What is a Consumer Agreement?
Consumer agreements are legally binding agreements reached between organisations and their customers about the terms under which products and/or services supplied by the organisation can be acquired. These agreements can include many other matters than those implied by the expression "terms and conditions". For example, they may incorporate information about products or services that are offered in conjunction with the main subject of the consumer agreement. Highlights of the product or service being acquired by the customer can also be referred to in the agreement, as can further details about any guarantees. The information is not limited to digital information. It can also be provided in advertisements in print publications or on digital media, or verbally in telephone or face-to-face communication.
Basic characteristics of a consumer agreement include: The inclusion of specific information in a consumer agreement is essential for the organisation entering into the agreement. An organisation should ensure that its consumer agreement contains relevant details about the offered products or services in sufficient detail to distinguish them from other available products or services. This can enable the organisation to demonstrate that it has entered into a consumer agreement with a consumer, if necessary .
Legislation regulates many aspects of consumer agreements. Fundamental requirements such as the information that must be provided in a consumer agreement and its form will be found in legislation. An example is the Consumer Rights Act 2015 (the 2015 Act). The 2015 Act contains mandatory information that must be stated in a written form and with legibility (normally an electronic form) in a consumer agreement. Part 1 of the 2015 Act specifies the requirements concerning standard form consumer contracts. For contracts with consumers, an example is that standard terms must be set out as the aspects of the contract that applying-download and apply without negotiation with the supplier. A failure by an organisation to comply with such legislation can result in fines and damage to the organisation’s reputation.
Although the UK has left the European Union (EU), EU law still has a very significant impact on consumer agreements in the UK. The European Consumer Centre website provides useful guidance for consumers and organisations. Under the Consumer Rights Directive, for example, a term in a consumer agreement cannot be binding on the consumer if it creates a significant imbalance in the parties’ rights and obligations.
Types of Consumer Agreements
In general, there are three types of consumer agreements: purchase agreements, service agreements, and installment agreements. All three types of agreements have distinguishing features.
A purchase agreement is a legal contract for the sale of goods in the amount of $500 or more. The contract must be in writing and signed by the parties. The UCC provides special provisions for a purchase of $500 or more, but that is not satisfied by a bank’s imposition of service fees or the buyer’s reimbursement of taxes, license fees, delivery costs, or handling charges. If the price is payable by installments, the right to an action may be denied if the party receiving payment has not paid for the full quantity of goods.
Generally, a service agreement is a written contract for the providing of services, such as architect’s services, artist’s services, accountant’s services, attorney’s services, engineer’s services, and title examination services. Service agreements may also include repairing, cleaning, hanging, hanging, repairing, remodelling, wallpapering, batting, packing, painting, carpentering, and constructing.
An installment agreement is a written contract for the sale of goods, where the price is payable by installments. An installment agreement must: (1) specify the goods, (2) provide that the payment is payable in installment, (3) fix the installment price, (4) contain a description of the goods, (5) provide that ownership is to remain with the seller until the full purchase price is paid or until certain conditions occur such as their abandonment, (6) provide for a right of repossession in the case of a default; and (7) provided for a penalty for failure to make payments.
A contract for goods where the payment of $1,000 or less is required at the time of delivery and does not exceed $5,000, is a consumer credit transaction and does not need to be in writing. Imposing interest at a rate beyond the lawful limit is an abuse for which a prison sentence can be imposed.
Core Components of a Consumer Agreement
The primary elements of a consumer agreement should include the following:
- Terms and conditions. The agreement should specify the rights of the parties and set out the obligations of the service provider to the consumer and the consumer to the service provider. It is often beneficial to document what happens if a party is unable to perform its obligations under the agreement.
- Rights and responsibilities of each party. The agreement should outline the transfer or delegation of rights and responsibilities from one party to another and determine how those rights and responsibilities will be enforced, especially where there are grouped services provided by a number of service providers.
- Dispute resolution. All agreements should contain proper dispute resolution clauses, including how the disputes will be resolved by the parties, setting out the procedure including the place, time and language of the dispute resolution process. It is critical to pay particular attention to any international dispute resolution clauses or restrictions, as it can be very difficult for Canadian service providers to enforce their rights under an agreement with parties in foreign jurisdictions.
Rights of Consumers in an Agreement
Depending on the type of consumer agreement, consumers are often afforded certain rights. These rights typically include the right to receive information, the right to cancel or withdraw from a contract, and protection against unfair terms.
Right to Information
As stated above, consumers have the right to be informed in a clear and transparent manner the essential terms and conditions of the agreement. This might include clear information relating to the price of the goods or services, main characteristics, delivery conditions and complaints procedures. Consumers may also have the right to receive written information about the main characteristics of the goods or services they purchase, their rights of withdrawal or cancellation, as well as the seller’s identity.
Right to Cancel or Withdraw From a Contract
Consumers are entitled to withdraw from or cancel many types of agreements by stating their intention to do so without incurring a charge within a certain prescribed period. The length of this period will depend on the jurisdiction. Suppliers may also have cancellation rights, however these rights are usually limited.
Protection from Unfair Terms
Terms that create an imbalance between consumers and sellers, or allow sellers to take advantage of consumers are considered unfair and are found in both consumer agreements and standard consumer terms and conditions. A table comparing common examples of fairness requirements in consumer contracts is set out below.
