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28/08/2020

Refunds: Optional or Compulsory?

Consumers and businesses should be aware that whether or not a consumer is entitled to a refund will depend on the nature of the goods or services in question, the sector, the detail of the arrangements that have been entered into (including the terms and conditions of any contract) and the impact of the coronavirus pandemic and any restrictions on the arrangement.

Contracts that cannot go ahead due to lockdown laws

In some circumstances, due to lockdown laws, a contract cannot go ahead as agreed or at all, and is therefore ‘frustrated’. A contract will be frustrated as a matter of law if, due to no fault of the parties, something happens after the contract was entered into which means it can no longer be performed at all or performance would be radically different to what was agreed.

As a result, the contract comes to an end and, where consumers have paid money in advance for services or goods that they have yet to receive, they will generally be entitled to obtain a refund.

They will also not be required to make further payments.

In particular, for most consumer contracts, the CMA would expect a consumer to be offered a full refund where:

  • a business has cancelled a contract without providing any of the promised goods or services
  • no goods or services are provided by a business because this is prevented by the lockdown laws
  • a consumer is prevented from receiving any goods or services, because, for example, lockdown laws in the UK or abroad have made it illegal to receive or use the goods or services

In most cases, consumers will contact a business to ask for their money back, but there is no requirement for consumers formally to communicate with a business before becoming entitled to a refund.

Examples of legal restrictions in lockdown laws include:

  • restrictions imposed under the original lockdown laws in the early stages of the pandemic
  • restrictions imposed by local lockdown laws
  • specific restrictions imposed by local authorities under their legal lockdown powers
  • mandatory self-isolation following a direction from a public health officer
  • mandatory self-isolation when returning to the UK from certain countries which may affect the consumer’s ability to use a service during the self-isolation period (provided that the requirement to self-isolate was imposed after the consumer had entered into the relevant contract and was not reasonably anticipated by the consumer)

If laws in another country prevent a business from providing a service under a contract with a UK consumer or prevent that consumer from receiving the service, then in most cases consumers will also be entitled to a refund.

Businesses should not require consumers to take unreasonable or unnecessary steps in order to obtain refunds. A business imposing such barriers may breach consumer protection law by doing so.

Read more.

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