The issue of cancellation notices and credit hire is a very important one. Failure of the credit hire company to provide a cancellation notice can lead to serious consequences. It's such an important issue that it can proceed all the way to the higher courts. Indeed, there were two important cases which were dealt with in the higher courts.
There was the case of W v Veolia Environmental Services (UK) Plc [2011] 7 WLUK 808 which was decided by the Queen's Bench Division. There was also the case of Salat v Barutis [2013] EWCA Civ 1499 which was decided by the Court of Appeal, a case in which I was involved in.
I have noticed a number of cases, including recently, where there have been issues with cancellation/cancellation notices, but these issues have been overlooked in the pleadings. This article aims to provide more awareness of some of these issues. To be forewarned is to be forearmed.
I propose to deal with this topic in the following way:
(i) Circumstances in which a cancellation notice is required;
(ii) Consequences of not complying with a cancellation notice; and
(iii) Conclusion
There are currently two main circumstances in which a cancellation notice is required. One is inevitably covered by the Consumer Credit Act 1974 (The Act). The other one is covered by the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013/3134 (the 2013 regulations).
The provisions of the Consumer Credit Act 1974 (the Act) cover agreements that are “regulated”. Consequently, if a hire agreement is not regulated by the Act, then provisions in relation to cancellable agreements do not apply.
But what if the hire agreement is regulated by the Act? Then under the Consumer Credit Act 1974, there are certain circumstances whereby a cancellation notice has to be provided to the client, otherwise the agreement is unenforceable, unless a court order allows it to be enforceable. So very serious consequences indeed.
To qualify under the Consumer Credit Act 1974 for cancellation rights, it has to be a “Cancellable Agreement”. Section 67 states as follows:
“67. Cancellable agreements. [ (1) Subject to subsection (2) a regulated agreement may be cancelled by the debtor or hirer in accordance with this Part if the antecedent negotiations included oral representations made when in the presence of the debtor or hirer by an individual acting as, or on behalf of, the negotiator, unless— (a) the agreement is secured on land, or is a restricted-use credit agreement to finance the purchase of land or is an agreement for a bridging loan in connection with the purchase of land, or (b) the unexecuted agreement is signed by the debtor or hirer at premises at which any of the following is carrying on any business (whether on a permanent or temporary basis)— (i) the creditor or owner; (ii) any party to a linked transaction (other than the debtor or hirer or a relative of his); (iii) the negotiator in any antecedent negotiations. (2) This section does not apply where section 66A applies.” The parts relevant to this article are underlined by me.
The above, which is expressed in opaque language, can be simplified for vehicle credit hire as follows:
(1) For an agreement to be cancellable, it must be “regulated”. I have dealt with how agreements are regulated in my earlier article, “How does a hire agreement becomes regulated?” It can be summarised as: (a) a hire agreement becomes regulated where “credit” is provided – which I would summarise as the “credit route”; and/or (b) a hire agreement becomes regulated where a hire agreement is capable of subsisting for more than three months – which I would summarise as the “duration route”. But of course, if the agreement is “exempt”, then it is not regulated by the Act.
(2) For an agreement to be cancellable, it must be signed away from the business premises of the creditor or owner (example: hire company) or the party to a linked transaction (example: accident management company, body shop, repair garage), or the negotiator in any antecedent negotiations (a good example is a hire company sales representative who discussed the hire terms with the customer before the agreement was signed). An agreement signed at home or in a cafe would normally attract cancellation rights, as long as there were “antecedent negotiations” with “oral representations” in the presence of the consumer. Those antecedent negotiations could take place at street and then the agreement is signed at the customer's home or a cafe. Or the antecedent negotiations take place at the customer's home or cafe and are signed there also. Both these situations seem to be cancellable agreements. Section 67 uses the words “in the presence of” so I would state that antecedent negotiations by telephone call or even FaceTime, Zoom, are not likely to be covered.
These regulations require cancellation rights information to be given in defined circumstances. Let me, however, state this pre-emptively for clarity purposes: whilst many credit hire agreements may be covered by these regulations, it is not because of the provision of hire or provision of credit, but because of how the contract is concluded. Let's take it in stages.
Regulation 5 refers to “distance contract” and to “off premises contract”. It is for these contracts that cancellation information must be provided. “On-premises contract” does not require cancellation information. Regulation 5 defines these terms. I will deal with each in turn.
