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RE-THEORISING CONSUMER LAW

Published online by Cambridge University Press:  19 March 2018

Chris Willett
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Abstract

This article develops a new theoretical framework for understanding consumer contract law, one based on competing ethics of self-interest/reliance and need. It shows how this is a better way of understanding choices as to levels of protection than the traditional “freedom versus fairness” framework. The self-interest/reliance ethic favours rules allowing traders to use processes to escape responsibility for poor quality and harsh outcomes, while the need ethic is concerned with consumer weaknesses and better protects against such outcomes. The article also shows that need-based rules are usually more effective at improving clarity and certainty, and where such rules cause uncertainty, at least as much uncertainty is caused by the alternative self-interest/reliance-based rules.

Keywords

consumerscompeting ethicsself-interest/reliance-need
Type
Articles
Information
The Cambridge Law Journal , Volume 77 , Issue 1 , March 2018 , pp. 179 - 210
Copyright
Copyright © Cambridge Law Journal and Contributors 2018 

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Footnotes

*

Professor of Commercial Law.

My thanks are due to Professors Roger Brownsword, Lorna Fox-O'Mahony, Sabine Michalowski, Onyeka Osuji, Christian Twigg-Flesner and the anonymous reviewers for comments on drafts.

References

1 C. Willett, “General Clauses and the Competing Ethics of European Consumer Law in the UK” [2012] C.L.J. 412, developing Weber, M., The Theory of Social and Economic Organization, trans. Parsons, T. (New York 1947), 184–86Google Scholar, on how “substantive” rationality (which includes choices about rules) involves value judgments (cf. “formal” rationality denying such value judgments).

2 Consumer Insurance (Disclosure and Representations) Act 2012, Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, SI/3134, Consumer Protection (Amendment) Regulations 2014, SI/870.

3 Part 3 covers enforcement powers, private actions in competition law, and letting agents.

4 Contracts between “traders” and “consumers” as defined in ss. 2(2)–(3).

5 See also on delivery and risk (ss. 28–30) and contractually binding information (ss. 12, 37, 50).

6 Dept. of Business, Innovation and Skills (BIS), Enhancing Consumer Confidence by Clarifying Consumer Law (London 2012), 5.54Google Scholar; Citizens Advice and Oxford Economics, Consumer Detriment (Oxford 2016)Google Scholar.

7 Whittaker, S., “Distinctive Features of the New Consumer Contract Law” (2017) 133 L.Q.R. 47 Google Scholar.

8 BIS, Enhancing Consumer Confidence, pp. 4–10.

9 E.g. Law Commissions, Unfair Terms in Contracts (London 2005), 199, 242Google Scholar; BIS, Consolidation and Simplification of UK Consumer Law (London 2010)Google Scholar; BIS, Enhancing Consumer Confidence.

10 Rickett, E.F. and Telfer, G.W., International Perspectives on Consumers’ Access to Justice (Cambridge 2003)Google Scholar.

11 2013/11/EU, implemented by The Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015, SI, 2915/542.

12 Twigg-Flesner, C., “Does the Codification of Consumer Law Improve the Ability of Consumers to Enforce Their Rights?” in Heiderhoff, B. and Schulze, R. (eds.), Consumer Law and Consumer Behaviour (Baden-Baden 2016), 211 Google Scholar.

13 BIS, Enhancing Consumer Confidence.

14 E.g. conformity in sales (Sale of Goods Act (SGA) 1979, ss. 12–15, 35), work and materials, exchange, hire (Supply of Goods and Services Act (SGSA) 1982, Part 1), hire purchase – HP (Supply of Goods (Implied Terms) Act 1973 (SOGIT)); remedies in sales (SGA, ss. 35, 48A–E), work and materials (SGSA, s. 11M–S), hire and HP (common law affirmation doctrine – Farnsworth Finance Facilities v Attryde [1970] 2 All E.R. 774); conformity of services (SGSA, Part 2); unfair terms (Unfair Contract Terms Act (UCTA) 1977 and Unfair Terms in Consumer Contracts Regulations (UTCCR) 1999).

15 E.g. cure, price reduction and final rescission remedies existed for sale and work and materials (SGA, s. 48A–E, SGSA, s. 11M–S), but not for hire, HP, digital content (DC) or services.

