COVID-19: Consumer Contracts

Submitted by Rocco Limongelli on Fri, 05/22/2020 - 10:31
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Can a consumer contract provide for immediate payment of a service, which will only be available after the COVID-19 emergency is over?

 

The practice of “pay-now-get-after-COVID” has been employed by many businesses worldwide. Some have created marketplaces to buy restaurant vouchers to be redeemed as soon as they are allowed to re-open. Gyms have also been offering “pay-now-get-after-COVID” discounts.

The “pay-now-get-after-COVID” schemes are being offered in a bid to maintain cash flow and avoid insolvency. However, in the UK, consumer contracts with a “pay-now-get-after-COVID” clause will most likely be considered unfair.

 

The Consumer Rights Act 2015 (CRA) provides that “pay-now-get-after-COVID” terms are potentially unfair: "A term which has the object or effect of obliging the consumer to fulfil all of the consumer's obligations where the trader does not perform the trader's obligations." (paragraph 18, Schedule 2, Part 1, CRA)

 

The CMA (Competition & Markets Authority) has recently clarified that a business should not ask for payment in advance for a future service that it knows it will be unable to provide. However, if the business reasonably expects to be able to provide the service as agreed, it can include “pay-now-get-after-COVID”, for services due at a later date.

Nonetheless, if a “pay-now-get-after-COVID” scheme is offered by a business in financial hardship, it will be very difficult to prove that there was a reasonable expectation to be able to provide the service as agreed at a later stage.

 

At Optimal Solicitors, we can help you draft commercial contracts to protect your business interests and build long lasting business relationships. Our experienced lawyers will be able to assist you in managing the impact of COVID-19 on your business.

Please contact Rocco Limongelli on 0161 2507 771 , who will be able to assist you.

Author

Rocco Limongelli
Rocco Limongelli
Corporate and Commercial Solicitor at Optimal Solicitors Rocco joined Optimal Solicitors in April 2020, setting up the Corporate and Commercial department. He practices in both corporate and commercial law, and has particular experience in the fintech, technology and fashion sectors. Rocco has also particular expertise in dealing with cross-border matters, having assisted clients from all over Europe. He has a commercially aware approach when advising clients. He understands how to work with highly driven and business minded clients, and getting deals done. He also advises on corporate transactions, including mergers and acquisitions, joint ventures, corporate re-organisations and shareholders disputes. Rocco also advises on a wide range of commercial and contractual arrangements, including drafting of terms and conditions, GDPR compliance, outsourcing agreements and SaaS agreements. Rocco has the skills to help you set up, run and expand your business worldwide.
 
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