Cancellation Fees in Consumer Contracts

In the recent case of Swift v. Robertson the Court of Appeal dealt with an appeal regarding a removal agreement which the Defendant had tried to terminate. The issue for the Court to consider was whether the Claimant was entitled to charge a cancellation fee under the Cancellation of Contracts made in a Consumer's Home or Place of Work etc Regulations 2008.

Paragraph 5 of the Regulations states that the Regulations will apply to all contracts for the supply of goods or services which are made between a consumer and a trader during a visit by the trader to the consumer's home or place of work. Contracts made in these circumstances are not enforceable against the consumer unless the trader has given the consumer a notice of the right to cancel in accordance with the Regulations. The Regulations then allow for a "cooling off" period of seven days.

In this particular case, the Claimant owned a removal firm and the Defendant was a homeowner who had requested a quote from the Claimant for undertaking removal services. The parties had an initial discussion at the Defendant's home, at which they agreed the contract price. The Claimant then went away and prepared a removal acceptance document, which was e-mailed to the Defendant together with a copy of the removal company's standard terms. The Claimant later returned to the Defendant's home to deliver packing materials, at which point the Defendant signed and handed over the acceptance document. The Claimant did not give the Defendant notice of his right to cancel the agreement.

Subsequently the Defendant made enquiries of other removal firms and obtained a cheaper quote, so decided to cancel the contract with the Claimant. The Defendant wrote to the Claimant to confirm cancellation within the seven day cooling off period.

The Claimant demanded payment of the cancellation charges due under its standard terms which the Defendant contended that he was not liable to pay, because he had cancelled the contract within the seven day cooling off period.

At first instance, the Claimant's case succeeded as the Judge held that the Regulations only applied where a contract was made in a single visit to a consumer's home. Here, the contract had been made in two separate visits to the Defendant's home, and so the Judge decided that the Regulations were not applicable.

However, on appeal to the Court of Appeal, the Court determined that the Regulations would apply in any circumstances where the consumer's home was the place where the contract was made, and the Regulations did not limit the contractual process to a single visit. The Regulations were designed to protect consumers making contracts in their own homes, as they were perceived to be in a vulnerable position and the right to cancel was designed to address this. It would be an unfair result if a trader was able to escape the effect of the Regulations by making the same offer in two separate visits. Accordingly, as the Claimant had not given the Defendant written notice of his right to cancel as required by the Regulations, the agreement was unenforceable against the Defendant and the Claimant was not entitled to claim a cancellation charge.

The decision serves as a reminder of the importance of giving consumers notice of the right to cancel in circumstances where agreements are entered into at a customer's home. The Courts are keen to protect consumers who enter into contracts in these circumstances and if notice of the right of cancel is not given, the Courts will not hesitate to find that the agreements in question are unenforceable.

This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.