16 Bradgate, R., Consumer Rights in Digital Products (London 2010)Google Scholar.

17 Part 1, chs. 1–3 (goods, DC and services), Part 2 (unfair terms); and Sch. 1 for dis-application of SGA, SGSA, SOGIT and UCTA rules (notes 14–15 above) from B2C contracts, and revocation of UTCCR (note 14).

18 E.g. cure and price reduction remedies for goods, DC and services (ss. 23, 24, 43, 44, 55, 56).

19 Part 1, ch. 3.

20 Note 2 above and, on unclear drafting in the CRA, Whittaker, “Distinctive Features”, pp. 49–50.

21 Collins, H., Regulating Contracts (Oxford 1999), 268 Google Scholar.

22 Ibid., at p. 271.

23 Willett, “General Clauses”; and, on judicial ethics and general clauses in consumer credit, Brown, S., “Consumer Credit Relationships – Protection, Self-Interest/Reliance and Dilemmas in the Fight against Unfairness” (2016) 36 L.S. 230 Google Scholar.

24 Note 6 above.

25 Enterprise Act, 2002, Part 8.

26 See McKendrick, E., Contract Law, 11th ed. (Basingstoke 2015), ch. 1Google Scholar.

27 Atiyah, P.S., The Rise and Fall of Freedom of Contract (Oxford 1979)Google Scholar; Willett, C., Fairness in Consumer Contracts (Aldershot 2007)Google Scholar.

28 S. 11.

29 Walford v Miles [1992] 2 A.C. 128; Parking Eye Ltd. v Beavis [2015] UKSC 67; Beale, H., “Penalty Clauses in English Law” (2016) 24 E.R.P.L 353 Google Scholar.

30 Consumer Contracts etc. Regulations, note 2 above; and Whittaker “Distinctive Features”, on these and other provisions evidencing bifurcation in B2C and B2B contract law values.

31 UCTA, ss. 6(3), 7(3).

32 UCTA, Part 1.

33 Brownsword, R., “Regulating Transactions: Good Faith and Fair Dealing” in Howells, G. and Schulze, R. (eds.), Modernising and Harmonising Consumer Contract Law (Munich 2009), 89–113 Google Scholar.

34 Willett, Fairness.

35 See e.g. the choice (Section IV below) in the CRA to adhere to a fault standard for services, although this is not openly expressed as a choice based on values of self-interest/reliance.

36 See Section IV on the CRA following this approach, although not openly linking it to self-interest/reliance.

37 Willett, Fairness.

38 Willett, “General Clauses”, p. 420, and for recent re-affirmation of this problem, particularly in relation to lost leisure time and emotional costs, Citizens Advice and Oxford Economics, Consumer Detriment, chs. 5, 7.

39 Willett, “General Clauses”.

40 Wightman, J., “Beyond Custom: Contracts, Context and the Recognition of Implicit Understandings” in Campbell, D., Collins, H. and Wightman, J. (eds.), Implicit Dimensions of Contract (Oxford 2003), ch. 5Google Scholar; Willett, “General Clauses”; and for recent support from behavioural economics, Esposito, F., “A Dismal Reality: Behavioural Analysis and Consumer Policy”, (2017) 40 J.C.P. 1 Google Scholar.

41 Brownsword, R., Contract Law: Themes for the Twenty-First Century (Oxford 2006), 79–85 Google Scholar; and Willett, Fairness, pp. 39–46.

42 Willett, “General Clauses”, pp. 423–24.

43 Ibid., at pp. 423–24; generally on the limits of protection via transparency, Howells, G., “The Potential and Limits of Consumer Empowerment by Information” (2005) 32 (3) J. Law Soc. 349 CrossRefGoogle Scholar.

44 Esposito, “A Dismal Reality”.

45 Willett, Fairness.

46 Sunstein, C.R. and Thaler, R.H. “Libertarian Paternalism Is Not an Oxymoron” (2003) 70 U.Chi.L.Rev. 1159 Google Scholar.

