A recent case has confirmed that non-refundable, 100% upfront payments are not enforceable under the Consumer Rights Act. The case was between barristers and their client, but this can apply to any business to consumer relationship and applies whether you are providing a service or supplying goods.
The barristers had agreed a fee for a court appearance, irrespective of whether that court appearance went ahead. The court appearance was cancelled and therefore the client refused to pay the fee. The court determined that the clause saying the full fee was payable even if the court appearance was cancelled was unfair. Initially, the court nevertheless allowed the barristers to claim 70% of the fee. This was on the basis that they had completed some of the work. On appeal, the court reversed this and the barristers were not allowed to recover any of their fee. The judge explained that this was necessary to discourage businesses from taking a belt and braces approach. The concern was that businesses would continue to include unfair terms such as these and, if challenged by the consumer, rely on still being entitled to be paid something for their work anyway. The court said that, once the unfair clause was struck, there was no longer any agreed basis to pay for work done. Therefore, no payment was due at all.
The issue is that if a consumer decides or cannot continue with purchasing your goods or services, then it is unfair to make them pay a high sum in compensation for something which they haven't received.
If your contracts with consumers are unfair then you risk being unable to enforce your contract. You could also be reported to trading standards, resulting in you losing time, money and dealing with reputational damage.
If you'd like advice or to find out what your business can do instead, then contact me: firstname.lastname@example.org or +44 (0) 20 7611 2343.
it would have the potential to disincentivise traders from ensuring that the terms under which they contracted were fair. Otherwise they could opt to incorporate unfair terms in the hope that they would not be challenged but confident that there would be a safety net providing for the payment of a reasonable sum in the event that they were.’