“Distance contract” is defined as: “distance contract” means a contract concluded between a trader and a consumer under an organised distance sales or service-provision scheme without the simultaneous physical presence of the trader and the consumer, with the exclusive use of one or more means of distance communication up to and including the time at which the contract is concluded.”
In simple terms, this involves a contract made under the trader’s organised system for selling goods or services remotely, where the trader and consumer do not physically meet, and which is concluded entirely by distance means such as online, by telephone, email or app. Common examples include:
(i) Arranging a replacement vehicle by telephone with a credit hire company after a road traffic accident;
(ii) E-signing a vehicle credit hire agreement by email or secure online link;
(iii) Completing an online application for a replacement vehicle supplied on credit hire terms;
(iv) Accepting vehicle credit hire terms through the trader’s mobile app or customer portal;
(v) Concluding a replacement vehicle hire agreement entirely by telephone and email without meeting any representative.
Regulation 13 states that “— (1) Before the consumer is bound by a distance contract, the trader— (a) must give or make available to the consumer the information listed in Schedule 2 in a clear and comprehensible manner, and in a way appropriate to the means of distance communication used, and (b) if a right to cancel exists, must give or make available to the consumer a cancellation form as set out in part B of Schedule 3”. Underline is my emphasis.
This regulation makes it mandatory for the trader to inform the consumer if the agreement is cancellable and if so, the trader must provide the consumer with a cancellation form.
Under Regulation 30: “— (1) The cancellation period ends as follows, unless regulation 31 applies. (2) If the contract is — (a) a service contract, or (b) a contract for the supply of digital content which is not supplied on a tangible medium, the cancellation period ends at the end of 14 days after the day on which the contract is entered into.” Underline is my emphasis.
Most hire agreements can be considered to be service contracts and therefore 14 days seems to be the usual cancellation period.
“Off premises contract” is defined as:
“(a) a contract concluded in the simultaneous physical presence of the trader and the consumer, in a place which is not the business premises of the trader;
(b) a contract for which an offer was made by the consumer in the simultaneous physical presence of the trader and the consumer, in a place which is not the business premises of the trader;
(c) a contract concluded on the business premises of the trader or through any means of distance communication immediately after the consumer was personally and individually addressed in a place which is not the business premises of the trader in the simultaneous physical presence of the trader and the consumer;
(d) a contract concluded during an excursion organised by the trader with the aim or effect of promoting and selling goods or services to the consumer;”
In simple terms, an off-premises contract includes a contract in the following circumstances:
The contract is concluded while the consumer and trader are physically together in a place which is not the trader’s business premises – for example, a vehicle credit hire agreement signed at the customer’s home when the replacement vehicle is delivered;
The consumer makes the offer while physically together with the trader in a place which is not the trader’s business premises, regardless of where the contract is later concluded – for example, the customer signs a vehicle credit hire order at the roadside after an accident, which is later accepted at the hire company’s office;
The contract is concluded on the trader’s business premises, or remotely (for example by telephone, email or online), immediately after the trader personally and individually approached the consumer while physically together in a place which is not the trader’s business premises – for example, a representative meets the customer at the roadside after the accident and the customer immediately afterwards attends the hire company’s office to sign the agreement, or signs it online.
“Excursions” under (d) are unlikely to apply to vehicle hire.
Regulation 10 states that — “(1) Before the consumer is bound by an off-premises contract, the trader — (a) must give the consumer the information listed in Schedule 2 in a clear and comprehensible manner, and (b) if a right to cancel exists, must give the consumer a cancellation form as set out in part B of Schedule 3.” Underline is my emphasis.
This regulation makes it mandatory for the trader to inform the consumer if the agreement is cancellable and if so, the trader must provide the consumer with a cancellation form.
Under Regulation 30: “— (1) The cancellation period ends as follows, unless regulation 31 applies. (2) If the contract is — (a) a service contract, or (b) a contract for the supply of digital content which is not supplied on a tangible medium, the cancellation period ends at the end of 14 days after the day on which the contract is entered into.” Underline is my emphasis.
Most hire agreements can be considered to be service contracts and therefore 14 days seems to be the usual cancellation period that has to be provided for.
On-premises contracts are not subject to the cancellation information requirements under the 2013 Regulations.
In regulation 5 “...on-premises contract means a contract between a trader and a consumer which is neither a distance contract nor an off-premises contract.”