47 Wilhelmsson, T., Critical Studies in Private Law (Dordrecht 1992)Google Scholar.

48 E.g. CRA, s. 9(2)(a).

49 Atiyah, The Rise and Fall; and Willett, Fairness, on procedural and substantive fairness; and Willett, “General Clauses”, on non-protective judicial interpretations of the “fairness” test applicable to contract terms. Note also the contrast between the “need” ethic and the “inequality of bargaining power” doctrine suggested for the common law but rejected in National Westminster Bank plc. v Morgan [1985] A.C. 686: the focus on “bargaining power” could suggest a concern only with procedural (process/input) problems and therefore something more in tune with the self-interest/reliance ethic.

50 BIS, Enhancing Consumer Confidence, p. 138.

51 SGA, note 14 above – for B2C contracts, now CRA, ss. 9–18.

52 International Computers Ltd. v St. Albans District Council [1996] 4 All E.R. 481 Google Scholar; and SAM Business Systems v Hedley (unreported).

53 Beta Computers (Europe) Ltd. v Adobe Systems Ltd. [1996] S.L.T. 604; but now Software Incubator Ltd. v Computer Associates [2016] EWHC 1587 (QB), where software supplied alone was viewed as goods under the Commercial Agents (Council Directive) Regulations 1993.

54 Salvage Association v CAP [1995] F.S.R. 654.

55 SGSA, s. 13 – for B2C contracts, now CRA, s. 49.

56 BIS, Enhancing Consumer Confidence, 7.44–5.

57 Ibid., at 7.46–59; Bradgate, Consumer Rights.

58 S. 33.

59 Ss. 34–36, 41; and ss. 39–40 for other rules specially designed for DC.

60 These standards cannot be excluded by businesses’ standard terms – s. 47.

61 Bolam v Friern Hospital Management Committee [1957] 2 All E.R. 118; on fault in common and civil law systems, S. Grundman, “The Fault Principle as the Chameleon of Contract Law: A Market Function Approach” (2009) Mich.L.Rev. 1583, at 1593–94.

62 Twigg-Flesner, “Does the Codification”.

63 Bradgate, Consumer Rights, pp. 40–41.

64 Twigg-Flesner, “Does the Codification”.

65 Collins, Regulating Contracts, p. 271.

66 Twigg-Flesner, “Does the Codification”; European Commission, Behavioural Research (Brussels 2016)Google Scholar.

67 99/44/EEC, Article 3.

68 Ss. 19, 23, 42, 43; note the separate 30-day short-term rejection right (s. 22).

69 Ss. 23(8), 43(8).

70 Ss. 54, 55.

71 S. 54(2).

72 Ss. 23(3)(a), 43(3)(a), 55(3).

73 Ss. 23(3)(b), 43(3)(b).

74 Case 65/09, Gebr Weber GmbH v Wittmer; and Case 87/09, Ingrid Putz v Medianess Electronics GmbH, interpreting SCGD, Article 3, from which the “disproportionality” test derives.

75 E.g. (the repealed) SGA, s. 48B; see ibid.

76 S. 58(2).

77 Beswick v Beswick [1968] A.C.

78 Gebr Weber GmbH; and Whittaker, “Distinctive Features”, p. 64.

79 See Whittaker ,”Distinctive Features”, p. 66, on the alternative of refusing SP, but granting damages in lieu under s. 50 of the Senior Courts Act 1981, to cover even disproportionate costs of third-party cure.

80 The damages remedy is preserved by the CRA: ss. 19(11)(a), 42(7)(a), 54(7)(a).

81 Beswick [1968] A.C.; and explaining the contrary civil law tradition, Whittaker, “Distinctive Features”, pp. 62–63.

82 On the duty to mitigate losses and the need to establish the causal link between breach and loss: Thai Airways International plc. v KI Holdings Co. Ltd. [2015] EWHC 1250 (Comm); Hart, H.L.A. and Honoré, T., Causation in the Law (Oxford 1985), ch. XIGoogle Scholar.

83 Notes 63–65 above and related text, particularly on how this argument develops prior thinking on reasonable expectations and clarity/certainty.

84 Twigg-Flesner, “Does the Codification”; cf. Whittaker, “Distinctive Features”, p. 63, on the inconsistency of SP still not being available for breach of primary obligations, e.g. failure to deliver.

85 See note 66 above and related text.

86 BIS, Consumer Protection Partnership Priorities (London 2015), 1.44–5Google Scholar.

87 SGSA 1982, s. 13.

88 Also where tangible things like semen are supplied, but courts classify this as a services contract, because strict liability is considered inappropriate in policy terms ( Kobe Ter Neuzen v Korn (1995), 127 DLR (4th) 577Google Scholar).

