Contract II: General Provisions, Delivery of Goods, Package Travel and Payment Services 9783866538733

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Principles of the Existing EC Contract Law (Acquis Principles)

Contract II General Provisions, Delivery of Goods, Package Travel and Payment Services

Principles of the Existing EC Contract Law (Acquis Principles)

Contract II General Provisions, Delivery of Goods, Package Travel and Payment Services

prepared by

Research Group on the Existing EC Private Law (Acquis Group)

ISBN (print) 978-3-86653-024-9 ISBN (eBook) 978-3-86653-873-3 The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data are available on the Internet at http://dnb.d-nb.de. © 2009 by sellier. european law publishers GmbH, Munich.

All rights reserved. No part of this publication may be reproduced, translated, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photo-copying, recording or otherwise, without prior permission of the publisher. Design: Sandra Sellier, Munich. Production: Karina Hack, Munich. Typesetting: fidus PublikationsService GmbH, Nördlingen. Typeface: Goudy Old Style and Goudy Sans from Linotype. Printing and binding: Friedrich Pustet KG, Regensburg. Printed on acid-free, non-ageing paper. Printed in Germany.

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Table of Contents Preface The second volume of the Acquis Principles Gianmaria Ajani/Hans Schulte-Nölke

xiii

Contributors Members of the Acquis Group Authors of the Comments to the Acquis Principles

xv xxi

Introductory Part Structure and Values of the Acquis Principles: New features and their possible use for political purposes Hans Schulte-Nölke/Fryderyk Zoll

xxiii

Consolidating EC Contract Law: an Introduction to the Work of the Acquis Group Gerhard Dannemann

xxxvi

Consolidating EC Contract Law Terminology: The Contribution of the Terminology Group Gerhard Dannemann/Silvia Ferreri/Michele Graziadei

l

Acquis Principles Structure of the Acquis Principles

3

Text of the Acquis Principles

5

Rules and Comments

49

Chapter 1: Introductory Provisions Section 1: Scope Article 1:101: Scope and purpose of these Principles

49

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Section 2: Consumer and business Article 1:201: Consumer Article 1:202: Business Article 1:203: Mandatory nature of consumer rules

55 63 67

Section 3: Notice and form Article 1:301: Means of notice Article 1:302: Effectiveness of notice Article 1:303: Electronic notice Article 1:304: Freedom of form Article 1:305: Textual form Article 1:306: Durable medium Article 1:307: In writing Article 1:308: Signatures

71 72 73 75 81 84 89 94

Chapter 2: Pre-Contractual Duties General Provisions Section 1: General duties Article 2:101: Good faith Article 2:102: Legitimate expectations Article 2:103: Negotiations contrary to good faith

99 106 110

Section 2: Pre-contractual information duties Article 2:201: Duty to inform about goods or services Article 2:202: Information duties in marketing towards consumers Article 2:203: Information duties towards disadvantaged consumers Article 2:204: Clarity and form of information Article 2:205: Information about address and identity Article 2:206: Information about price Article 2:207: Burden of proof Article 2:208: Remedies for breach of information duties

115 119 125 132 135 140 143 144

Specific Provisions Part A: Contracts Negotiated Away from Business Premises Article 2:A-01: Specific pre-contractual information duties Placeholder for distance selling of financial services

vi

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Part B: Contracts for the Delivery of Goods Article 2:B-01: Pre-contractual information on consumer Placeholder guarantees

149

Part C: Timeshare Contracts Article 2:C-01: Specific pre-contractual information duties Placeholder for timeshare contracts

149

Part D: Service Contracts Article 2:D-01: Specific pre-contractual information duties Placeholder for service contracts

149

Part E: Package Travel Contracts Article 2:E-01: Specific pre-contractual duties for package travel contracts

149

Part F: Consumer Credit Contracts Article 2:F-01: Specific pre-contractual information duties Placeholder for consumer credit contracts

155

Part G: Payment Services

155

Chapter 3: Non-discrimination Section 1: General Rules/Definitions Article 3:101: Principle of non-discrimination in contract law Article 3:102: Discrimination Article 3:103: Exception

157 163 167

Section 2: Remedies Article 3:201: Remedies Article 3:202: Content of the remedies Article 3:203: Burden of proof

170 175 178

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Chapter 4: Formation General Provisions Article 4:101: Agreement between the parties Article 4:102: Conclusion of contract Article 4:103: Offer; public statements Article 4:104: Information duties in real time communication Article 4:105: Formation by electronic means Article 4:106: Unsolicited goods or services Article 4:107: Pre-contractual statements by a contract party Article 4:108: Pre-contractual statements by third parties Article 4:109: Binding force of unilateral promises Article 4:110: Acknowledgment of receipt

181 184 187 188 193 200 205 209 213 216

Specific Provisions Part C: Timeshare Contracts Article 4:C-01: Timeshare contracts

222

Part E: Package Travel Contracts Article 4:E-01: Package travel contracts

228

Part F: Consumer Credit Contracts Article 4:F-01: Consumer credit contracts

Placeholder

231

Chapter 5: Withdrawal General Provisions Article 5:101: Mandatory nature Article 5:102: Exercise of a right of withdrawal Article 5:103: Withdrawal period Article 5:104: Information on the right of withdrawal Article 5:105: Effects of withdrawal Article 5:106: Linked contracts

viii

233 239 245 254 260 266

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Specific Provisions Part A: Contracts Negotiated Away from Business Premises Article 5:A-01: Right to withdraw from contracts negotiated away from business premises Article 5:A-02: Effects of withdrawal in case of supply of equivalent goods or services. Article 5:A-03: Effects of withdrawal from financial Placeholder services contracts

274 285 287

Part C: Timeshare Contracts Article 5:C-01: Right to withdraw from timeshare contracts Article 5:C-02: Effects of withdrawal from timeshare contracts

288 293

Chapter 6: Non-Negotiated Terms Section 1: Scope of Application Article 6:101: Subject matter

297

Section 2: Inclusion and interpretation of terms Article 6:201: Acquaintance with terms not individually negotiated Article 6:202: Preference to negotiated terms Article 6:203: Interpretation of terms Article 6:204: Conflicting standard terms

305 312 314 316

Section 3: Validity of terms Article 6:301: Unfairness of terms Article 6:302: Transparency of terms Article 6:303: Scope of the unfairness test Article 6:304: List of unfair terms Article 6:305: Indicative list of unfair terms Article 6:306: Effects of unfair terms

319 324 326 329 331 335

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Chapter 7: Performance of Obligations General Provisions Section 1: General duties Article 7:101: Duty to perform Article 7:102: Good faith in the exercise of rights Article 7:103: Duty of loyalty Article 7:104: Duty to co-operate Article 7:105: Language of communications

339 346 349 352 356

Section 2: Modalities of Performance Article 7:201: Time of performance Article 7:202: Place of performance

361 367

Specific Provisions Part A: Contracts Negotiated Away from Business Premises Article 7:A-01: Goods or services of equivalent quality

368

Part B: Contracts for the Delivery of Goods Article 7:B-01: Conformity of goods to the contract Article 7:B-02: Mandatory nature for consumer contracts

