2 March 2010
Solicitors who enter into contracts with clients, including conditional fee agreements or client care agreements, away from the solicitor's own place of business, or following discussions that take place away from their own place of business.
The Cancellation of Contracts made in a Consumer's Home or Place of Work etc Regulations 2008 ('the Regulations') came into force on 1 st October 2008.
The Regulations are likely to apply to a wide range of contracts made between solicitors and their clients. Whether they apply will depend on the nature of the client and the circumstances in which the contract was made.
Where the Regulations apply then the client has a right to cancel the contract within a 7 day period. The solicitor must give the client written notice of this right, setting out various prescribed information. Failure to do so is a criminal offence.
This practice note considers in what circumstances the Regulations will apply to contracts between solicitors and their clients, and explains the consequences if the Regulations apply.
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The scope of the Regulations is governed by regulation 5 . This provides that the Regulations apply to a contract between a consumer and a trader:
Under regulation 5, the Regulations apply to contracts for the supply of goods or services to the consumer by a trader. Contracts for the provision of legal advice or other legal services would therefore come within the Regulations.
A solicitor entering into a contract with a client is a 'trader' within the meaning of the Regulations. A 'trader' is defined in regulation 2(1) as 'a person who, in making a contract to which these Regulations apply, is acting in his commercial or professional capacity and anyone acting in the name or on behalf of a trader'.
A 'consumer' is defined in regulation 2(1) as 'a natural person who in making a contract to which these Regulations apply is acting for purposes which can be regarded as outside his trade or profession'. So not all clients will be consumers; but many clients will be caught by the Regulations.
Regulation 6 sets out a number of contracts to which the Regulations do not apply. Where your contract consists wholly of exempt activities, you will not be subject to the Regulations. As a brief summary, the exemptions relate to:
In most cases, these exemptions are unlikely to be relevant to contracts between solicitors and their clients. However you must refer to Regulation 6 and Schedule 3 of the Regulations for the full list of exempt contracts.
Work undertaken on the basis of legal aid funding is not excluded, and may fall within the scope of the Regulations. Whether or not it will do so depends on the matters discussed in the next section. The relevant contract, for the purposes of the Regulations, would be between the consumer (i.e the client) and the trader (i.e. the solicitor), notwithstanding that the solicitor receives payment from a third party funder. Thus where the Regulations apply written notice of the right to cancel must be provided to the client. Any legal aid client care letter should point out the potential difficulties in re-applying for legal aid for the same issue, if the contract is terminated. The Regulations do not affect the rights and liabilities of the solicitor and the funder under any separate funding agreement between them.
The Regulations only apply if the contract is made in one of the three situations described in limbs (a)-(c) of Regulation 5. The following text describes how those provisions may apply as between a solicitor and their client.
Limb (a) specifies situations in which the contract is made during a visit by the solicitor to:
Other than in respect of those agreements outside the scope of the regulations (see regulation 6), it does not matter whether the solicitor made the visit at the client's request; the relevant factor is whether the visit is to one of the places specified in (a), and whether the contract is made during that visit.
Limb (b) specificies situations in which the contract is made during an excursion organised by the solicitor away from their business premises.
This only applies if:
For example, if a contract is made over dinner at a restaurant, and the meal was organised by your client, then limb (b) does not apply. However, if you organised the meal then limb (b) would apply.
If the contract is made during a drinks party at your office then limb (b) would not apply; but if the drinks party took place at some other venue, and you organised it, limb (b) would apply.
The precise scope of limb (b) is, however, unclear. Until it is clarified by case-law, it is prudent to assume that limb (b) would apply to any situation where a solicitor arranged to meet a client away from his business premises. Therefore, if you arrange to meet a client in hospital you should assume that this falls within limb (b), even though the meeting would not be social in nature and the client and solicitor would not go anywhere or do anything together.