89 If goods or DC are also supplied (e.g. car parts, paint) these are covered by the outcome-based terms on quality etc. (CRA, ss. 8–18); similarly where a business sells and installs goods (s. 15(1)(c)).

90 BIS, Enhancing Consumer Confidence, pp. 115–20, 183–85.

91 Ramsay, I., Consumer Law and Policy (Oxford 2012), 567 Google Scholar, supporting an outcome-based standard in such cases.

92 S. 49.

93 BIS, Consumer Rights Bill: Statement on Policy Reform and Responses to Pre-Legislative Scrutiny (London 2014), 23–26 Google Scholar.

94 CRA, ss. 9–11.

95 CRA, s. 9.

96 Note 90 above.

97 On outcome-based standards for services related to property, in German and French law, Beale, H., Fauvarque-Cosson, B., Rutgers, J., Tallon, D. and Vogenauer, S., Cases and Materials on Contract Law, 2nd ed. (Oxford 2010), 721–27Google Scholar.

98 Bolam [1957] 2 All E.R. 118; Grundman, “The Fault Principle”.

99 Independent Broadcasting Authority v EMI & BICC (1980) 14 BLR 1, and see potential liability under CRA, s. 50, when a satisfactory outcome is indicated pre-contractually, but this is entirely voluntary.

100 Note 86 above.

101 Twigg-Flesner, “Does the Codification”.

102 BIS, Enhancing Consumer Confidence, p. 124, on this conflicting with reasonable consumer expectations.

103 Acknowledging this, BIS, Enhancing Consumer Confidence, p. 113; and, on the complexities of negligence, Hedley, S., “Making Sense of Negligence” (2016) 36 L.S. 491–512 Google Scholar, especially 493.

104 E.g. European Commission, Behavioural Research.

105 BIS, Enhancing Consumer Confidence, pp. 4–10.

106 Notes 14, 17 above and related text.

107 Previously see UTCCR, reg. 5(1).

108 S. 71: reflecting the decisions of the Court of Justice of the EU in C-240/98, Océano Grupo Editorial S.A. v Roció Murciano Quintero [2000]; and C-243/08, Pannon GSM Zrt v Erzsébet Sustikné Győrfi [2009].

109 S. 62.

110 Willett, “General Clauses”.

111 Ss. 64(1)(b), 64(2).

112 93/13/EEC.

113 Willett, Fairness, pp. 245–54; terms specifying the main subject matter are also exempted by Article 4(2)/s. 64(1)(a).

114 Replacing the “plain and intelligible language” condition (UTCCR, 6(2)/UTCCD Article 4(2)).

115 Article 8.

116 Willett, “General Clauses”.

117 OFT v Abbey National and others [2009] UKSC 6; Whittaker, S., “Unfair Contract Terms, Unfair Prices and Bank Charges” (2011) 74 M.L.R. 106 Google Scholar; and Willett, “General Clauses”.

118 Abbey National plc and Others v OFT [2009] EWCA Civ 116.

119 OFT [2009] UKSC 6, at [113], per Lord Mance.

120 Ibid., at para. [102], per Lord Mance.

121 Ibid., e.g. at para. [47], per Lord Walker; see Case C-26/13, Árpád Kásler, Hajnalka Káslerné Rábai v OTP Jelzálogbank Zrt [2014] holding that a charge is not the price unless there is a service in exchange, but not being clear whether contingent charges for contingent services can be the price. See Parking Eye Ltd. [2015] UKSC 67: no service, so the charge was not the price.

122 Law Commissions, Unfair Terms in Contracts; and Law Commissions, Unfair Terms in Consumer Contracts: Advice to the Department for Business, Innovation and Skills (London 2013)Google Scholar.

123 E.g. the airline and bank charges discussed above in the text.

124 Law Commissions, Unfair Terms in Consumer Contracts, 3.109.

125 S. 64(2).

126 Law Commissions, Unfair Terms in Consumer Contracts , 3.23.

127 UTCCR, reg. 7(1).

128 Árpád Kásler, para. 75.

