evidence that he agreed to them. One way to do this is to ensure the consumer ticks a box prior to completing the order, confirming that he has read and accepts the terms and conditions of sale (a link to which is inserted next to the tick box), thus preventing the consumer from proceeding with the sale if he does not tick the box. The dealer may also wish to ensure that a copy of the terms and conditions accompany the property at the time of delivery.
Exercise of the Right to Cancel
The effect of a notice of cancellation is that the contract is treated as if it had not been made.
If a consumer wishes to cancel the contract, he is required to notify the dealer in writing within the cooling off period, and the dealer must then reimburse him within a period not exceeding 30 days beginning with the day on which the notice of cancellation was given, irrespective of whether the dealer received the property. The dealer cannot insist on the property being received by him before he makes a refund. For that reason, dealers may prefer to collect before they refund.
The consumer is under a duty to take reasonable care of the property whilst in his possession and, if he arranges to return the property, to see that the dealer receives it and that it is not damaged in transit. The dealer should, within 21 days of the day when the notice of cancellation is given, notify the consumer to make the goods available for collection. If he does not give notice within 21 days, the buyer’s duty to take care of the goods ceases at the end of that period. If the sale contract provides that the consumer should return the goods upon calncellation, the notice period is extended to 6 months.
The Regulations provide that the consumer has no obligation to deliver the rejected goods except at his own premises. If the dealer wishes to impose upon the consumer the obligation to return the goods to his premises, he must provide for this specifically in the sale contract, and he must inform the consumer in writing, preferably prior to the conclusion of the contract.
If the consumer cancels the sale, the dealer must give him a full refund free of any charges. The only charge allowed under the Regulations is the cost of collecting the goods, if the contract provides that the consumer must return the goods at his costs if he cancels the contract but he does not return them or returns them at the dealer’s expense.
Enforcement and Guidance
The Distance Selling Regulations are enforced by local trading standard departments and the Office of Fair Trading, who may require undertakings from any online dealer failing to comply with the Regulations, and may apply for an injunction against the dealer. The Distance Selling Hub, run by the Trading Standards Institute and available at http://dshub.tradingstandards.gov.uk/, provides useful practical guidance.
Cross-Border Sales
Online sales raise difficult issues of applicable law. If the dealer is based in the UK, the sale is on-line on a server hosted in Ireland, the property being sold is physically in Switzerland and the consumer is in Germany, which law applies? In particular, can the German buyer (assuming he is a consumer) cancel the sale within the ‘cooling off period’?
If the consumer buyer is in another EU Member State, he will be entitled to exercise the right to cancel. The Regulations specifically provide that if the contract has a close connection with a Member State, they will apply even if the sale contract was made subject to the laws of a non-Member State. In other words, there is no point in making the contract subject to the laws of, say, New York to try and avoid the right to cancel because the consumer will be able to exercise the right if he can show that the sale was closely connected with the territory of a Member State.
The Cooling-Off Period is being extended
The Distance Selling Regulations are due to be replaced next year by the Consumer Contracts (Information, Cancellation and Additional Payments) Regulations 2013. The new Regulations will implement the Consumer Rights Directive (2011/83/EU).
The draft Regulations extend the cooling off period to a minimum of 14 calendar days (instead of the current period of 7 working days); and if a dealer fails to provide the consumer with the required information on the right to cancel, the cooling off period is extended by up to 12 months (instead of the current 3 month period).
Other changes include:
- the right of withdrawal is extended to online auctions, such as eBay – though goods bought at auction online can only be returned when bought by a consumer from a professional seller;
- dealers will be required to provide extensive information to consumers before they conclude the contract. The information is set out in detail in the Regulations. Dealers will also be required to give the consumer a cancellation form using the model contained in the Regulations;
- if the dealer does not provide information on delivery costs in advance of concluding the contract, the consumer is not liable for those costs; and
- dealers will be required to reimburse the consumer within a period not exceeding 14 days beginning with the day on which the notice of cancellation was given (instead of the current 30 days). Dealers will be able to delay repayment until 14 days after the day they receive the goods back or the consumer supplies evidence that he returned the goods, assuming that he is contractually obliged to return the goods (as opposed to the dealer collecting them).
The draft Regulations are due to be finalised by mid-December 2013, and they will apply to consumer contracts from 13 June 2014. Whilst some of the detail may change, the extended cooling off period has been set by the Consumer Rights Directive. Once the new Regulations have been published, dealers are encouraged to review government guidance on them. Guidance will be available on the Distance Selling Hub. Dealers should also ensure that their terms and conditions are amended by the time the Regulations come into force.
In the next few weeks, we shall publish an article on the impact of the forthcoming Consumer Contracts (Information, Cancellation and Additional Payments) Regulations 2013 on dealer sales.
Pierre Valentin and Hannah Shield
Articles published on this blog reflect the opinion of the stated author of the article only. The information they contain does not constitute legal advice.