373 377

Part E: Package Travel Contracts Article 7:E-01: Mandatory nature Article 7:E-02: Definition of package travel contract Article 7:E-03: Revision of price Article 7:E-04: Duty to notify of proposed modifications Article 7:E-05: Business’s right of termination Rules only Article 7:E-06: Information before departure

380 382 387 391 396 398

Part G: Payment Services

399

Part H: Commercial Agency Contracts

399

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Chapter 8: Remedies General Provisions Section 1: General Rules Article 8:101: Definition of non-performance Article 8:102: Exclusion or restriction of remedies

401 405

Section 2: Performance and cure of non-performance Article 8:201: Monetary obligations-performance Article 8:202: Nononetary obligations

408 409

Section 3: Termination and reduction of performance Article 8:301: Grounds for termination and reduction Article 8:302: Notice of termination Article 8:303: Effects of termination Article 8:304: Right to withhold performance of reciprocal obligation

411 421 421 425

Section 4: Damages Article 8:401: Right to damages Article 8:402: Measure of damages Article 8:403: Contributory negligence and mitigation Article 8:404: Interest on delayed payment Article 8:405: Interest in case of creditor’s non-performance Article 8:406: Interest in commercial contracts Article 8:407: Unfair terms relating to interest

427 433 437 440 440 442 444

Specific Provisions Part A: Contracts Negotiated Away from Business Premises Article 8:A-01: Goods or services ordered are unavailable

448

Part B: Contracts for the Delivery of Goods Article 8:B-01: Mandatory nature for consumer contracts Article 8:B-02: Time of conformity Article 8:B-03: Presumption Article 8:B-04: Choice of cure Article 8:B-05: Return of replaced goods Placeholder Article 8:B-06: Right of redress Placeholder Article 8:B-07: Time limit

451 452 455 458 461 464 464

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Part E: Package Travel Contracts Article 8:E-01: Mandatory nature Article 8:E-02: Alternative arrangements in case of partial non-performance Article 8:E-03: Duty of assistance Article 8:E-04: Duty to inform about non-performance

464 466 469 472

Part G: Payment Services

474

Part H: Commercial Agency Contracts Article 8:H-01: Immediate termination of agency contract

Placeholder

474

Annexes Table of Derivations

477

List of “grey rules” taken from the Draft CFR (DCFR)

481

Table of Legislation and other Sources

483

Table of Cases

503

Abbreviations

509

Glossary

513

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Preface The second volume of the Acquis Principles This volume presents a new edition of the results of the Research Group on the Existing EC Private Law. This research group, commonly known as the Acquis Group, aims to formulate the existing EC law in the field of private law in the form of a restatement, entitled ‘Principles of the Existing EC Private Law’ or ‘Acquis Principles’ (ACQP). In addition to revising those parts of the ACQP which were published in the ‘Contract I’ volume of 2007, this new volume ‘Contract II’ presents numerous new rules, in particular on remedies for non-performance and on certain specific situations or contracts such as delivery of goods, package travel and payment services. Furthermore, this new volume is part of an ongoing project and is therefore transitory. As readers will note, the work already contains placeholders for further articles, which are currently being and will continue to be elaborated upon in the coming years. While a core aim of the first publication was to stimulate and feed the discussion of the ongoing work on the Draft Common Frame of Reference, the perspective of this and later volumes lies also in the further improvement of the existing EC law. It is particularly aimed at enriching the current debate on the European Commission’s Proposal for a Directive on Consumer Rights.1 This book consists of two main parts. The first introductory part is meant to give an overview of the aim, structure and drafting process of the Acquis Principles. In the first section of the introductory part Hans Schulte-Nölke and Fryderyk Zoll present the new structure of the Acquis Principles which could be seen as one of the core novelties in comparison to the volume ‘Contract I’. 2 Following this, Gerhard Dannemann introduces to the working method of the Acquis Group and, specifically, explains the drafting process and the methodology used.3 In a further contribution the Terminology Group reports how the task of a uniform terminology was dealt with.4 Lists of the members of the Acquis Group, i. e. the participants at the Plenary Meetings, as well as the members of the Redaction Committee and several drafting teams are included immediately after this preface.

1

2

3

4

European Commission, Proposal for a Directive of the European Parliament and of the Council on consumer rights, COM(2008) 614 final. Hans Schulte-Nölke/Fryderyk Zoll, Structure and values of the Acquis Principles: New features and their possible use for political purposes, p. xxiii et seq. in this volume. Gerhard Dannemann, Consolidating EC Contract Law: an Introduction to the Work of the Acquis Group, p. xxxvi et seq. in this volume. Gerhard Dannemann/Silvia Ferreri/Michele Graziadei, Consolidating EC Contract Law Terminology: the Contribution of the Terminology Group, p. l et seq. in this volume.

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Preface

The second and main part of this volume displays the Acquis Principles in a ‘rules only’ and commented version. The comments outline the foundation of the rules in the acquis and show how they were developed from that basis. Additionally, the comments provide explanations of the rules. However, since all the adopted rules have not yet been commented upon, the commented version only reproduces those rules which already have comments. Notably the sections on payment services and commercial agencies are not replicated in the commented part. For a comprehensive view of the Acquis Principles the reader is thus referred to the ‘rules only’ version. It is difficult to precisely nominate all the individual contributions to this work, as it is the result of very close co-operation between more than 40 scholars and has been influenced by innumerable discussions with further colleagues and many other stakeholders. We would just like to express our gratitude to all our colleagues from so many jurisdictions who have committed themselves to participate and who will certainly continue to take part in a truly European research project. We are also grateful for the encouragement and support the Acquis Group has received from many institutions, among them the European Commission, which organised stakeholder workshops and other conferences; the other research groups organised in the ‘Network on Excellence’ for the preparation of the draft Common Frame of Reference, in particular, from the Study Group on a European Civil Code; the stakeholders, whose active contribution to discussions was invaluable, and last but not least, the universities and other institutions who hosted our meetings. Furthermore, this volume has received a large share of the necessary funding under the 6th EU Framework Programme within the ‘Joint Network on European Private Law’ (CoPECL), particularly with immense help from the Universities of Bielefeld and Turin which administer the funds available to the Acquis Group. June 2009

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Gianmaria Ajani Hans Schulte-Nölke

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Contributors Members of the Acquis Group Participants at the Plenary Meetings The Plenary Meetings in Helsinki (March 2005), Trier (November 2005), Hull (April 2006), Barcelona (November 2006) and Paris (March 2007) were attended by: Gianmaria Ajani, Esther Arroyo i Amayuelas, Carole Aubert de Vincelles, Guillaume Busseuil, Simon Chardenoux, Giuditta Cordero Moss, Gerhard Dannemann, Martin Ebers, Silvia Ferreri, Lars Gorton, Michele Graziadei, Hans Christoph Grigoleit, Luc Grynbaum, Geraint Howells, Tsvetana Kamenova, Konstantinos Kerameus, Stefan Leible, Eva LindellFrantz, Piotr Machnikowski, Ulrich Magnus, Paolisa Nebbia, Peter Møgelvang-Hansen, Susana Navas Navarro, Barbara Pasa, Thomas Pfeiffer, António Pinto Monteiro, Jerzy Pisulin´ ski, Elise Poillot, Judith Rochfeld, Ewa Rott-Pietrzyk, Søren Sandfeld Jakobsen, Hans Schulte-Nölke, Reiner Schulze, Carla Sieburgh, Sophie Stalla-Bourdillon, Matthias Storme, Maciej Szpunar, Evelyne Terryn, Christian Twigg-Flesner, Antoni Vaquer Aloy, Thomas Wilhelmsson, Fryderyk Zoll. A detailed list of the participants at the Plenary Meetings from 2005 to 2007 was published in the volume ‘Contract I’ at pp. XV et seq. and is therefore not reproduced here.