129 Willett, “General Clauses”, pp. 423, 426, 428.

130 Note 43 above and related text.

131 See Competition and Markets Authority, Retail Banking Market Investigation: Provisional Decision on Remedies (London 2016)Google Scholar, on the £1.2 billion paid in 2014 on unauthorised overdraft charges alone (para. 59); and on requiring banks to set a monthly maximum charge (including fees for unauthorised overdrafts) (para. 57), but many caps already set by banks are as high as £100 per month (e.g. Halifax).

132 The CMA propose requiring banks to warn consumers of imminent unauthorised overdrafts, and allowing a subsequent “grace period” (ibid., at para. 56).

133 See Parking Eye Ltd. [2015] UKSC 67 on the “legitimate interest” element of the test; note 110 and related text, on interpreting the formal legal “fairness” standard by reference to the need ethic. See also C-415/11, Mohamed Aziz v Caixa d'Estalvis de Catalunya, Tarragona i Manresa (Catalunyacaixa) [2013], where the CJEU said that core to fairness was whether a “consumer would have agreed to the term concerned in individual contract negotiations” (para. 76). This suggests an even more need-oriented standard of fairness, one placing greater emphasis on consumer interests, than in Parking Eye. In Parking Eye, the focus on the legitimate interests of businesses was actually based on reliance on the opinion of the Advocate General in Mohamed Aziz (e.g. paras. 106–107), rather than on the opinion of the CJEU itself (the CJEU did not refer at all to the legitimate interests of businesses).

134 Parking Eye Ltd. [2015] UKSC 67.

135 S. 67(4).

136 The Law Commissions recommended this (Unfair Terms in Consumer Contracts, ch. 2, 4.46), but it is not provided for expressly in the CRA (s. 67(4)).

137 See note 46 above and related text.

138 E.g. on philosophy, Austin emphasised that “to say something is to do something” ( Austin, J.L., How to Do Things with Words (Oxford 1975), 94)Google Scholar; and on the benefits of clarity (for legislators, courts and stakeholders) in regulating for social corporate responsibility, Osuji, O., “Fluidity of Regulation-CSR Nexus: The Multinational Corporate Corruption Example” (2011) 103 Journal of Business Ethics 31–57, at 35Google Scholar.

139 BIS, Consumer Rights Bill.

140 Ibid., at pp. 23–26; and Law Commissions, Unfair Terms in Consumer Contracts, p. 19.

141 See e.g. Consumer Contracts etc. Regulations, note 2 above, implementing Directive 2011/83/EU, Consumer Protection from Unfair Trading Regulations (CPUTR) 2008 SI/1277 implementing Directive 2005/29/EC and Consumer Protection Act 1987 implementing Directive 85/374/EEC.

142 Willett, C., “The Directive on Unfair Terms in Consumer Contracts and Its Implementation in the United Kingdom” (1997) 5(2) E.R.P.L. 223 Google Scholar; but note also the tensions between more protective (“need”) and information based (“self-interest/reliance”) values both in the UTCCD itself and in CJEU interpretation of it: Howells, G., Twigg-Flesner, C. and Wilhelmsson, T., Rethinking EU Consumer Law (Abingdon 2018), ch. 4Google Scholar.

143 Koutsias, M. and Willett, C., “The Unfair Commercial Practices Directive in the UK” (2012) 5 Erasmus Law Review 237 Google Scholar.

144 Howells, G. and Pilgerstorfer, M., “Product Liability” in Twigg-Flesner, C. (ed.), Cambridge Companion to European Private Law (Cambridge 2010), ch. 19Google Scholar.

145 2005/29/EC, Article 5(2)(b)/CPUTR, reg. 3(3)(b).

146 Article 5(3)/CPUTR, reg. 2(5).

147 EEA Agreement, Article 72 and Annex XIX.

148 S. 2(1).

149 S. 6(1).

150 On CJEU interpretation of the UTCCD, Micklitz, H. and Reich, N. “The Court and Sleeping Beauty: The Revival of the Unfair Contract Terms Directive (UCTD)” (2014) 51(3) C.M.L.R. 771 Google Scholar; on the UK Supreme Court, Willett, “General Clauses”.

151 European Commission, Results of the Fitness Check of Consumer and Marketing Law and of the Evaluation of the Consumer Rights Directive (Brussels 2017)Google Scholar.