The need for cancellation notices is only mentioned for distance contracts and off-premises contracts, not for “on premises contracts”.
Common examples of this situation include:
(i) A vehicle credit hire agreement signed at the credit hire company’s office;
(ii) replacement vehicle hire agreement signed at the accident management company’s branch;
(iii) credit hire agreement signed at the trader’s depot upon collection of the replacement vehicle.
The immediate consequences are very serious.
The agreement is unenforceable. In stark terms, section 65 states:
“65. — Consequences of improper execution.
(1) An improperly-executed regulated agreement is enforceable against the debtor or hirer on an order of the court only.”
The agreement can only be enforced with the leave of the court. In other words, it is redeemably unenforceable: s127 of the Act gives the hire company a chance to redeem.
127.— Enforcement orders in cases of infringement.
“(1) In the case of an application for an enforcement order under—
...(a) section 65(1) (improperly executed agreements) ...
the court shall dismiss the application if, but only if, it considers it just to do so having regard to— (i) prejudice caused to any person by the contravention in question, and the degree of culpability for it; and (ii) the powers conferred on the court by subsection (2) and sections 135 and 136.”
In Dimond v Lovell, there was a breach of the Consumer Credit Act 1974. The result of this breach was that the hire agreement was unenforceable. As the agreement was unenforceable, it effectively meant that Mrs Dimond had suffered “no loss”. The hire charges were dismissed. The difference was that in 2002 the breach was “irredeemably” unenforceable.
There were changes in 2006 (discussed in my previous article: “Should Dimond v Lovell be re-visited?”) to the Consumer Credit Act 1974, which mean that every breach of the Act can be cured, though an application for an order to the court must be made, and then it is a matter for the court as to whether the agreement can be enforced.
This decision in Dimond v Lovell was reinforced by the Court of Appeal decision in Salat v Barutis, a case in which I was involved. In an interesting take for this article, the regulations at play in Salat v Barutis were predecessor regulations to the above 2013 regulations, namely the Cancellation of Contracts made in a Consumer's Home or Place of Work etc. Regulations 2008 reg.7(2) (2008 regulations). These regulations were commonly known at the time as “doorstep” cancellation regulations.
But the consequences of the lack of cancellation notice under those regulations were somewhat different from the 2013 regulations (to be discussed later). Indeed, the breach of the 2008 regulations had the exact same consequence as the breach of the Consumer Credit Act 1974 did in Dimond v Lovell. The agreement was unenforceable and irredeemably so.
A variety of arguments were put forward by the Claimant in Salat v Barutis by the legal team, of which I was a part. But the Court of Appeal found that the case was essentially indistinguishable from Dimond v Lovell. Both cases had agreements that were irredeemably unenforceable and therefore the claimant had suffered no loss – in other words, if the claimants were to be sued by the hire company for the hire charges, they could mount the potentially unassailable defence that the agreement was unenforceable, therefore there was no “loss” to claim.
Dimond v Lovell and Salat v Barutis were dealing with two different regimes, but because the consequences of both were that the agreements were unenforceable, there could be no distinction between the cases.
So very serious consequences? Potentially the hire company will not be able to recover anything for the hire if the cancellation notice is not provided under the Consumer Credit Act 1974. The agreement is unenforceable.
In my view, the only realistic way to get round this is for an application to be made under section 127(1) of the Consumer Credit Act 1974 for the court to make an order that the agreement is enforceable, an option that was not available in Dimond v Lovell.
There appear to be two ways to do this. One could be in the Dimond v Lovell type scenario where a claimant sues the defendant, and the hire is claimed from the defendant. In that scenario, a hire company can seek to add itself as a party to the proceedings and make an application under section 127(1) of the Consumer Credit Act 1974.
The other route is this: the hire company sues the consumer directly for the recovery of the hire charges, and with the issue of the proceedings also makes a written application under section 127 of the Act seeking a declaration that the hire agreement is enforceable.
Dimond v Lovell and Salat v Barutis are a good basis to submit that as the hire agreement is unenforceable, then there is no loss and therefore the hire charges should be dismissed. It will be noticed that I used the words “good basis” and not “authority”.
The one difference, and something for which urgent guidance from the higher courts in my view is needed, is this: Dimond v Lovell and Salat v Barutis were dealing with irredeemably unenforceable agreements, that is agreements for which no application or order could cure the defect. The Consumer Credit Act 1974 now does not have any breaches which cannot be potentially cured by a court order. So, the situation has changed since Dimond v Lovell. Drastically changed.
