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.