In order to determine whether the contract falls within (a) or (b), you must be aware of the point in time when a contract is made with your client. Difficult questions may arise where discussions take place with your client in your business office, either face to face or on the telephone, and then those discussions are continued during a visit falling within (a) or an excursion falling within (b). Determining when and where a contract was made will depend on the facts of the particular case.
In some cases it will be clear at which point the contract came into effect. For example, if a client telephones you and you orally run through the terms of the agreement and inform them of costs, and a client care letter is sent to the client with their agreement prior to any visit or excursion, then the situation would be unlikely to fall within (a) or (b). However, caution must be exercised if a subsequent agreement is made during a follow up visit; such an agreement may be a new contract, and caught by the Regulations. In general, where there is doubt you should assume that the Regulations do apply, to avoid criminal penalties for any breach.
Limb (c) of Regulation 5 will apply if the contract is made after an offer made by the consumer during:
A contract may fall within limb (c) even if it is made in your office, if it is made after an offer of the relevant kind made by the client.
For example, if you visit a client at home, the client offers to engage you to carry out legal work, and you then accept the offer by telephoning the client from your office the following day, then the Regulations will apply.
In order for limb (c) to apply, it is not necessary for the contract to be made by your acceptance of the client's offer. For instance, it may be that the client makes an offer, and that you subsequently make a counter-offer which the client accepts. In this case the contract would be made after the client's offer. However, if the client's offer was not part of the negotiations leading to the contract, but was a wholly separate matter, then limb (c) would be unlikely to apply.
For example: you visit a client at home and the client offers to engage you to perform work at an hourly rate of £80 but you refuse. After returning to your office you write a letter offering to do the work for £100 an hour, and the client accepts. The contract is made after an offer made by the client during a home visit: it therefore comes within (c) and the Regulations would apply.
If, however the client refuses your intial offer but telephones you at your office six months later to request that you do other work for £100 an hour, and you agree, the client's initial offer is wholly separate from the contract that has come into existence, and limb (c) is therefore unlikely to apply.
You should bear in mind that regulation 5(c) applies where a contract is made after an offer made by the consumer in certain circumstances. The word offer probably bears its normal contractual meaning; i.e. a communication that would be capable, if accepted, of giving rise to a binding contract. Not every request as to whether a solicitor would be willing to carry out work will be an offer in this sense.
The following are hypothetical examples of how the Regulations may apply in practice:
A client phones you and during this call you take oral instructions to prepare a Will for the client. You later visit the client's home with the drafted Will based on the oral instructions provided over the phone and the client signs the Will without any amendments.
In this situation the Regulations probably do not apply as the contract was probably made during the telephone conversation and prior to the visit. If however the contract did not come into existence until the visit itself then limb (a) of regulation 5 would apply, and the contract would come within the Regulations.
If the Will was subsequently amended during the visit to the client's home then this would probably make no difference to the above analysis. If the contract was made before the home visit, the work done in amending the Will will almost certainly fall within the scope of that contract, rather than being the subject of a fresh contract.
A relative of one of your clients, acting on behalf of your client, visits your office and provides you with instructions on the preparation of a personal welfare lasting power of attorney (LPA). Based on these instructions you prepare the LPA and visit the client who is critically ill in hospital. The client agrees to the LPA.
Again, if the contract is made during the visit to your office then the Regulations probably do not apply. In order to establish whether the contract was made at your office, you would need to consider carefully the content of what was said in your office, and whether the relative had authority to enter into a contract on the client's behalf.
If the contract was made during the hospital visit then limb (a) of regulation 5 would not apply; the visit was not to the client's home or place or work or to the home of another individual. However, there would be a question as to whether limb (b) would apply. This depends on whether the hospital visit amounted to an 'excursion' organised by you away from your business premises.
As a matter of construction, this is not wholly clear. However, what you have done here is to make arrangements to travel to a place other than your business premises (i.e. the hospital), for the purpose of meeting a client or potential client.