There is, of course, a perfectly respectable line of argument that Dimond v Lovell and Salat v Barutis do not apply anymore? I painstakingly put this idea forward in my article: “Does Dimond v Lovell need to be re-visited?” I use the words “idea” because I was only offering some serious thought on what I consider to be an overlooked gap that had developed in the law.
The idea in summary is this: both Dimond v Lovell and Salat v Barutis were dealing with cases in which no court could ever remedy or cure the defects in those cases: in other words, the agreements were perpetually and irredeemably unenforceable, but the law has moved on and hire agreements, when unenforceable, can be “redeemed” through an application, so they are “redeemably enforceable”.
So, let's say on a current day case, in a Dimond v Lovell type case, the courts find that as: (1) that the agreement is unenforceable; and (2) despite it being a “redeemably unenforceable” hire agreement, no application is before the court under s127(1) Consumer Credit Act 1974; (3) there is therefore no “loss” and in line with Dimond v Lovell and Salat v Barutis, the hire claim is dismissed.
So where does this leave the claimant? The claim for hire charges of let's say £50,000 has been dismissed in the court, as the agreement was unenforceable and no application was made by the hire company under section 127(1) of the Consumer Credit Act 1974.
What if the hire company, then pursues a claim for hire charges against the claimant and makes an application for declaration of enforceability of the hire agreement, after the dismissal of the £50,000 hire claim? Even if a court with foresight decides to dismiss the application by the hire company based on the prejudice it now causes, as it should have been made when the claimant was suing the defendant, can it be correct that the claimant suffered no loss in the face of an agreement that could be enforced through a court order?
Whilst the situation has actually changed, in a situation where a credit hire case proceeds to trial in which there is a breach of the cancellation notice provisions under the Consumer Credit Act 1974 and no written application for a court order to enforce the agreement has been made, then it seems to me that a lower court may feel that they are very much bound by the Dimond v Lovell and Salat v Barutis ruling, namely the hire agreement is unenforceable.
But in reality, is there not a “loss” for the claimant when s/he pursues a defendant for the hire charges on a “redeemably unenforceable” hire agreement? Dimond v Lovell and Salat v Barutis were dealing with a hire agreement that can never be enforced? There is always the potential for an unenforceable hire agreement to become enforceable later? But these arguments are really a matter for the higher courts.
It seems to me that it will take a very bold lower court to decide that where there is non-compliance with a cancellation notice, then in the absence of an application by the hire company under section 127(1), there is a “loss” and the hire claim should be allowed.
For clarity, in my view, in the absence of any application under s127(1), a court is likely to dismiss the hire claim and state it is following cases such as Dimond v Lovell and Salat v Barutis.
If there is a failure to comply with cancellation notice, then there are clear and immediate consequences.
In the case of “off premises contract”, it's actually a criminal offence!
19.—(1) A trader is guilty of an offence if the trader enters into an off-premises contract to which regulation 10 applies but fails to give the consumer the information listed in paragraph (l), (m) or (n) of Schedule 2 in accordance with that regulation.
(2) A person who is guilty of an offence under paragraph (1) is liable on summary conviction to a fine not exceeding level 5 on the standard scale.”
When I was involved in the case of Salat v Barutis and the court was dealing with the predecessor 2008 “doorstep” regulations, a failure to comply with cancellation notices was also a criminal offence. But the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, whilst dealing with some of the situations covered by the 2008 regulations, also introduced “distance contracts”, but there is no criminal offence enshrined for that.
The penalty that a hire company need to be most concerned about is regulation 31 of the 2013 regulations. This applies to off-premises contracts and distance contracts.
“Cancellation period extended for breach of information requirement
31.— (1) This regulation applies if the trader does not provide the consumer with the information on the right to cancel required by paragraph (l) of Schedule 2, in accordance with Part 2.
(2) If the trader provides the consumer with that information in the period of 12 months beginning with the first day of the 14 days mentioned in regulation 30(2) to (6), but otherwise in accordance with Part 2, the cancellation period ends at the end of 14 days after the consumer receives the information.
(3) Otherwise the cancellation period ends at the end of 12 months after the day on which it would have ended under regulation 30.”
In simple terms, this means that the cancellation period extends in the event of default. Under the previous cancellation regulation under 2008, the sanction was far more draconian in that the agreement, in the case of non-compliance with a cancellation notice, became irredeemably unenforceable.
