Session 10Client cancellation rights

Contents

Part 1: Cancellation rights before 13 June 2014Part 2: The new regulationsPart 3: Different types of contractPart 4: Information requirementsPart 5: CancellationPart 6: Failure to complyPart 7: Why should you care?Part 8: What should you do?

Cancellation rights before 13 June 2014

Which Regulations applied

Type of client Scenario Regulations

Consumer Contract made:• during visit to client's

home/workplace• during visit to home of

another individual• during excursion you

organise that takes place away from your business premises

• after an offer made by the client during such a visit or excursion

Cancellation of Contracts made in a Consumer's Home or Place of Work etc Regulations 2008

Consumer You do not meet your client before entering into a contract to provide legal services

Consumer Protection (Distance Selling) Regulations 2000

Cancellation notice

Relevant Regulations

Timing Prescribed wording

Cancellation period

Cancellation of Contract Regs 2008

At the time the contract is made

Yes, plus notice must be incorporated into the contract

Seven days, starting from the day client receives notice of cancellation rights

Distance Selling Regs 2000

In good time prior to the conclusion of the contract, ie before both parties become bound by the contract

No, but cancellation notice should state:•when and how to exercise right to cancel•consequence of agreeing to you starting work within cancellation period

Depends on when you notify client of their right to cancel

Failure to give cancellation notice

Relevant Regulations Consequence of not giving cancellation notice

Cancellation of Contract Regs 2008

• Offence—fine on summary conviction

• You will not be able to enforce your contract with the client—meaning you will not be able to charge the client for the work you have done

Distance Selling Regs 2000 Client has three months and seven working days to cancel the contract.

If they do:•contract treated as if it had never existed•you will have to refund any sum paid by or on behalf of the client

The Consumer Contracts (Information, Cancellation and Additional Charges)

Regulations 2013

Different types of contract

Qualifying requirements

Consumer client

AND

Off-premises or distance contract

Off-premises contract

Definition When might this apply?1 Contract concluded somewhere

other than at your business premises in the simultaneous physical presence of you and the client

You meet the client:•at their home, place of work or a hospital•at a neutral venue, eg a hotel meeting room or café

2 Contract for which an offer was made by the client in your physical presence in a place somewhere other than at your business premises

Difficult to apply this definition to retainer with a consumer client

Off-premises contract

Definition When might this apply?3 Contract concluded

•at your business premises, or through any means of distance communication •immediately after the client was personally and individually addressed somewhere other than at your business premises in the simultaneous physical presence of you and the client

You meet the client at their home and immediately afterwards, you either:•return to your office to conclude the retainer, or•you conclude the retainer by phone or email

4 Contract concluded during an excursion organised by you with the aim or effect of promoting services to the client

Contract concluded on the golf course, where you arranged to meet the prospective client

Distance Contract

• contract was concluded under an organised distance sales or service-provision scheme (see old OFT guidance)

• without the simultaneous physical presence of you and the client

• with the exclusive use of one or more means of distance communication up to and including the time at which the contract is concluded (see old Distance Selling Regs)

(All components must be present)

Information requirements

Information requirements (pre-contract)

Feature/requirement Off-premises contract Distance contractInformation to be given before the client is bound by the contract

1. Information required by Schedule 2 of the Regulations

2. Instructions for cancellation3. Cancellation form

How to give this information

On paper or, if the client agrees, on another durable mediumIn a clear and comprehensible manner

Give or make available in •clear and comprehensible manner, and •a way which is appropriate to the means of distance communication

Extra requirements for contract concluded by electronic means/phone?

No Yes

Information requirements (post-contract)

Feature/requirement Off-premises contract

Distance contract

Information to be given after the client is bound by the contract

Copy of the signed contract, or confirmation of the contract

Confirmation of the contract

How to give this information

On paper or, if the client agrees, on another durable medium, eg email

Durable medium

Additional reqs if contract is for digital content not on a tangible medium

Yes, if client wants you to start work during cancellation period

When Within a reasonable time after conclusion of the contract, but in any event before you

begin to provide services under the contract

Cancellation

Cancellation rights

Feature/requirement Off-premises contract

Distance contract

Cancellation period 14 days

How does the client cancel?

By using the cancellation form or making any other clear statement setting out the

decision to cancel the contract

Can the client cancel via your website?

Yes

Can you start work during the cancellation period?

Yes, but you need the client’s express

consent on a durable medium

Yes, but you need the client’s express

consent (no requirement for a durable medium)

Effect of cancellation

Feature/requirement Off-premises contract Distance contractEffect of cancellation within 14 days

1. parties’ obligations to perform the contract ends

2. unless client asked you to start work, reimburse all payments

3. Ancillary contracts cancelled

Timescale and method of reimbursement

Without undue delayIn any event not later than 14 days

Timescale and method of reimbursement

Same means of payment as client used for the initial transaction unless the client expressly agrees otherwise

Can you charge for reimbursement

No

Cancellation rights if client asks you to start work

Feature/requirement Off-premises contract

Distance contract

Effect on cancellation rights if client asks you to start work during cancellation period

Client can still cancel within the 14 day cancellation period unless:•the work is finished•contract relates to digital content and you have started to deliver

What can you charge if the client asks you to start work then cancels during the cancellation period

Pro-rata for the work you’ve done

Failure to comply

Failure to comply

Feature/requirement Off-premises contract

Distance contract

Offence, punishable on summary conviction to a fine of up to £5,000 Yes No

Cancellation period is extended by 12 months from the date the cancellation period should have expired, ie a total of 12 months and 14 days from the date of the contract)

Yes Yes

What should you do?

Wherever you are in doubt about whether or not a client is entitled to cancel the contract you should refer the matter to your manager for a decision.

If it is decided that the client has a right to cancellation you must:

1.Include the relevant paragraph in the client care letter2.Enclose the ‘Instructions for Cancellation’ and the ‘Cancellation Form’3.Ensure that you do not engage in any work for which we may not be paid.

Final comments

• Any questions?• Email to nigel.harper@parfittcresswell.com• Update your training records in Compliance Manager