This situation may fall within limb (b) of regulation 5. In the absence of any case-law on the question, it may be wise to treat the Regulations as applicable to any contract with the client that you make during the hospital visit.
At the request of a client you visit the client's work place. During this visit a contractual agreement is made that you will undertake work for the client. The client has asked this work to be done urgently and provides you with a request in writing for work to commence before the 7 day cancellation period expires. You commence work but receive a cancellation notice from the client 6 days after the agreement is reached.
In this situation the Regulations apply to the contract: it falls within regulation 5(a). The client is entitled to cancel the contract, despite the written request. However, you are entitled to claim payment in accordance with the reasonable requirements of the contract for services that were supplied before the cancellation: regulation 9(2). If the client had not provided a written request to start work before the cancellation period expired, then the solicitor would not be entitled to payment: regulation 9(3). See section 5 below for discussion of regulation 9.
A Solicitor organises for a client to accompany him/her to a trade conference and during this conference the consumer makes an offer for work to be done by the solicitor. The solicitor goes back to his/her business premises and then informs the client that the offer has been accepted.
The Regulations apply to this situation. The client's offer was made during an excursion falling within regulation 5(b). The contract was made following that offer, and so would fall within regulation 5(c).
If the offer was made at the home of one of the client's friends, then the offer would be made during a visit falling within regulation 5(a); hence, if the contract was made following that offer,again, it would fall within regulation 5(c).
If the Regulations apply then the client has a right to cancel the contract during the cancellation period (regulation 7(1)). The cancellation period is the period of 7 days starting with the date of receipt by the client of a notice of the right to cancel (regulation 2(1)).
Under regulation 7(2) you must give the client a written notice of his right to cancel the contract.
Notice must be given as follows:
Regulations 7(3) and 7(5) set out what the notice must contain.
Regulation 7(4) stipulates that you must incorporate the notice in the contract where the contract is wholly or partly in writing
If incorporated in the contract or another document the notice of the right to cancel must be set out in a separate box with the heading 'Notice of the Right to Cancel'. It must have as much prominence as any other information in the contract or document apart from the heading and the names of the parties to the contract and any information inserted in handwriting: see regulation 7 (5).
Draft example templates have been provided in section 6 to assist in the preparation of a standardised notice.
If you enter into a contract to which the Regulations apply, and you do not give the client a notice of the right to cancel and the information required by regulation 7, then you will not be able to enforce the contract against the client: see regulation 7 (6).
For instance, you will not be able to sue under the contract for fees for work done. But the contract will not be void, and so it will still be enforceable against you by the client.
You may have entered into a contract to which these Regulations apply, since 1 October 2008, without advising your client of the right to cancel under the Regulations. If so and all fees remain outstanding in such a matter, you should consider advising the client of the right to cancel.
You may consider entering into a new agreement that meets the requirements, to ensure that you are entitled to payment of any fees or costs due for future work.
Even if you enter into a new contract, you may be unable to recover fees for work already done, if you ought to have given notice of the right to cancel but failed to do so.
This matter is not free of doubt and is likely to remain so until an opportunity presents itself for the court to provide further guidance. Until then, to minimise the risk of potential difficulties an alternative option may be to offer to vary the terms of the agreement where this is a possibility and is appropriate in the circumstances. However, when inviting the client to agree to any variation you must explain clearly what is proposed and the full implications of any agreement to vary the contract.
If you have entered into a conditional fee agreement (CFA) without giving notification of the right to cancel, then where applicable, you may consider entering into a retrospective CFA which provides notification of this right.
You must, however, fully explain to the client the reason for the new contract and the consequences of such an agreeement.
With regard to CFAs, the courts do appear to have recognised that inviting a client to agree a retrospective CFA is an acceptable means of remedying certain failures to comply with the legislatative requirements to provide prescribed information to clients prior to entering a CFA to which those requirements would apply. It therefore seems likely that entering a retrospective CFA with a client in order to comply with the Cancellation of Contracts Regulations is a realistic option to consider in respect of any client whose CFA came into existence after 1 October 2008 but without the requisite notice.