Under the current 2013 cancellation regulations, the extension of the cancellation period can be explained in simple terms by giving two examples:
(1) The hire agreement is signed on the 1st of January 2026. The cancellation notice should have been provided on the 1st of January 2026 with the cancellation period ending on the 15th of January 2026. In default of this, the cancellation notice is not given until the 1st of February 2026. Apart from the timing issue, the cancellation notice is otherwise compliant. In this case, the penalty for the hire company is that the right to cancel for the consumer is extended to the 15th of February 2026. This is under regulation 31(2).
(2) The hire agreement is signed on the 1st of January 2026. During that period no cancellation notice has been given, or a materially defective notice has been given in that it does not contain the required information. So, it's not just a question of timing in that a late cancellation notice has been given as in the previous example, but it's a question of a failure in substance. The cancellation notice should have been provided on the 1st of January 2026 with the cancellation period ending on the 15th of January 2026. In this case, the penalty for the hire company is that the right to cancel for the consumer is extended to the 15th of January 2027. This is under regulation 31(3).
The issue of cancellation notices and credit hire is a serious topic. I have seen defects in cancellation notices in a number of cases recently. The position can be briefly summarised as follows:
(1) The need for cancellation notices/information arises from the Consumer Credit Act 1974 and the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013;
(2) Broadly speaking, the Consumer Credit Act 1974, in cases of regulated agreements, states that in certain circumstances a cancellation notice has to be given to the consumer. But if the agreement is not regulated by the Act, then cancellation notices are not necessary;
(3) In simple terms, the Consumer Credit Act 1974 deals with cancellation notices in doorstep-type cases where face-to-face oral representations are made to the hirer during the negotiations, and the unexecuted hire agreement is then signed somewhere other than premises where the creditor or owner, any party to a linked transaction, or the negotiator is carrying on business. I state “doorstep cases” for ease of understanding, and signing at the consumer's home is the obvious example, but it can be anywhere away from those business premises such as a pub or a cafe.
(4) The penalty for failure to comply with a cancellation notice, whether because it is late or there is total non-compliance, is draconian. The hire agreement is unenforceable without a court order. The lower courts are likely to find that the hire agreement is unenforceable pursuant to cases such as Dimond v Lovell and Salat v Barutis, in the absence of an application for an enforcement order by the hire company under s127(1) of the Act. But in my view the issue is far more nuanced than this. In a nutshell, Dimond v Lovell and Salat v Barutis were dealing with “irredeemably” unenforceable hire agreements. No hire agreements are now irredeemably unenforceable as the Consumer Credit Act 1974 was amended in 2006. So, there is a genuine argument that there is a “loss” now, but it's doubtful that a lower court will find this; higher court guidance is very much needed on this point;
(5) If the hire company has successfully made an application under section 127(1) under the Act either when suing the consumer for the hire charges, or being joined in the proceedings when the claimant sues the defendant, then there is clearly a “loss” and then even a lower court is likely to find so;
(6) The second need for cancellation notices/information arises from the 2013 regulations. This has nothing to do with whether an agreement has credit or is regulated under Act. These 2013 regulations are concerned with how the contract is concluded and can include a range of different types of contracts including credit vehicle hire.
(7) The 2013 regulations are successor cancellation regulations to the 2008 regulations which were dealt with in Salat v Barutis. The cancellation regulations of 2008 essentially dealt with contracts concluded in the consumer’s home, or in other qualifying off-premises situations. But the 2013 regulations also cover distance selling where the trader and the consumer were never face to face.
(8) The 2008 regulations rendered hire agreements unenforceable if there was non-compliance with a cancellation notice. The Court of Appeal in Salat v Barutis therefore decided that the claimant had suffered no loss and arguments to say there was still a loss were rejected. In this regard, the position was being aligned with the case of Dimond v Lovell. The 2008 regulations have been replaced by those in 2013;
(9) The 2013 regulations do not provide that a contract is unenforceable if there is non-compliance with a cancellation notice. Instead, they extend the cancellation period in the case of late compliance to 14 days from the day after the consumer receives that information. In the case of non-compliance (forgets or provides a cancellation notice which is materially deficient in providing the required information), the cancellation period is extended to 12 months from the date the cancellation notice period should have ended.
I hope some guidance is provided in this area of cancellation notices/cancellation information and credit hire.