Krakow, October 2007 Esther Arroyo i Amayuelas Carole Aubert de Vincelles Giuditta Cordero Moss Gerhard Dannemann Silvia Ferreri Michele Graziadei Stefan Leible Piotr Machnikowski Paolisa Nebbia Barbara Pasa Thomas Pfeiffer Jerzy Pisulin´ ski Judith Rochfeld Ewa Rott-Pietrzyk Reiner Schulze Hans Schulte-Nölke Matthias Storme Maciej Szpunar

University of Barcelona University of Lyon III University of Oslo University of Berlin (Humboldt) University of Torino University of Torino University of Bayreuth University of Wrocław University of Oxford University of Torino University of Heidelberg University of Kraków University of Paris XI Silesian University of Katowice University of Münster University of Bielefeld University of Antwerp/Leuven Silesian University of Katowice

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Contributors

Thomas Wilhelmsson Fryderyk Zoll

University of Helsinki University of Kraków

Copenhagen, April 2008 Gianmaria Ajani Esther Arroyo i Amayuelas Giuditta Cordero Moss Gerhard Dannemann Silvia Ferreri Lars Gorton Michele Graziadei Geraint Howells Stefan Leible Piotr Machnikowski Peter Møgelvang-Hansen Damjan Mozˇina Barbara Pasa Thomas Pfeiffer Jerzy Pisulin´ ski Ewa Rott-Pietrzyk Søren Sandfeld Jakobsen Hans Schulte-Nölke Reiner Schulze Markéta Selucká Maciej Szpunar Matthias Storme Gert Straetmans Fryderyk Zoll

University of Torino University of Barcelona University of Oslo University of Berlin (Humboldt) University of Torino University of Lund University of Torino University of Lancaster University of Bayreuth University of Wrocław Copenhagen Business School University of Ljubljana University of Torino University of Heidelberg University of Kraków Silesian University of Katowice Copenhagen Business School University of Osnabrück University of Münster University of Brno Silesian University of Katowice University of Antwerp/Leuven University of Antwerp University of Kraków

Leuven, November 2008 Gianmaria Ajani Gerhard Dannemann Silvia Ferreri Lars Gorton Michele Graziadei Geraint Howells Jan Hurdik Piotr Machnikowski Peter Møgelvang-Hansen Damjan Mozˇina Barbara Pasa Thomas Pfeiffer Jerzy Pisulin´ ski xvi

University of Torino University of Berlin (Humboldt) University of Torino University of Lund University of Torino University of Lancaster University of Brno University of Wrocław Copenhagen Business School University of Ljubljana University of Torino University of Heidelberg University of Kraków

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Contributors

Ewa Rott-Pietrzyk Søren Sandfeld Jakobsen Hans Schulte-Nölke Reiner Schulze Markéta Selucká Maciej Szpunar Matthias Storme Gert Straetmans Fryderyk Zoll

Silesian University of Katowice Copenhagen Business School University of Osnabrück University of Münster University of Brno Silesian University of Katowice University of Antwerp/Leuven University of Antwerp University of Kraków

Prague, February 2009 Gianmaria Ajani Esther Arroyo i Amayuelas Carole Aubert de Vincelles Gerhard Dannemann Silvia Ferreri Lars Gorton Michele Graziadei Luc Grynbaum Jan Hurdik Stefan Leible Piotr Machnikowski Peter Møgelvang-Hansen Damjan Mozˇina Barbara Pasa Anders Ørgaard Thomas Pfeiffer Jerzy Pisulin´ ski Judith Rochfeld Søren Sandfeld Jakobsen Hans Schulte-Nölke Reiner Schulze Markéta Selucká Gert Straetmans Maciej Szpunar Evelyne Terryn

University of Torino University of Barcelona University of Lyon III University of Berlin (Humboldt) University of Torino University of Lund University of Torino University of Paris V University of Brno University of Bayreuth University of Wrocław Copenhagen Business School University of Ljubljana University of Torino University of Aarhus University of Heidelberg University of Kraków University of Paris XI Copenhagen Business School University of Osnabrück University of Münster University of Brno University of Antwerp Silesian University of Katowice University of Leuven (Campus Kortrijk)

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Contributors

Speaker Gianmaria Ajani

Coordinator Hans Schulte-Nölke

Members of the Redaction Committee Gerhard Dannemann (Chair) Gianmaria Ajani Luc Grynbaum Hans Schulte-Nölke Reiner Schulze Matthias Storme Christian Twigg-Flesner Fryderyk Zoll In addition to the above Permanent Members, meetings of the Redaction Committee were attended by founding member Geraint Howells, who, after having resigned, was succeeded by Christian Twigg-Flesner, by Ulrich Magnus as ad hoc member (3 meetings), and by Stefan Leible, Judith Rochfeld and Antoni Vaquer Aloy as members of Drafting Teams (1 meeting each). Irene Maier acted as secretary to the Redaction Committee.

Members of the Terminology Group Gerhard Dannemann (Chair) Silvia Ferreri Michele Graziadei

Drafting Teams Contract I Esther Arroyo i Amayuelas Martin Ebers Christoph Grigoleit Peter Møgelvang-Hansen Barbara Pasa Thomas Pfeiffer Hans Schulte-Nölke Reiner Schulze xviii

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Contributors

Evelyne Terryn Christian Twigg-Flesner Antoni Vaquer Aloy (The Contract I Team was partially organised in the following subteams: Definition of Consumer and Business, Form, Good Faith, Pre-contractual Information Duties, Formation, Withdrawal, Non-negotiated Terms)

Contract II Carole Aubert de Vincelles Piotr Machnikowski Ulrich Magnus Jerzy Pisulin´ ski Judith Rochfeld Hans Schulte-Nölke Reiner Schulze Matthias Storme Maciej Szpunar Fryderyk Zoll (The Contract II Team was partially organised in the following subteams: Definitions, Package Travel, Payment Services, Right of Redress, Sales)

Commercial Agency Ewa Rott-Pietrzyk Reiner Schulze

Consumer Credit Jerzy Pisulin´ ski Fryderyk Zoll

E-Commerce Stefan Leible Jerzy Pisulin´ ski Fryderyk Zoll

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Contributors

Language Geraint Howells Damjan Mozˇina Hans Schulte-Nölke Reiner Schulze Gert Straetmans Evelyne Terryn