With regard to any amendments to CFAs you should ensure that you take into account the Civil Procedure Rules 1998 (Parts 43-45), and in particular the requirement under 44.15 to provide information regarding the existence of the CFA to the court and other parties to the litigation, and inform them within 7 days of any amendments that may lead to additional liabilities. Failure to do so may result in additional liabilities being irrecoverable.
It is a criminal offence to fail to provide written notice of the right to cancel the contract: regulation 17. The offence is one of strict liability and carries up to the maximum penalty for a summary offence.
The duty of enforcing regulation 17 is placed on weights and measures authorities (i.e. local trading standards departments): see regulation 21(1). They have various powers of investigation, including powers to require the production of documents: regulation 22. However, you cannot be required to produce a document which you would be entitled to refuse to produce in High Court litigation on grounds of legal professional privilege: regulation 22(6).
There are various offences in connection with obstructing, or failing to co-operate with, officers of enforcement authorities. On summary conviction these carry a fine not exceeding level 3 on the standard scale: see regulation 23.
The cancellation period lasts for 7 days, beginning with the date when the client receives notice of the right to cancel: see regulation 2(1).
During that period the client can cancel the contract by serving a written notice indicating that s/he wishes to cancel it. The notice does not have to be in any specific form.
If a client exercises their right to cancel, then s/he is not liable to pay for work done before the cancellation, unless s/he has made a written request for the performance of the contract to begin before the end of the cancellation period: regulation 9(1)-(3).
Notice of cancellation can be given by email (see regulation 8(6)), and you must inform clients of this fact in your written notification of your right to cancel.
In practical terms this means that you must be able to deal with notices sent by email, even if you do not usually conduct correspondence by email or accept service of documents by this means.
A cancellation notice sent by email is taken to have been served on the day on which it is sent: regulation 8(6). It is unclear whether an email notice that is not actually received by you is an effective notice of cancellation under the Regulations.
A cancellation notice sent by post is taken to have been served at the time of posting, whether or not it is actually received: regulation 8(5).
There is some risk that a client will serve an effective notice of cancellation, without you becoming aware that this has been done. To avoid this situation you may wish to check with clients, shortly after the end of the cancellation period, that they have not exercised their right to cancel.
If your client wishes you to do work urgently, your client can request in writing that you commence work before the cancellation period expires. This request means the client must pay for services provided such as the instructions, even if the contract is later cancelled.This request does not mean that the client has waived the right to cancel the contract within the cancellation period.
Absent such a written request, you are not legally obliged to start work on performing the contract before the end of the cancellation period: regulation 9(3)(a). However, see also section 6.3 below.
You must ensure that the client fully understands the nature, effect, benefits, risks and foreseeable consequences of requesting work to commence before the cancellation period expires, in order to enable them to form a view as to the wisdom of the proposed transaction.
Assessing your client's understanding of the implications of commencing work straight away may help you to determine whether they have the capacity to make the decision, or whether they are subject to undue influence from family, beneficiaries or others.
Where you are requested to attend a weak or seriously ill client it may be impracticable or inappropriate either to obtain a written request, or to wait for the cancellation period to expire before you start work.
These situations are very difficult. You will need to balance your interest in securing payment for work done, with your professional duty to act in the best interests of the client.
Unless there is a request to commence work before the cooling-off period expires, any payment taken before the end of the cooling off period will be repayable under regulation 10 should the client cancel the contract under regulation 8.
Suggested template for written Notice of right to cancel, for use in cases falling within regulation 5(a) or (b) of the Cancellation of Contracts made in a Consumer's Home or Place of Work etc Regulations 2008 ('the Regulations').
