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How can I cancel my phone contract without paying?

We enter into contracts every day, perhaps without realising it! When we buy a coffee, shop online, finally decide to commit to that gym membership or sign a phone plan; contract law governs these common exchanges. A recent heavy fine issued by regulator Ofcom to telecom giants EE and Virgin media highlighted the importance of fairness in contracts – these companies had been excessively charging consumers for cancelling their contracts early, with the charges totalling over £7 million. It raises many questions around consumer rights and the complications that can arise when big companies try to pull the wool over the eyes of everyday consumers.

To save grappling with contractual legal dilemmas, we sit down with dispute resolution and civil litigation specialist, Stewart Croft, to ask him what exactly people can and can’t do when it comes to contracts.

Q. Do consumers ever have the right to end a contract early?

Sometimes our plans for the gym can be a little too ambitious, which is why we can be thankful that all contracts entered into over the phone, online or at your home can be cancelled within a cooling off period of 14 days.

After this cooling off period, it can be difficult to terminate a contract early unless a certain exemption applies. For example, if:

There has been a contract price increase, such as with a phone or broadband provider, then you can cancel within 30 days
You believe the service or product offered under the contract was mis-sold
You believe the terms of the contract are unfair (though your first option would be to report the business to Trading Standards or the Competition and Markets Agency).

Q: What are the risks of cancelling a contract if you don’t have the right to?

Contract law if very specific on the allowable reasons that people can cancel a contact, and if you terminate a contract early without a legally valid reason, you could run the risk of being pursued for all outstanding charges and fees outstanding for the duration of the contract. I’ll use the example of a phone contract to demonstrate the financial risk and consequences.

Many mobile phone contracts for new models reach in excess of £50 per month, which would make it extremely costly to cancel a contract just a few months into a long-term contract; if you were to cancel a 24-month phone contract just three months in then you could be liable for £1,050.

If your phone provider wanted to recoup this financial loss, they would need to have clearly stated the consequences of terminating your contract early in your contract. The charges must not be at a level that would make switching to another provider too costly. Whether you read the fine print or not, this condition would be enforceable. Consumers would need to weigh up the financial risks of switching to another provider by cancelling a contract early, having to pay out the remainder of the contract, and potentially having to pay additional enforcement costs and court fees on top of the debt.

Q: Is it ever possible to negotiate out of a deal if you need to?

It is possible to negotiate out of a deal; however, this will vary from business to business and depend on factors including length of the contract, contract price and the reasons for cancellation. If you believed the terms were unfair and you have some justification, the business may be more likely to allow for termination rather than become involved in a consumer rights dispute with the attributed negative publicity this may bring. Businesses too have to weigh up the value of pursuing a claim against their own legal costs and potential reputational damage, though I wouldn’t rely on ‘luck’ when it comes to contracts!

Q: How should people approach a company if they want to escape a contract early?

Telephone the business to express your concern and ask what would be required to terminate the contract. Remember that this is a first conversation and, despite any existing reasons you may have to want to terminate, you should remain amicable. The cancellation team will usually ask why you wish to cancel and, more often than not, they will offer a cheaper or alternative package that might better suit your needs.

If you believe the cancellation terms are unfair or the charges excessive, you should write to the business, set out your detailed reasons for wanting to cancel the contract and make it clear that you will refer the dispute to trading standards if required. You should keep records of all correspondence as this may be necessary if you cannot come to an agreement. If you’re unsure about your consumer and contractual rights, you can also seek legal advice to find out what options may be available to you.

Excerpts of this article were recently published in The Independent’s article ‘How to escape your contract early without paying the price’.

Posted in: Consumer issues

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