Non-discrimination Stefan Leible Susana Navas Navarro Jerzy Pisulin´ ski Fryderyk Zoll

Specific Performance Lars Gorton Geraint Howells

Secretary of the Acquis Group Christoph Busch

Editing Team for Volume Contract I Christoph Busch Elisabeth Lege Filip Wejman

Editing Team for Volume Contract II Christoph Busch Irene Maier Filip Wejman Martin Werneburg

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Authors of the Comments to the Acquis Principles Article 1:101

Hans Schulte-Nölke/Christoph Busch

Article 1:201 and 1:202

Martin Ebers

Article 1:203

Hans Schulte-Nölke/Christoph Busch

Article 1:301 to 1:303

Stefan Leible/Jerzy Pisulin´ ski/Fryderyk Zoll

Article 1:304 to 1:308

Esther Arroyo i Amayuelas/Barbara Pasa/Antoni Vaquer Aloy

Article 2:101 to 2:103

Thomas Pfeiffer/Martin Ebers

Article 2:201 to 2:204

Christian Twigg-Flesner/Thomas Wilhelmsson

Article 2:205 to 2:207

Christian Twigg-Flesner

Article 2:208

Christian Twigg-Flesner/Thomas Wilhelmsson

Article 2:E-01

Christoph Busch

Article 3:101 to 3:203

Stefan Leible/Susana Navas Navarro/Jerzy Pisulin´ ski/ Fryderyk Zoll

Article 4:101 to 4:103

Reiner Schulze

Article 4:104 and 4:105

Matthias Lehmann

Article 4:106 to 4:109

Reiner Schulze

Article 4:110

Matthias Lehmann

Article 4:C-01 and 4:E-01

Hans Schulte-Nölke/Christoph Busch

Article 5:101 to 5:C-02

Peter Møgelvang-Hansen/Evelyne Terryn/Reiner Schulze

Article 6:101 to 6:306

Thomas Pfeiffer/Martin Ebers

Article 7:101 to 7:104

Carole Aubert de Vincelles/Piotr Machnikowski/ Jerzy Pisulin´ ski/Judith Rochfeld/Maciej Szpunar/Fryderyk Zoll

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Authors of the Comments to the Acquis Principles

Article 7:105

Hans Schulte-Nölke

Article 7:201 and 7:202

Carole Aubert de Vincelles/Piotr Machnikowski/ Jerzy Pisulin´ ski/Judith Rochfeld/Maciej Szpunar/Fryderyk Zoll

Article 7:A-01

Maciej Szpunar

Article 7:B-01 and 7:B-02

Fryderyk Zoll

Article 7:E-01 to 7:E-05

Piotr Machnikowski

Article 8:101

Piotr Machnikowski/Maciej Szpunar

Article 8:102

Ulrich Magnus

Article 8:201 and 8:202

Piotr Machnikowski/Maciej Szpunar

Article 8:301

Jerzy Pisulin´ ski/Fryderyk Zoll/Maciej Szpunar

Article 8:302

Piotr Machnikowski/Maciej Szpunar

Article 8:303

Jerzy Pisulin´ ski/Fryderyk Zoll/Maciej Szpunar

Article 8:304

Piotr Machnikowski/Maciej Szpunar

Article 8:401 to 8:407

Ulrich Magnus

Article 8:A-01

Maciej Szpunar

Article 8:B-01

Christoph Busch

Article 8:B-02 to 8:B-04

Fryderyk Zoll

Article 8:B-05

Martin Werneburg

Article 8:E-01 to 8:E-04

Piotr Machnikowski

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Introductory Part Structure and Values of the Acquis Principles: New features and their possible use for political purposes The core novelty of the new version of the Acquis Principles contained in this volume is its innovative structure. Since it was discussed and adopted at a Plenary of the Acquis Group at Paris in March 2007, it is often referred to internally as the ‘Paris Structure’. This new method of arranging the materials had originally been developed for the task of the Acquis Group, i. e. for the presentation of existing EC Law in a systematic and coherent fashion in order to overcome the piecemeal presentation of the current directives.1 However, the Paris structure of the Acquis Principles may also be seen as a contribution to the ongoing political discussion on how to improve the acquis. The purpose of the following is, firstly, to introduce the new Paris structure of the Acquis Principles (under I.). Secondly, it shall be elaborated upon as to what extent this new structure can contribute to the current discussion on how the acquis should be reorganised in order to become more coherent (under II.). Thirdly, as the discussion on the political Common Frame of Reference (CFR) seemingly heads for a tripartite structure of the CFR consisting of the three elements: ‘Principles’, ‘Definitions’ and ‘Model Rules’, it shall also be illustrated, which fundamental principles may be seen as underlying the acquis and the Acquis Principles and therefore being worth taking into account – alongside other works – for the section on Principles in the CFR (under III).

I.

Overcoming the codification approach: The merits of the new structure of the Acquis Principles

Regarding the new Paris structure of the present volume Contract II of the Acquis Principles, readers will note that matters like Delivery of Goods, Package Travel or Payment Services have been added and new fields are covered. 2 More importantly, though, a new way of structuring and presentation of the rules has been developed. Now, the individual chapters such as Pre-contractual Obligations (Chapter 2), Content and Performance (Chapter 7) or Remedies (Chapter 8) are divided into two parts. The first part of these 1

2

On this task see in more detail Gerhard Dannemann in this volume, pp. xxxvi et. seq.; Hans Schulte-Nölke, From the Acquis Communautaire to the Common Frame of Reference – The Contribution of the Acquis Group to the DCFR, Juridica International, 1/2008, 27; Fryderyk Zoll, Die Grundregeln der Acquis Gruppe im Spannungsfeld zwischen acquis commun und acquis communautaire, Gemeinschaftsprivatrecht (GPR) 2008, 116 (containing a response to some observations on the method made by Nils Jansen/Reinhard Zimmermann, Grundregeln des bestehenden Gemeinschaftsprivatrechts, Juristenzeitung (JZ) 2007, 1113). On the major changes see also the Preface to this volume, pp. xiii et. seq.

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chapters contains ‘general provisions’ harvested from the acquis by generalising rules from individual directives. Such generalisations have been made where a provision of EC law could be regarded as appropriate to govern not only the (rather specific) relationship regulated in, e. g., a certain directive with limited scope, but also the relation between contract parties in the context of general contract law. In contrast, the (new) second part of the above mentioned chapters contains a number of ‘specific provisions’ which respond to particular needs in specific situations (such as the pre-contractual duty to inform the consumer of package travel on details such as the meal plan3) and thus may be regarded as exceptions from the general provisions. Some examples may illustrate the new approach. Chapter 2 on pre-contractual duties now has the following two layer structure: Chapter 2: Pre-contractual Duties General Provisions Section 1: General duties Section 2: Pre-contractual information duties Specific Provisions Part A: Contracts Negotiated Away from Business Premises Part B: Contracts for the Delivery of Goods Part C: Timeshare Contracts Part D: Service Contracts Part E: Package Travel Contracts Part F: Consumer Credit Contracts Part G: Payment Services

Within the specific part of Chapter 2, each topic covered is indicated with a capital letter. To facilitate orientation for the reader, these capital letters – which serve as ‘topic markers’ – are used consistently throughout the ACQP. In addition, this approach is flexible with regard to the topics covered in the specific parts. In some chapters only some of the specific parts appear. For example, Chapter 7, regarding content and performance of obligations, contains a Part H (Commercial Agency), but not Parts C (Timeshare Contracts), D (Service Contracts) and F (Consumer Credit Contracts): Chapter 7: Content and Performance of Obligations General Provisions Section 1: General duties Section 2: Modalities of Performance Specific Provisions Part A: Contracts Negotiated Away from Business Premises Part B: Contracts for the Delivery of Goods Part E: Package Travel Contracts Part G: Payment Services Part H: Commercial Agency Contracts

3

Article 2:E-01(2)(a)(iii) ACQP.