This Notice has been provided to you because you have entered into a contract to which the Cancellation of Contracts made in a Consumer's Home or Place of Work Regulations 2008 ('the Regulations') apply. The contract is for the supply to you of goods or services. The person providing the goods or services is referred to in the Regulations as 'the trader'.
Under the Regulations, you have the right to cancel this contract if you wish to do so. This Notice explains how to exercise this right. It also gives you other information that is required by the Regulations.
In order to exercise your right to cancel the contract, you need to deliver or send a cancellation notice, that is, a written notice that you wish to cancel the contract. You can use the cancellation form provided below if you wish, but you do not have to do so. You can send your notification by email if you prefer.
Any cancellation notice should be delivered or sent to [name of person] at [postal address] or at [email address] .
You have 7 days in which to serve a cancellation notice. The period of 7 days begins with the date when you receive this Notice. This 7 day period is referred to in the Regulations as 'the cancellation period'.
Under the Regulations, a cancellation notice is treated as being served as soon as it is sent or posted to the trader. A cancellation notice sent by electronic communication is treated as being served from the day when it is sent to the trader.
If you agree in writing that the performance of this contract should begin before the end of the cancellation period, then even if you cancel the contract you may still be required to pay for goods or services supplied before the cancellation.
If you enter into a related credit agreement, then that agreement will be automatically cancelled if the contract is cancelled. A 'related credit agreement' means an agreement under which fixed sum credit which fully or partly covers the price under the contract is granted to you by the trader, or by another person under an arrangement made between that person and the trader.
The identity of the trader providing goods or services under this contract is [insert name of solicitor or firm that is party to the contract, including any trading name]
The reference number, code or other details to enable the contract to be identified is [insert details]
This Notice is dated [insert date when the Notice is given to the client]
[You must include with the written Notice a cancellation form as a detachable slip, in accordance with the form set out in Schedule 4 Part II to the Regulations. Schedule 4 Part II is reproduced at Template 3 below. You must complete the cancellation form in accordance with the notes in Schedule 4 Part II, before you give the written notice to the client.]
Suggested template for written Notice of right to cancel, for use in cases falling within regulation 5(c) of the Cancellation of Contracts made in a Consumer's Home or Place of Work etc Regulations 2008 ('the Regulations')
This Notice has been provided to you because you have offered to enter into a contract to which the Cancellation of Contracts made in a Consumer's Home or Place of Work Regulations 2008 ('the Regulations') would apply. The contract would be for the supply to you of goods or services. The person who would provide the goods or services is referred to in the Regulations as 'the trader'.
[ You must include with the written Notice a cancellation form as a detachable slip, in accordance with the form set out in Schedule 4 Part II to the Regulations. Schedule 4 Part II is reproduced at Template 3 below. You must complete the cancellation form in accordance with the notes in Schedule 4 Part II, before you give the written notice to the client.]
If you wish to cancel the contract you MUST DO SO IN WRITING and deliver personally or send (which may be by electronic mail) this to the person named below. You may use this form if you want to but you do not have to.
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(Complete, detach and return this form ONLY IF YOU WISH TO CANCEL THE CONTRACT.)
To: .. .. .. .. .. .. .. .. .. .. [trader to insert name and address of person to whom notice may be given.]
I/We (delete as appropriate) hereby give notice that I/we (delete as appropriate) wish to cancel my/our (delete as appropriate) contract .. .. .. .. .. .. .. .. .. .. [trader to insert reference number, code or other details to enable the contract or offer to be identified. He may also insert the name and address of the consumer.]
Signed
Name and Address
Date
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Practice Notes are issued by the Law Society as a professional body for the benefit of its members. They represent the Law Society's view of good practice in a particular area. They are not intended to be the only standard, nor do they necessarily provide a defence to complaints of misconduct or of inadequate professional service. Solicitors are not required to follow them.
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For queries or comments on this practice note contact the Law Society's Practice Advice Service.
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The Department has provided explanatory notes on the regulation.
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