Online terms and conditions: time for a health check?

There is a raft of inter-linking legislation governing trading with consumers, including legislation on unfair contract terms, rights of consumers online to receive certain information and rights to cancel an online purchase within a 'cooling off' period. In particular, the Distance Selling Regulations and the E-Commerce Regulations (which each derive from EU law so will have a similar impact in other Member States of the European Union) protect consumers when trading at a non-personable level, such as online.

The OFT has made clear that retailers who do not amend their terms and conditions in order to comply with consumer protection regulation will run the risk of enforcement action from the OFT or local Trading Standards Services.

Areas highlighted

Key areas highlighted in the OFT report include:

• restrictions on customers' rights to receive a refund after cancellation;
• restrictions on customers' rights to reasonably inspect and assess the product and then return it if defective;
• a lack of contact details on retailers' websites; and
• unexpected charges imposed at the point of checkout.

In particular, websites should provide clear details on the customers' cancellation rights, and this right to cancel should not be subject to unreasonable conditions. One of the most common conditions that the OFT came across was that the right to cancel was subject to the product remaining in its "original packaging, original condition, resalable or it must have been unused". This was deemed by the OFT to be unreasonable, and therefore potentially unenforceable.

Contact details were also seen to be an issue on a number of the sites. The E-Commerce Regulations make it compulsory for companies to provide an email address for consumers to contact. However, 40% of the companies did not provide this and, in 2% of the cases looked at, neither an email address nor a web contact address were provided.

Further, offer price and compulsory additional charges were also brought to the attention of the OFT. 72% of the companies' websites surveyed included additional charges to the final check-out price. However, when the price was first quoted, consumers were not always told that there would be an additional charge (eg, delivery). The OFT considered that a number of companies were not providing consumers with the correct information when prices and charges are first displayed on screen. In 24% of cases, reviewers believed that there were even unexpected charges which were not indicated at the time of the first quote or at the final check out price.

Practical steps

It may be time for a terms and conditions 'health check' to ensure compliance with current legislation. There are three key questions:

Question 1: Are you providing consumers with information to which they are legally entitled?

All online service providers, including retailers, must make certain information available to their consumers, including:

• The name and geographic address of the service provider;
• The details of the service provider, including e-mail address;
• If a corporate entity, the company registration number of the company;
• Details of the relevant supervisory authority if the retailer is subject to an authorisation scheme; and
• (if applicable) the VAT registration number.

Question 2: Are you aware of consumers' rights to cancel and request a refund if the goods are defective? If so, do your terms and conditions make reference to those rights?

Online terms and conditions should cover, amongst other things:

• The 'cooling off' right: subject to certain exemptions, consumers have a right to a 'cooling off' period and a right to change their mind after the goods have been delivered.
• The consumers' refund rights: consumers also have a right to inspect goods and return them if defective.
• Details on how and when a refund will be made.
• Details of any surcharges or extra fees that may be incurred on top of the purchase price for the goods.

Question 3: Are your terms and conditions reasonable?

Terms and conditions should be in plain English and avoid legal jargon. If contract terms imposed on a consumer are unreasonable, they may be unenforceable. A contract term that has not been individually negotiated is typically regarded as unfair if (in the absence of good faith) the term causes a significant imbalance in the parties' rights and obligations, to the detriment of the consumer. Over time, the OFT and the Courts have given guidance on what they consider to be 'unfair' in standard terms and conditions