Online Service Contracts: Cancellations & Compliance for UK Retailers

As an online retailer offering services to UK consumers, it’s essential to understand your legal obligations around cancellations. From cooling-off periods to new rules on subscription transparency, staying compliant is not only a legal necessity but also helps build trust with consumers.

What qualifies as a service contract?

According to the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, a service contract is:

'A contract (other than a sales contract) under which a trader supplies or agrees to supply a service to a consumer and the consumer pays or agrees to pay the price.'

Examples include:

• Cleaning services
• Gym memberships
• Subscription-based access (e.g. online platforms, streaming, rentals)

Why it matters: These contracts trigger specific consumer rights, especially regarding cancellations.

The 14-day cooling-off period

Consumers have the right to cancel a service contract within 14 days of conclusion, with no obligation to provide a reason. This applies to all online, phone, or off-premises contracts – unless an exemption applies (see below).

Best practice for retailers:

• Clearly state in your Terms & Conditions when the contract is considered “concluded” (e.g. at checkout).
• Ensure the customer is presented with the terms before checkout.
• Record acceptance of the terms (ideally with a checkbox).

Can you start the service during the cooling-off period?

Yes – but only if the consumer gives explicit consent to do so. Ideally, this should be obtained during the checkout process via a checkbox.

You must also inform the consumer that:

• The right to cancel ends once the service has been fully performed.
• If they cancel after service commencement but before full performance, they must pay a proportional fee for the provided service.

Include clear wording during checkout, such as:

'I request the immediate start of the service and understand that I will lose my right to cancel once the contract has been fully performed.'

Compensation for early cancellation

If a consumer cancels after the service has started (within the 14-day period), you are entitled to reasonable compensation, calculated in proportion to the services already delivered. This right exists only if the customer gave informed consent to begin early.

Important: If you didn’t obtain this consent before starting, you risk losing the right to any compensation.

Exceptions: When the right to cancel does not apply

Under Regulation 28, the right to cancel service contracts does not apply to:

• Services that are priced based on uncontrollable financial market fluctuations.
• Urgent repair or maintenance work explicitly requested by the consumer.
• Services related to accommodation, transport, vehicle rental, catering, or leisure activities for a specific date.

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New rules in 2024: Subscription transparency obligations

Since 2024, the Digital Markets, Competition and Consumers Act (DMCC) has introduced stronger consumer protection rules for subscription-based services:

• Clear pre-contract information on:
  • Contract duration
  • Automatic renewals
  • Cancellation terms
• Explicit consumer consent for payments after free trials.
• Reminder notices before renewal or the end of the trial.
• Easy cancellation processes.
• 14-day cooling-off period also applies after renewal of contracts longer than 12 months

Penalties: Non-compliance can lead to fines up to 10% of global turnover.

Digital content (downloads, streaming)

For digital content that is not supplied on a tangible medium (e.g. downloads, streaming services), the right to cancel also applies.

However, the right to cancel expires immediately once:

• The download or streaming has started, and
• The consumer has given their explicit consent and acknowledged that they will lose their right to cancel once the download or streaming begins.

Best practice: Before the download or streaming starts, obtain the consumer’s explicit consent (e.g. via a checkbox during checkout).

Conclusion

Navigating service contract cancellations in the UK can be complex, but with transparent communication and compliant processes, you not only avoid legal pitfalls but also build lasting customer trust. The new DMCCA 2024 raises the bar – proactive action is essential for every serious online retailer.

For tailored legal advice for the UK and numerous other European markets, we recommend reaching out to our partner law firm, FÖHLISCH Rechtsanwälte. If your online shop is based in Germany or Poland, you can explore the Trusted Shops Legal Products site, where you can get further guidance on e-commerce legal topics.