Caveat emptor- buyer beware in the 21st century

  8th February 2018

The internet wise twenty first century consumer buying goods or services might think that this is just an arcane phrase, a remainder  from the days before the consumer had extensive statutory protection.  But  this is not always the case; there are gaps in the protection, even in fairly commonplace circumstances. A couple of examples may help emphasise that  ‘buyer beware’ is still a sentiment worth remembering.

No protection against arbitrary penalties?

A recent Supreme Court case concerning penalty parking charges might make you think twice as regards the protection a consumer has when buying some services.

Most of us have used a free car-park without scrutinizing the terms and conditions on the notices that are displayed around the car-park. Some might hold their hands up and admit that they should have done so before they parked. Some, however, might retort that ignorance of the terms should not mean that the provider of the car park service can  charge ‘what they like’ if you breach the terms, especially where the breach is not serious (such as if were to you overstay the ‘free period’ for only a few minutes).

In the supreme court case of ParkingEye Ltd v Beavis (November 2015), this was pretty much what was in issue. In Beavis an £85 fixed penalty  charge was held to be enforceable despite the argument of Mr Beavis that the penalty was  arbitrary and bore no resemblance to the financial loss suffered by the car park provider.

There was no statutory protection governing the level of such charges and Mr Beavis’s argument relied on the application of a common law principle that suggested clauses in contracts which provided, on breach of a term, for the payment of a sum of money that was not related to the loss suffered by the innocent party would be unenforceable. In legal terms, this raised the difficult distinction between an unenforceable penalty clause  and a perfectly valid and enforceable liquidated damages clause, a distinction the courts have struggled with for years.

Prior to Beavis many thought that the crucial factor in making the distinction lay in whether the sum or charge was a genuine estimate of loss that might be suffered if the contract terms were breached. If it was a genuine estimate of loss then it was valid and enforceable. If it was not a genuine estimate of loss it was not (hence Mr Beavis’s argument). However, the Supreme Court revisited previous cases on the issue and concluded that a genuine estimate of loss was not the only basis on  which clauses could be valid. Instead the court recognised that the unenforceability  of penalty clauses rested on a wider principle; whether the  clause was ‘unconscionable and extravagant’. Consequently, the supreme court acknowledged that further factors could be considered; in other words,  there could be other justifications for including the clause, which would mean the clause was not ‘unconscionable’.

In Beavis there was a commercial justification (and public benefit) in ensuring  that drivers did not overstay the free period.  The fact that many motorists used the car park knowing of the penalty charge was considered as evidence of it’s reasonableness, and that the risk of the penalty for overstaying was, for motorists in general, an acceptable risk for the convenience of parking there.  The practical consequence for Mr Beavis was that, despite not seeing the notice informing users of the £85 charge, he was liable to pay the penalty.

Protection for online shoppers?

Another topical issue is the ease with which it is possible to buy goods and services online without being made fully aware of all the terms and conditions, since the seller may deliberately make finding some of the less consumer friendly terms (such as exclusion clauses and refund policies) difficult to read without opening various menus.

The purchases of services on-line provides a useful example. Increasingly purchases for services are made online, especially for flights, hotels and  car hire etc.  The Consumer Rights Act 2015 provides significant protection for consumers by ensuring the fairness of certain clauses s(62),  and the transparency and prominence of terms s(64). But in practice the protection for the consumer might in reality be an “imperfect shield”, particularly where you are contracting with foreign businesses.

Taking the example of booking a hotel on-line; it is quite likely that there will be an intermediary  between the supplier and the consumer.  For instance, many hotel booking sites do not own any of the accommodation on the site, the site is merely an intermediary between the customer and his accommodation.  Where this intermediary is not a business situated in the UK, this adds a layer of complexity to a potentially successful legal case.  Initially, there is the difficulty of starting proceedings against a company based in another jurisdiction. Even after a successful judgement, it is likely to be necessary to enforce that judgment, which becomes problematic and expensive if the business has no presence in the UK.

In other words, you might have a good legal case for the unfairness of the ‘no refund policy’ of the intermediary company under the Consumer Rights Act 2015, but the effort and expense of securing and enforcing judgement may mean it is somewhat of a hollow victory.   It is often worth checking where the intermediary is based before you agree to their terms and conditions.

On a related point, it is worth having in mind that the cancellation policy of an airline, or hotel (the actual provider of the service) might be more generous than the policy of any intermediary  booking site.  Therefore, before you purchase what appears to be a bargain, it is worth reading the ‘small print’ and finding out about such things as cancellation charges and refund policies, there is probably a reason why it is a bargain! If the  terms and conditions are hard to find, then perhaps the site doesn’t want  you to read them before you part with your money.  Even if the clauses are unenforceable under the Consumer Rights Act 2015, legal action is always time consuming.

The internet of course has bargains and is convenient, but whether it is the amount of the purchase or the possibility of changing your plans if purchasing a service then scroll through the terms to look for the refund policy- caveat emptor.