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Structure and Values of the Acquis Principles: New features and their possible use for political purposes

The motives for why this new structure has been developed relate to the peculiarities of EC contract law. Unlike many national laws, EC contract law does not strive to regulate areas of law comprehensively like a codification but rather follows a functionalist or instrumentalist approach. 4 The main reasons for that lie, on the one hand, in the style of politics of the EU, and, on the other hand, in the principle of conferred powers which limits the EU’s competence for legislation to specific, confined fields. The incentive for legislative activity is usually just a ‘problem’ seen as important or neuralgic in the light of the specific purposes of the EU, e. g. the creation of the internal market or securing a high level of consumer protection. Until now, there has been no intention of the European legislator to create a general EC contract law. Directives and regulations limit themselves to only tackling the identified problem. This ‘problem approach’ is reflected in the fragmented legislative landscape of EC contract law and is one of the reasons for the lack of coherence and consistence of the acquis.5 One of the striking differences between national codifications and EC contract law is that EC contract law is not built upon the classical typology of contracts. National codifications contain – usually at the beginning of a specific chapter – a definition of the contract type dealt with. Such classical definitions mainly list the so-called essentialia negotii, i. e. the main obligations under the contract allowing a distinction from other kinds of contracts.6 The acquis does not operate with a codification-like ‘classificatory’ definition of contract types. In contrast, the ‘problem approach’ of the acquis just tries to identify certain needs for action or protection and to describe the situations in which such action or protection shall become effective. It is in this sense that the directives on consumer credit and consumer sales define their scope of application, i. e. the ‘problem’ area targeted.7 An exception may be the early and somewhat solitary Commercial Agents Directive, which contains a kind of ‘mini-codification’ of a certain contract type, covering the full range of essentialia negotii with the function of determining the scope of application by distinguishing between other types of contracts.8 The legislation following the ‘problem approach’ has some advantages. From the perspective of a national lawyer, the target-oriented structure is quite user-friendly as it facilitates finding the solution for a particular legal problem in the targeted ‘problem’ area (for example difficulties with a package travel holiday) without being forced to look up in sev-

4

5

6

7 8

See for instance Norbert Reich, European Contract Law – Ghost or host for integration, 24 Wisconsin International Law Journal 425, 449 (2006-2007); Christoph U. Schmid, The Instrumentalist Conception of the Acquis Communautaire in Consumer Law and its Implications on a European Contract Code, ERCL 2005, 211; Hans Schulte-Nölke, EC Law on the Formation of Contract – from the Common Frame of Reference to the ‘Blue Button’, ERCL 2007, 332, 338. See Reiner Schulze, The New Challenges in Contract Law; in: idem (ed.), New Features in Contract Law, Munich 2007, pp. 12 et seq. See for instance Article 1582 Code civil (vente), Article 1709 Code civil (louage des choses), § 433 BGB (Kaufvertrag), § 535 BGB (Mietvertrag), Art. 535 of the Polish Kodeks Cywilny (sprzedaz˙), Art. 659 Kodeks Cywilny (najem). Cf. Article 1 of the Consumer Sales D., Article 3 lit. c) of the Consumer Credit D. 2008. Cf. Article 3, 4 of the Commercial Agency D.

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eral directives dealing with ‘horizontal’ aspects of contract law and to understand the interaction among the different directives and other pieces of legislation. The Paris structure of the Acquis Principles seeks to combine the user-friendliness of the existing acquis’ ‘problem approach’ with a more coherent and consistent structure. The reluctance (or even hostility) of the acquis to use the ‘classificatory’ definition techniques described above should not be ignored in the process of structure building undertaken by the Acquis Principles. Their structure maintains – in principle – the ‘problem approach’, but opens a way forward towards a more coherent systematization of contract law. In effect, the new structure of the Acquis Principles aims at a golden mean between the closed and systematic structure of some national codifications and the ‘problem approach’ of the existing EC contract law. It thus respects the specific character of EC law by not forcing it into the structure of a classical codification. At the same time, the Paris structure seeks to avoid the disadvantages of the ‘problem approach’ by putting the individual rules in a general framework. The Paris structure may be described as a ‘mirror model’.9 It does not have one general part of contract law followed by a specific part. Instead, it juxtaposes several ‘general parts’ and corresponding ‘specific parts’, as the above examples may have shown. This new structure is built with the aim to remain open for the permanent development of the acquis. New pieces of EC contract law may be easily incorporated without a permanent deconstruction of the general framework. The new structure also seeks to allow for smooth interaction between the generalized rules and the specific rules. The interplay between the general parts and the specific parts can follow different patterns. The main interaction model can be illustrated by the example of Chapter 5 (Withdrawal). In this Chapter, the ‘General Provisions’ (Art. 5:101 – 5:106 ACQP) are designed as a general framework for the specific rights of withdrawal. The ‘General Provisions’ do not have their own field of application. Their application is conditional, dependent upon the interposition of ‘trigger norms’, i. e. they will be activated only, if one of the provisions from the specific parts which grant a right of withdrawal is applicable. The reason for this structure is that a right to withdraw does not exist as a rule of general contract law, but only in specific situations, e. g. for contracts negotiated away from business premises or timeshare contracts. For such specific situations, however, the exercise and consequences of a right of withdrawal should be regulated in a consistent way.10 Therefore, the general provisions of Chapter 5 complement the specific rules and ensure that the exercising of the right to withdraw results in the same consequences, irrespective of the individual right to withdraw the consumer exercises. From this perspective, one could say that the general part of 9

10

Fryderyk Zoll, Problem struktury przyszłego polskiego Kodeksu cywilnego, in: Kosek/Słyk (eds.), W trosce o rodzine˛. Ksie˛ga pamia˛tkowa ku czci Profesor Wandy Stojanowskiej, Warszawa 2008, p. 651, p. 652; idem, GPR 2008, 116, 117. On common features of withdrawal rights in the acquis see Hans Schulte-Nölke/Christian TwiggFlesner/Martin Ebers, EC Consumer Law Compendium, Munich 2008; Evelyne Terryn, Bedenktijden in het consumentenrecht. Het herroepingsrecht als instrument van consumentenbescherming, Antwerpen/Oxford 2007.

