Cancellations and Refunds during Lockdown: What are your rights?

by Yusuf Odabashy

Lockdown has affected consumers on an unprecedented scale. From cancelled weddings to cancelled holidays, most will have had to deal with service providers in order to claim refunds. Whilst most have been accommodating and offered compensation, the exact nature of these rules and guidance during a period of such uncertainty lacked clarity to say the least.

As a result, on 28th August 2020, the Competition and Markets Authority (CMA) released newly updated guidance on consumer contracts, cancellations and refunds. It should be advised that the guidance is not definitive, but it sets out the CMA’s own interpretation on how the law should operate as a consequence of lockdown and Covid-19. Ultimately, only a court will be able to decide how consumer laws apply in each circumstance.

General Guidance

The beginning of lockdown saw the Government impose what was known as ‘The Health Protection (Coronavirus Restrictions)’. Due to the legal restrictions on everyday activities, certain contracts could not be executed. However, the CMA’s general stance as lockdown is lifting in most parts, and services are resuming, is that consumers should be aware that their entitlement to a refund will ultimately depend on the nature of the goods or service, the sector and any specific arrangements that have been entered into. What this means is that consumers should be aware of the impact that the lockdown laws have had (e.g. have the circumstances that have been created restrict a service from being carried out).

Contracts affected by Lockdown

Lockdown has created circumstances in which some contracts may not be able to go ahead, therefore as a matter of law, they become ‘frustrated’. When this happens, it is usually of no fault of either party, and it will mean that obligations cannot be performed. In these circumstances, the contract comes to an end and if consumers have paid for a service that they will not receive, the CMA would expect them to obtain a full refund.

Exceptions

If a consumer has already paid for a service which has been partially carried out, the CMA would expect that the consumer be able to obtain a partial refund for the service that was not carried out. If the consumer has already received a partial service, then they would be expected to pay for it – bear in mind you should not expect all of your money back. In some rare cases, businesses may even deduct a contribution for a service it cannot provide (if they cannot recover the cost from elsewhere). Again, this will always depend on the circumstances.

Ongoing Contracts

For ongoing contracts where a consumer pays regularly for regular services (e.g. Gyms), the CMA expects that consumers be entitled to a refund for services that they have already paid for but have not been able to receive due to lockdown. They should also be entitled to be able to withhold regular payment whilst the service is unavailable or restricted.

Contracts partially affected by Lockdown

The general advice given by the CMA states that unless the service being performed is completely different to what was agreed to, consumers should be able to claim a refund. If, however, the service can be performed with minimal changes and differences to what was agreed upon, then the contract can continue, and if necessary, consumers may be entitled to a price reduction. However, it is also advised by the CMA that both consumers and businesses find solutions that are mutually beneficial.

Cancellations

This is more relevant for those who have booked package holidays but have been affected by Government Guidance. It is important to note that this type of guidance is not legally binding therefore contracts affected may not be ‘frustrated’. This may mean that cancellations and refunds would have to be carried out using existing terms in the contract (so long as the cancellation terms are fair).

However, if a contract in the context of package holidays could be cancelled due to Government Guidance (e.g. FCO travel advice), then consumers should be entitled to a full refund. This is only applicable in circumstances which are considered unavoidable and extraordinary. Under the standard terms and conditions, if a business does cancel a service, then as a consumer, you should be entitled to receive your money back. 

What this means for you ?

Knowing your rights could be hugely beneficial for consumers, especially if a lot of money has been spent on a service that you have yet to receive. Having officially published guidance will certainly help those affected find effective solutions to ensure they are treated fairly, and not adversely, by businesses.

For more comprehensive and detailed guidance, please visit:

https://www.gov.uk/government/publications/cma-to-investigate-concerns-about-cancellation-policies-during-the-coronavirus-covid-19-pandemic/the-coronavirus-covid-19-pandemic-consumer-contracts-cancellation-and-refunds

This article is intended for guidance only and must not be relied upon for specific advice.

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