Common Mistakes in Consumer Agreements
Consumers often unknowingly enter into contracts that are not in their best interests. This section is going to address some of the common pitfalls often seen with consumer agreements, but it is by no means a complete list. At Young Alfred, we have seen common pitfalls with our clients in the following agreements: All of the above do not include a trial period and often times contain hidden fees. It is important to be on the lookout for these and other hidden fees. Hidden fees are hidden charges that are embedded throughout the agreement in a way that makes them hard to spot. One of the simplest and safest ways to avoid any hidden fees is to read the agreement in its entirety and ask questions when you have them. All agreements are negotiable; so even if you see something you don’t like within an agreement, don’t be afraid to cross out or add to the document. This is called a modification of the agreement. Make sure the other party signatures the modified contract. Even if one party has initialed changes , all parties must sign it to be binding. In general, consumer complaints have a few common concerns that include but are not limited to: Some consumers are more susceptible to these faults than others, as they can be particularly difficult for a nonprofessional to identify. Make sure you take your time and that you fully understand an agreement prior to signing it – even if it take some time and follow-up questions. This is especially true when dealing with high-pressure sales practices that promise a deal that you will never see again. If someone is pressuring you, do not sign anything! Tell them that you will take it home and seek legal guidance prior to signing. We suggest that all consumers take their time when entering into any consumer agreement to ensure they are receiving the best deal for their money and know exactly what services they are paying for.
Consumer Legal Protections
In many countries, consumer protection agreements are harmonised by national laws to dictate the terms of the agreement that are for the benefit of the customer and procedures enabling customers to have confidence in their purchases and to be empowered in their relationship with the selling party. National consumer protection laws commonly operate as a minimum standard of protection so that if an agreement is in breach of any statute, regulation or secondary legislation which prescribes minimum term or condition, then in the absence of a specific exemption, this will be unenforceable against the consumer. If a national law specifically states that a certain term or condition in an agreement is unenforceable against a consumer, this will usually mean it is unlikely that any court or other body will hold that it is enforceable against a consumer. It would be unusual to find a term or condition held to be unenforceable if it has been specifically legislated against and in the absence of an exemption. Consumer protection laws vary from country to country. The United Nations Guidelines for Consumer Protection provide some harmonisation in Europe and the G20 nations. They set out various undertakings and obligations which the signatories are expected to adhere to in the development and implementation of their respective consumer legislation.
In the EU, the Consumer Protection Co-operation (CPC) is a network of enforcement authorities in all EU member states, plus Iceland, Norway and Iceland. Using joint powers to investigate consumer complaints, the CPC can search and seize evidence, order traders to stop distributing products and shut down websites displaying problematic commercial practices, initiate injunctions against traders and impose fines for breaches of EU law on business operators.
Negotiation Tips for Better Consumer Agreements
When presented with an consumer agreement or credit card agreement, consider proactively negotiating the terms of the agreement to provide more favorable terms. It’s generally much easier to negotiate over terms beforehand than after the fact. It is also important to keep in mind that having the ability to negotiate favorable terms is very much determined upon the consumer having bargaining power in the transaction. If a consumer has limited credit and does not have strong credit factors, then it is likely that the consumer will not be able to negotiate favorable terms and/or may not be approved for an open line of credit because of the credit risks involved with granting the consumer credit. As a general rule, consumer agreements make many provisions unilaterally binding on the consumer, and very few provisions bind the provider to protect the consumer in any way.
In some situations, the consumer may have a significant financial interest in the transaction sufficient to merit negotiating a more fair contract. For instance, if a consumer is applying for a mortgage for hundreds of thousands of dollars, it’s certainly permissible to ask to negotiate the terms of the mortgage agreement, such as the term, interest rate, loan payments and how payments are to be applied (such as to principal or interest). These terms are often negotiable, and a well-informed consumer should be well-qualified to negotiate these terms in a way most favorable to him or her. A consumer in these situations should avoid presenting demands couched as questions (e.g., "don’t you think we should…"), but rather approach this with the mind-set that the terms of the contract may be open for further discussion to achieve a more beneficial term to both parties.
Industry Examples: Consumer Agreements
To fully understand the importance of consumer agreements, we will now look at some real-world examples or case studies of consumer agreements (or lack thereof). The first example is of an agreement done well.
Case Study 1: Wagmore Pet Services
Wagmore Pet Services, a pet-care company that caters to dogs and cats, markets itself through agreements. Their philosophy is that it is easier to attract new clients by providing a full account of their services in an agreement than by maintaining a website full of information (which can be very costly). In this case, the agreement is very long, but this policy of marketing is beneficial because it gives clients a full account of their services. Going through each clause line-by-line with clients allows Wagmore to answer any questions they may have and make appropriate recommendations based on their individual needs. This is always better than being asked about a clause later when it is too late to change if your client does not agree with what is written in the agreement.
Case Study 2: Vegas Casinos
On the contrary , Las Vegas casinos have some of the most ridiculous consumer agreements in the world. Which is why we are going to use them as our second case study. In Nevada, when gambling or betting, you are required to agree to the rules and conditions set out by the casino in writing. However, given the number of complaints about those agreements, the casinos are obligatory under Federal law (U.S. Code 25 U.S.C. § 2701 et seq., the Indian Gaming Regulatory Act) to provide formal arbitration and mediation services to resolve disputes between casinos and customers. The Federal law also gives the administration authority to promulgate regulations to establish a framework for tribal-state relations, which include negotiation and adoption of tribal gaming ordinances. Some would argue that the casinos could simply change their contracts to allow binding arbitration without violating their basic rights, but then consumers would be far less likely to gamble. All things considered, the site of the Las Vegas strip gives the casinos more bargaining power, and consumers in that area probably have hundreds of other options outside of gambling which incentivizes the casinos to change their contracts.