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Simon, a homeowner, obtained planning permission for an extension to his home. He obtained quotations from a number of local building companies and decided to accept the slightly higher quote of £30,000 from a large commercial and residential contractor. The contractor issued Simon with a detailed contract that ran to many pages. The contractor began preliminary works at the property; however, Simon was made redundant. He decided he could not afford to proceed with the building works and sought to terminate the building contract pursuant to a "cooling off" clause. The contractor now seeks payment of the sum of £61,000 pursuant to a clause in the contract that asserts the right of the contractor to claim "compensation" in the event of the early termination of the contract in addition to the cost of any works actually undertaken.
Which of the following statements best reflects the position?
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The clause is unfair pursuant to the provisions of the Consumer Rights Act 2015. The Consumer Rights Act 2015 extends the existing law on unfair terms in relation to consumer contracts. Section 62(1) of the 2015 Act provides that an unfair term of a consumer contract is not binding on the consumer. A term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer. Part 1 of Schedule 2 of the 2015 Act contains a list of consumer contract terms that may be regarded as unfair. Paragraph 5 refers to “a term which has the object or effect of requiring that, where the consumer decides not to conclude or perform the contract, the consumer must pay the trader a disproportionately high sum in compensation or for services which have not been supplied." Taking into account the nature of the contract and by reference to all the circumstances, it is reasonable to conclude that the clause in the construction contract will be deemed unfair for the purposes of the 2015 Act and Simon will not be bound by it. It should be noted that aside from the unfair clause the contract continues, so far as practicable, to have effect in every other respect and thus entitle the contractor to obtain payment on the basis of a quantum meruit for any works actually undertaken.
Key Point: Under the Consumer Rights Act 2015, terms causing a significant imbalance in consumer contracts are deemed unfair and unenforceable. The contractor may still claim for work already done under a quantum meruit basis.
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Please explain options A and C
Certainly! Let's go through options A and C in detail, in the context of Simon's situation and the provisions of the Consumer Rights Act 2015.
### Option A:
"The clause is unfair pursuant to the provisions of the Consumer Rights Act 2015."
This statement is correct. Under the Consumer Rights Act 2015, certain contract terms are considered unfair and therefore not binding on the consumer. Specifically, Section 62(1) of the Act states that an unfair term in a consumer contract is not enforceable against the consumer. A term is considered unfair if it leads to a significant imbalance in the parties' rights and obligations, to the detriment of the consumer and contrary to the requirement of good faith.
In this case, the clause that allows the contractor to claim a disproportionately high sum (£61,000) as compensation for the early termination of the contract can be deemed unfair, as it imposes a significant and undue financial burden on Simon, the consumer. Hence, Simon would not be bound by this clause.
### Option C:
"Simon will have to pay the contractor £61,000 in accordance with the contract terms."
This statement is not correct. Given that the clause permitting the contractor to claim £61,000 upon the early termination of the contract is likely to be deemed unfair under the Consumer Rights Act 2015, Simon would not be required to comply with this unfair clause. Therefore, Simon should not have to pay the £61,000 as demanded by the contractor.
However, it is important to note that while the unfair clause is not enforceable, the contractor can still claim reasonable payment for the preliminary work already completed. This payment would be on a "quantum meruit" basis, which essentially means a fair amount for the value of the services provided so far.
### Encouragement:
You're doing a great job in navigating these complex legal concepts! Understanding the nuances of consumer protection laws, especially under the Consumer Rights Act 2015, is crucial. Keep up the good work, and don't hesitate to ask if you have any more questions!