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Structure and Values of the Acquis Principles: New features and their possible use for political purposes

Chapter 5 is always a part of the rules on withdrawal applicable in a specific case. Consequently, there is no relation of lex generalis and lex specialis between the ‘general provisions’ and ‘specific provisions’ – the ‘general provisions’ are not ‘more general’ in the given scope of application, but they are common for different cases of withdrawal. This main interaction technique is varied in other chapters of the Acquis Principles. Chapter 2 (Pre-contractual information duties) applies a ‘presumption technique’: The first part of Chapter 2 formulates a set of general pre-contractual duties, which have been harvested by generalization of the numerous individual rules spread over several directives.11 This part is followed and complemented by specific rules on pre-contractual duties derived from rules of the acquis which were not considered suitable for generalization as they only seemed appropriate for specific situations like Timeshare Contracts (Part D) or Package Travel (Part E). The general and the specific parts of Chapter 2 are connected by a particular type of linkage, the afores said ‘presumption’ technique. For instance, Art. 2:E-01 ACQP provides that a business ‘is presumed to have complied’ with the general information duties set out in certain articles of the general part in this chapter (e. g. Art. 2:202, 2:203 ACQP), if it complies with the specific information duties listed in Art. 2:E-01 ACQP. This technique seeks to combine the need for legal security (in particular for the business) with the necessary flexibility of the law to adapt to the continuous change of marketing practices. In the vast majority of cases, a business which complies with the specific information duties can be confident of having fulfilled all the information duties listed in the relevant specific part.12 However, in exceptional cases, consumers and courts can fall back on the general rules which do not contain a precise list but use more abstract concepts like the ‘legitimate expectations’ of the consumer.13 In other words: the specific information duties are drafted in a way that they should be everything a consumer can legitimately expect in typical cases. This relation between general and specific rules should be able to enhance the transparency and coherency of law and, at the same time, legal security with regard to the requirements businesses have to fulfil. Whereas this ‘presumption’ technique seemed appropriate for pre-contractual duties (Chapter 2), in Chapter 7 (Content and Performance of Obligations) and Chapter 8 (Remedies) the Acquis Principles apply a more classical model in order to establish a connection between the general parts and specific parts. In these Chapters, the relationship between the general provisions and the specific provisions is governed by the traditional

11

12

13

For example, Article 2:203(1) ACQP (Information duties towards disadvantaged consumers) is a generalization of pre-contractual information duties expressed inter alia in Article 4(1) of the Doorstep Selling D., Article 3(2) and 4(1) of the Package Travel D., Article 4 of the Distance Selling D., Article 6 of the Consumer Sales D. The provision of the specific information due under the specific parts could be facilitated by laying down the relevant specific information duties in a form to be filled in by the business and to be given to the consumer, cf. the model of the Consumer Credit Directive 2008. See Christian Twigg-Flesner/Thomas Wilhelmsson, Comment No. 2 and 6 to Article 2:201 ACQP (Duty to inform about goods or services) on the concept of ‘legitimate expectations’.

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lex generalis – lex specialis rule. Here, the specific provisions derogate the general provisions in their scope of application and the latter subsidiarily apply, if a certain question is not governed by the specific provisions. Some chapters of the Acquis Principles do not have respective ‘mirroring’ specific parts. These are: Chapter 1 (Introductory Provisions), Chapter 3 (Non-Discrimination) and Chapter 6 (Non-Negotiated Terms). However, in all these chapters further development of the Acquis Principles may result in formulation of specific parts in the future. In Chapter 1 it is possible to imagine specific definitions of consumer or business for specific situations (the specific notion of a ‘customer’ in the case of package travel contracts in Art. 7:E-01 ACQP may be a forerunner). It is also possible to imagine the introduction of specific provisions on form. In the case of non-discrimination (Chapter 3) specific provisions on non-discrimination in the case of services may be introduced.14 Such need may also emerge in the case of non-negotiated terms (Chapter 6), although at this moment the Acquis Group is not working in a field where such a specific acquis, unfeasible for generalization, is in sight. The model presented above allows for quite a simple and user-friendly application of the law. If, for example, an answer to a question related to the non-performance of a package travel contract is sought, all relevant rules can be found in the chapter on remedies (Chapter 8). Thus, the main advantage is that the general rules on remedies are placed very close to the specific rules. Moreover, this structure is highly suitable for electronic presentation. In the example of a package travel contract (for which the specific rules are placed in Part E), with one mouse-click one could hide the other specific parts (i. e. A, B, C and so on, except E) and thereby create a systematic set of rules especially designed for package travel contracts.

II. The possible political applicability of the Acquis Principles Currently there is a lot of friction concerning the method of achieving the aim of a more coherent contract law. Originally, the Commission discussed two principally different ways on how to achieve this aim. One was the idea of a CFR being a ‘toolbox’ for better legislation.15 The other, apparently developed later, was the idea of a legislative horizontal approach consisting of the adoption of one or more framework instruments to regulate common features of the acquis, to be underpinned whenever necessary by sector-specific rules.16 The main difference is that the CFR only pursues a non-legislative approach, creating an aid for legislators. The CFR as a toolbox – envisaged as a collection of rules and definitions, which may possibly be used for the improvement of the drafting process of the proposals for European law17 – can fulfill this function only to a quite limited extent. If such a 14

15 16

See Article 20(1) of the Services D. which is a concretization of the non-discrimination rules formulated in Articles 12 and 49 of the EC Treaty, cf. Recital 94 of the Services D. Action Plan ‘A More Coherent European Contract Law’, COM (2003) 68. Green Paper on the Review of the Consumer Acquis, COM (2006) 744, p. 7.

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‘toolbox’ is only an internal, informal drafting source, it might contribute to a more consistent use of terms and language in EC legislation. However, such a CFR will probably not be able to secure overall coherence of European contract law formed by the interplay of the EC and the national level. The main reason for the lack of coherence of the existing European contract law is not only the problem of the differences in concepts used in different directives, which cannot be justified by peculiarities of different areas of law. By contrast, the fundamental reason for the lack of coherence arises from the substantive differences of the national laws. This problem was not fundamental as long as the European legislator focused on areas which did not belong to the traditional core of the national private laws. However, the Rubicon has meanwhile been crossed. The European legislator has set foot into the realm of general contract law. In particular, the Unfair Terms Directive and the Consumer Sales Directive were crucial steps in this process. Until now, every directive adopted in the core areas of contract law necessarily created incoherency. Such directives usually contain only bits and pieces of the targeted area, which need to be integrated into the framework of the national legal traditions. European legislation is inevitably subjected to two sources of Vorverständnis or ‘pre-understanding’ – the different national traditions and emerging EC law. Because there is no conceptual framework of European contract law, the numerous national traditions destroy the consistency of terms and meaning of European legislation. The directives amend the national legal systems only in relatively small areas. Every concept of law needs to be integrated with other concepts in order to create a coherent system. Every concept or legal term is influenced by the legal system which is behind it.18 European private law can gain coherence only if there is a system of European law. The toolbox might be useful, but it is not enough, because, as just an informal instrument, it cannot fulfill the function of a foundation which provides the common environment of concepts and legal institutions. The diverging national traditions would pull apart every European piece of legislation which only regulates fragments of law. Of course, a European civil code would be an answer to provide such basis, but a binding code on a European level is not politically realistic. Probably it is, at least at this stage, not even desirable, due to the differences which still exist in the mode of operation of the individual European legal systems. The way to achieve such coherency needs to be more self-limited. But it also has to be something more than just an informal toolbox, which cannot provide sufficient legislative context in the confrontation with national laws. Because of the rather limited effect of a non-legislative CFR, the proposed legislative horizontal approach in the field of consumer law, i. e. the adoption of a framework directive19, could be seen as an attractive alternative. The recently proposed Directive on Consumer Rights does not provide such a framework.20 It is mainly a mere compilation of the existing sector-specific directives with only limited effort to generalize, e. g. regard17 18

