Following the Prime Minister’s announcement on 4 January 2021, lockdown has, unfortunately, returned to everyday life. During the first lockdown, the government sought to introduce new guidance and legislation to safeguard the vulnerable and to protect legal rights.
Frustration of Contracts
Due to lockdown, a contract may not be able to go ahead as agreed or even at all and may therefore be said to have been ‘frustrated’.
The contract will be frustrated as a matter of law if, due to no fault of either party, a change in circumstances takes place after the contract has been agreed. This means that it will not be able to be performed or that performance would be radically different to what was agreed.
Consumer contracts can come in a variety of forms, including contracts for the purchase of goods or for the provision of services.
Lockdown restrictions may make it difficult for goods to be delivered on time, if at all, and/or prevent a trader from carrying out agreed services. If it is found that the contract is frustrated, then it may be that the consumer can seek a refund.
The true nature of any remedy will very much depend on the facts of any given case, but it is becoming a fact of lockdown life that contracts may need to be varied if they can even be performed at all.
Consumer Complaints in Lockdown
The Competition and Markets Authority (CMA), which works to ensure that consumer protection is upheld and that businesses operate within the law, established a COVID-19 taskforce to ‘identify, monitor and respond to the competition and consumer problems arising from coronavirus (COVID-19) and the measures taken to contain it’. This taskforce was responsible for:
- Scrutinising market developments to identify harmful sales and pricing practices as they emerged.
- Warning firms suspected of exploiting the exceptional circumstances and people’s vulnerability through unsatisfiable prices or misleading claims.
- Taking enforcement action if there was evidence that firms may have breached competition or consumer protection law and had failed to respond to warnings.
- Equipping the CMA to advise the government on emergency legislation if people had been negatively impacted and could not be addressed through existing powers.
- Enabling the CME to advise the government on how to ensure competition law does not stand in the way of legitimate measures to protect public health and support the supply of essential goods and services.
Reviewing its findings in response to the first lockdown can serve as a useful reminder of the challenges that may be faced as the nation navigates these latest restrictions.
The CMA Report in Response to the First Lockdown
In analysing the response to the first national lockdown, the CMA reported, amongst other things, that:
- From 10 March to 28 June 2020, more than 80,000 consumers contacted the CMA with coronavirus-related issues. The CMA reportedly received almost 7,000 consumer issues per week in May, compared to only 3,500 in June. The lockdown appeared to have had an appreciable effect on the number of complaints submitted.
- From mid-April to the end of June, 70 – 80% of complaints received by the CMA were about unfair practices in relation to cancellations and refunds. In response to this, the CMA prioritised four sectors for further investigation:
- Holiday accommodation
- Weddings and events
- Nurseries
- Package holidays
The CMA had written to businesses and, on occasions, published open letters to entire sectors (most recently to the wedding sector on 7 September 2020) to help businesses in these sectors to understand how the CMA considers consumer protection law applies to their business contracts with consumers.
- The complaints were primarily concerned with the refusal of refunds: the introduction of unnecessary complexity into the process of obtaining refunds, the charging of high administration or cancellation fees and pressurising consumers into accepting vouchers instead of cash refunds.
These findings indicate that the pandemic has had a significant impact on consumers and businesses. Much like before, this latest lockdown restricts everyday life and will have the capacity to interfere with consumer rights.
Put simply, consumers continue to enjoy the same legal protections despite COVID-19, and this extends to cancellations and refunds. Businesses are required to treat consumers fairly when dealing with these issues and in accordance with existing legislation.
It remains to be seen if the CMA reports similar issues for this latest lockdown. Only time will tell.
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