England and Wales: Law Commission Recommends Update to 19th-Century Consumer Protection Laws

England and Wales: Law Commission Recommends Update to 19th-Century Consumer Protection Laws

On April 23, 2021, the Law Commission for England and Wales published a draft bill to update rules contained in the Consumer Rights Act 2015 regarding the “transfer of ownership under contracts for the sale of goods between a trader and a consumer. The proposals build upon a previous report from 2016 by the Law Commission, which found that the current rules have their genesis in the 19th century and were written using contract language from that period. The rules have not been changed since then to cover situations when the consumer pays for the goods before receiving them, such as when a consumer purchases goods online or custom-made items, or when the buyer has paid for goods and the seller becomes insolvent before the buyer receives them.

The draft bill aims to modernize the 2015 law to provide clearer rules using “modern, consumer-focused language” that are easier to understand and vary depending upon the type of good purchased, such as whether the good is purchased in a physical store or online. The terms “buyer” and “seller” would be replaced with “trader” and “consumer,” and terms that have caused confusion would be removed. The bill would provide that the transfer of ownership of most goods online would occur “when the retailer identifies the goods to fulfil the contract” (the “concept of identification”), such as when the goods are labelled or set aside for the consumer.

The Law Commission determined that retailers have adopted a common practice of delaying the formation of the sales contract until the point when the goods are shipped to the consumer. While stating this does not appear to have a detrimental effect upon the consumer, the commission noted that this practice would reduce the impact of the proposed reforms, which hinge upon a sales contract being in place.

If enacted, the reforms would also likely impact only a small group of consumers who pay for goods by check, cash, or balance transfer, because debit and credit cards are protected by section 75 of the Consumer Credit Act 1974, with companies typically reimbursing consumers who use this method of payment and do not receive their goods.

Some respondents to the consultation about the proposals criticized them, notably that “the concept of ‘identification’ is not necessarily clearer than the [current] concept of unconditional appropriation.”

The Law Commission has stated that it is for Parliament to determine whether to enact the proposals and that it believes the proposed reforms may be “more necessary or effective in the future should retail and finance practices change,” and the reforms, therefore, “should be kept under review, as should the practice of delaying contact formation.”

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