19

Cf. Action Plan, COM (2003), 68 p. 16 et seq. On the difficulties arising from the incompatibility between different terms and concepts cf. Gianmaria Ajani et al (eds.), The Multilanguage Complexity of European Law, Florence 2007. Green Paper on the Review of the Consumer Acquis, COM (2006) 744, p. 8.

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ing rights of withdrawal.21 Only a real horizontal framework directive could achieve the aim of a more coherent EC law and a better interplay with national laws. Such a framework directive would contain a sort of general part of European contract law, which might look like the ‘general parts’ of the Acquis Principles. The general parts of a real framework directive would not be an applicable law as such. They would not have their own field of application. But they would provide a framework for specific legislation in the areas targeted by EC consumer law. The ‘specific’ directives governing fields like package travel holidays, timeshare contracts, consumer credit etc. would be added to the general parts in the way the ‘specific parts’ of the Acquis Principles have been integrated into the relevant general part of the Acquis Principles. A horizontal framework directive in that sense would serve as a ‘reservoir of norms’ for individual specific directives. Instead of having half a dozen sets of diverging vertical rules on the exercise and effects of withdrawal, consumers’ remedies in case of non-performance etc., the specific directives could simply refer to the horizontal directive thus making the uniform horizontal rules applicable for a certain specific field of regulation. This approach would lead to both leaner specific directives and more coherency within the acquis. The ‘general parts’ of the framework directive would only be ‘activated’ within the scope of application of the specific directives. For instance, if travel services falling within the scope of a ‘specific’ package travel directive are of bad quality, the rules on non-performance of the framework directive would apply. In the fields which are not covered by the specific directives, usually the framework directive would not be applicable. However, there might be some exceptions. For instance, the rules on unfair terms could be made applicable just by the virtue of the framework directive itself (i. e. without a ‘specific’ directive on unfair terms). Such a framework directive – even though it is principally not applicable by its own virtue – would have a different character as just a mere non-binding toolbox. A framework directive would be part of the applicable law, because in all cases where sector-specific directives ‘activate’ the framework directive, the same general parts would always be applicable. Therefore, EC (consumer) contract law would advance to a self-standing European system of contract law, without claiming to be a European code of contracts. The Acquis Principles illustrate how such an integrated technique of a general framework directive and specific directives may look like. 20

21

xxx

Martin Schmidt-Kessel, Der Vorschlag zur Horizontalrichtlinie im Kontext der Rechtsharmonisierung in Europa, in: Jud/Wendehorst (eds.), Neuordnung des Verbraucherprivatrechts in Europa, Vienna 2009, pp. 39 et seq.; Hans-Werner Micklitz, The Targeted Full Harmonisation Approach: Looking Behind the Curtain, in: Howells/Schulze (eds.), Modernising and Harmonising Consumer Contract Law, Munich 2009, pp. 51 et seq. Cf. Marco Loos, in: Howells/Schulze (eds.), Modernising and Harmonising Consumer Contract Law, Munich 2009, pp. 237 et seq.; Hans Schulte-Nölke, Scope and Role of the Horizontal Directive and its Relationship to the CFR, ibid., pp. 39 et seq.

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Structure and Values of the Acquis Principles: New features and their possible use for political purposes

The Commission, which originally seemed to pursue the idea of a general framework directive, has obviously silently dropped this approach. It is difficult to imagine how the proposed Directive on Consumer Rights can provide structure and framework for further development of the acquis. If one were to find metaphors one could say that the proposed directive is driven by the technical approach a bookbinder would take when joining individual booklets of independent origin into one volume. Such a volume may have advantages, in particular, enhancing access to the law. However, this approach cannot fulfill the function of a framework directive as envisaged in the Green Paper.22

III. Underlying values and how to express them: The issue of

fundamental principles in the Acquis Principles and in the CFR Another issue of structure is the current controversial discussion of whether the CFR should start with a series of so called ‘fundamental principles’. Like all other academic works on restatements and principles which contribute to the CFR, the Acquis Principles also have to answer the question of which the underlying values are and where and how they should be expressed in the work. This is – at least in part – also a question of the structure of the Acquis Principles. Readers may remember that the volume Contract I, which is the predecessor of this volume, contained a short section on ‘Political and Theoretical Underpinnings’.23 The more the academic works on principles are under consideration for political use, the more the demand for clarification of the underlying political and ethical values increases. This can clearly be seen in the political debate in the Council which is focussed on the issue of whether the (political) CFR should have so called ‘fundamental principles’. 24 The Council positions formulated since 2008, which reflect earlier Commission documents, envisage that the CFR will be structured into three parts, which are: Fundamental Principles, Definitions, and Model Rules. All these parts are meant to be intertwined in the sense that the initial part on Fundamental Principles explains (or governs) the underlying values of the whole CFR and that 22

23

24

See also the critical appraisal of the draft directive in the contributions to Geraint Howells/Reiner Schulze (eds.), Modernising and Harmonising Consumer Contract Law, Munich 2009, and Brigitta Jud/Christiane Wendehorst (eds.), Neuordnung des Verbraucherprivatrechts in Europa, Vienna 2009. Gianmaria Ajani/Hans Schulte-Nölke, in: Research Group on the Existing EC Private Law (Acquis Group), Principles of the Existing EC Contract Law, Contract I, Pre-contractual Obligations, Conclusion of Contract, Unfair Terms, Munich 2007, pp. IX-XIII. See the Draft report to the Council on the setting up of a Common Frame of Reference for European contract law, Council Doc. 15306/08 of 7 November 2008, and the Questionnaire on the setting up of a Common Frame of Reference for European contract law, Council Doc. 5116/ 09 of 15 January 2009.

