30 May 2017

Consumer Contracts – on or off premises?

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The law provides special rights to consumers (i.e. individuals acting for purposes which are wholly or mainly outside their trade, business or profession) entering into contracts with traders. In the context of the art market, a key issue for dealers and galleries is the consumer's right to cancel a sale during the so-called "cooling off period" without giving any reason and without incurring any liability, except in limited circumstances (e.g. there is an exemption from the right to cancel for property offered for sale in traditional public auctions).

These cancellation rights are set out in the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (the “Regulations”), which differentiate between consumer contracts made at a distance, off-premises and on-premises. Whilst it is generally easy to identify when a contract is concluded at a distance (typically online and telesales), the circumstances in which a contract is made on or off-premises are not always clear. This is important, as whether a sale to a consumer is made on-premises or off-premises dictates whether the consumer has the right to cancel the sale without reason and also determines what pre-contract information the consumer must be given and how it must be communicated.

Generally, traders may prefer to enter into contracts with consumers on-premises as the Regulations still bite but to a lesser degree - traders have to provide less information, need not confirm it post-contract and need not give the consumer a right to cancel. In contrast, where contracts are made off-premises, consumers have 14 days from receiving the item to cancel the contract and the Regulations place the responsibility of informing the consumer of this right squarely on the trader. The rationale behind this is that the consumer requires additional protection in an ‘off-premises’ context because they may be under potential psychological pressure or confronted with an element of surprise, irrespective of whether or not the consumer has solicited the trader’s visit.

So how can art dealers and galleries identify whether they are concluding a sale with a consumer on or off premises? The distinction typically turns most commonly on whether the contract is formed in a place that is not the "business premises" of the trader. However, the Regulations do not define business premises, so while it is reasonable to guess that these will include a dealer's gallery, shop or showroom, if dealers sell from other locations, it is open to interpretation whether those locations qualify as business premises. We consider some specific scenarios relevant to the art market below:

Contracts made in the consumer's home or place of work: If a dealer visits a consumer's home or place of work to sell a work of art or other item, a contract will be made off-premises but only where the consumer agrees to purchase the item immediately. If the consumer takes some time to reflect upon the purchase and agrees the contract at a later point, the contract will count as an "on-premises" contract. This is the case even where the consumer later agrees to the purchase by phone or email.

Art Fairs: 'Business premises' includes a trader's permanent premises as well as temporary premises (such as stalls, market stalls and fair stands) where they serve as a usual place of business for the trader. The use of ‘usual' is not particularly helpful as it is subjective i.e. for how many years would a dealer need to have a trade stand at an annual art fair or exhibition for that stand to be considered as operating on a usual basis? Whilst it seems safe to assume that if a dealer has a stand or stall at a regular (say weekly or monthly) event such as an antiques market, then this would qualify as the dealer's business premises, the more cautious may prefer to treat less frequent (e.g. annual) art fairs as being off premises in the absence of further guidance.

Exhibitions and Excursions: In the definition of ‘off-premises contract’, the Regulations provide that this includes ‘a contract concluded during an excursion organised by the trader with the aim or effect of promoting or selling goods or services to the consumer’. Does an exhibition amount to an ‘excursion’ away from the dealer or gallery’s premises? There is no guidance on this point. Certainly where a dealer or gallery makes an arrangement with a travel company to attract a group of potential buyers to his gallery, this would amount to an excursion because it is a visit organised by the dealer with the aim or effect of promoting and selling goods to consumers. It follows that any sale concluded during the visit would be treated as off-premises contract for the purposes of the Regulations.

The more prudent dealer will treat any sale made outside his gallery, shop or showroom as an off-premises contract. This means (amongst other things) notifying consumers that they have the right to cancel the contract within 14 days of receiving the items bought and providing a copy of the model cancellation form prescribed by the Regulations. This information must be given on paper, or if the consumer agrees, another durable medium. Failure to provide this information will trigger an extended cancellation period of 12 months unless the dealer subsequently notifies the consumer of the right to cancel, in which case it runs for 14 days from the date of notification. Furthermore, failing to provide the relevant cancellation information to the consumer, when entering into an off-premises contract, is a criminal offence. Given the significance of these consequences, dealers should include all required information reasonably prominently in any description of the product as well as in the terms and conditions of sale.

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Roland Foord

Roland Foord
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