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the Model Rules refer to the Definitions (and vice versa). Whereas it seems quite clear with regard to Model Rules and Definitions as to what they could look like, the question remains very open, what the Fundamental Principles could be and how they could be formulated. The latest proposals discussed in the Council only present a list of rather vague abstract keywords to which no one would seriously want to object: Freedom of contract (party autonomy), Binding force of the contract (pacta sunt servanda), Legal certainty, Fair dealing (which includes, inter alia, good faith and reasonable behaviour) and Equality of the parties (which may imply, to some extent, the principle of protection of the weaker party, in contracts where the parties are not on an equal footing). 25 At first sight, it is, of course, very much to be welcomed that politicians wish to act on the basis of principles. However, as the Acquis Principles and the DCFR are shaped along different models of existing legislation (both on a national and EC level), it becomes difficult to find a model for the presentation of such fundamental principles. It is rather unusual nowadays – at least in the field of private law – that a law announces its underlying values in an introductory chapter. Therefore there is hardly any model of introductory fundamental principles to be found in current national or EC private law legislation.26 The academic network entrusted with the elaboration of the DCFR and its evaluation has produced three relevant works from which the envisaged fundamental principles could be harvested. There is, firstly, a comprehensive discursive text on possible principles in the DCFR which should be an excellent quarry, but which does not deliver a fully enunciated set of fundamental principles apt for being a preamble of a CFR.27 This text is, moreover, too broad, as it also deals with areas outside the likely scope of the CFR. Secondly, there is an innovative draft of ‘principes directeurs’ by a French working group.28 This draft, which has mainly been distilled from some national contract laws, is, however, neither based on the existing EC contract or consumer acquis nor on the DCFR. The draft is also too narrow in scope as it only covers general contract law and, thus, would need to be supplemented, in particular, by principles of consumer law. Finally – and perhaps closest to that which is now on the political agenda – there is a draft of acquis-based funda25

26

27

28

See Draft report to the Council on the setting up of a common frame of reference for European contract law, Council Doc. 9741/09 of 15 May 2009 (sub 10). Cf. the former introductory chapters in non-democratic codifications where ideological principles were expressed with the clear aim to override the results reached under the individual rules. See for example the preamble of the Zivilgesetzbuch der Deutschen Demokratischen Republik of 19 June 1975. According to the removed former Art. 4 of the Polish Civil Code all provisions of the civil law should be interpreted and applied with the conformity of the political system and aims of the People Republic of Poland. See the section ‘Principles’ in: Christian von Bar/Eric Clive/Hans Schulte-Nölke (eds.), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of Reference (DCFR), Outline Edition, Munich 2009, 57-99. See Bénédicte Fauvarque-Cosson/Denis Mazeaud (eds.), Principes contractuels communs, Projet de cadre commun de référence, Paris 2008. This study has also been published in English as a part of Bénédicte Fauvarque-Cosson/Denis Mazeaud (eds.), European Contract Law, Materials for a Common Frame of Reference: Terminology, Guiding Principles, Model Rules, Munich 2008.

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Structure and Values of the Acquis Principles: New features and their possible use for political purposes

mental principles which was elaborated by a working team of the Acquis Group and discussed some time ago with Commission officials and stakeholders. Apart from the differences of scope, there is no great disagreement in terms of substance between the DCFR statement on Principles, les principes directeurs and the old draft for the Acquis Principles. However, there seems to be a very interesting peculiarity of les principes directeurs with regard to the function a possible statement on fundamental principles could have in a political CFR. Les principes directeurs are drafted as articles in a normative style. They are apparently not meant to be just an explanation and aid for interpretation as recitals or a preamble would be. Les principes directeurs seemingly are intended to be directly applicable basic rules. A model for such technique could be seen in Art. 1-24 of the French Code de procédure civile or in Art. 15-18 of the Projet de réforme du droit des contrats in the Draft of the French Ministry of Justice from July 2008. By contrast, the works of the Acquis Group and the DCFR Compilation and Redaction Team on fundamental principles never aimed at drafting applicable rules. The objective was just to put down some of the underlying basic aims and values for informative and explicative purposes. This difference can already be inferred from the headings used. The notion of principes directeurs, thus ‘guiding’ principles instead of just ‘underlying’ or ‘fundamental’ principles, indicates that les principes directeurs claim a leading role for the application and interpretation of other rules of the CFR. Hence, the main difference is one of structure and presentation. Shall the CFR have a fully fleshed out set of guiding (or even overriding) principles or rather an explanative preamble setting out the underlying values? The basic rules of the Acquis Principles (as of the DCFR) are not concentrated in an isolated programmatic chapter at the very beginning. The Acquis Principles rather place their basic rules where they belong according to their structure, thereby preserving the context, in particular, the more nuanced accompanying rules with necessary details, modifications and exceptions.29 This follows the tradition of the Principles of European Contract Law, the Unidroit Principles and is the same in the DCFR. It is the less programmatic, but more practical way. Nevertheless, this does not disburden the Acquis Group from further reflection on the underlying principles and how to present them in its work. A working team of the Acquis Group had begun to draft fundamental principles, but decided not to continue this work before the rules were advanced further. The reason was that the principles, which would set out some basic policy decisions and values behind the individual rules, should finally be formulated in the light of all the rules drafted at the end of the project. With regard to the presentation of the underlying values and principles, the Acquis Group thus opted for a bottom-up approach starting from the concrete rules to the more abstract principles (instead of a ‘Cartesian’ top-down approach from axiomatic abstract principles to concrete rules).30 This leads to the consequence that in our view it should be left to the plan29

For example, the principle of good faith is expressed in the context of pre-contractual dealings (Article 2:101 ACQP) and performance of obligations (Article 7:101(1) ACQP). Similarly, Chapter 3 deals both with the principle of non-discrimination (Article 3:101 ACQP) and its exceptions, i. e. cases in which unequal treatment of contractual parties may be justified by a legitimate aim (Article 3:103 ACQP).

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ned final volume of the Acquis Principles31 to contain a part on fundamental principles. This part should be drafted in an explicative and discursive style different from the normative style used in the rules in the Articles of the Acquis Principles.32 The way forward could be to start from the acquis-based draft und to take on board those elements and experiences from the DCFR principles and the ‘principes directeurs’ which are relevant for the scope and purpose of the Acquis Principles. The acquis – based draft had provisionally identified five possible fundamental principles, which could stand at the very beginning of the Acquis Principles (and possibly also of the CFR) and which had the headings (1) General Functions of Contract33, (2) Binding force of contract34, (3) General Functions of European Contract Law35, (4) Freedom of contract and its restriction36 and (5) Information37. It was beyond doubt that this first draft was not comprehensive and might need to be amended and supplemented. 38 The most obvious candidates were a principle of good faith and fair dealing, a general prohibition of crimination and a principle on lingual and cultural plurality. Also the balance between generality and 30

31 32

33

34

35

36

37

38

On the ‘bottom-up’ approach of the acquis communautaire see Norbert Reich, European Contract Law – Ghost or host for integration, 24 Wisconsin International Law Journal 425, 449 (2006-2007). As to the planned further work see Gianmaria Ajani/Hans Schulte-Nölke in this volume, p. xiii. For a more discursive approach also Jan Smits, The Draft Common Frame of Reference, Methodological Nationalism and the Way Forward, TICOM Law Working Paper 2008/12, p. 10, available at SSRN: http://ssrn.com/abstract=1300965. The draft reads: “Contract is the basic legal instrument enabling natural and legal persons the freedom to regulate their relations with each other by agreement”. “A contract will be enforced or recognised by law if it is based on the parties’ agreement, as this has been expressed by each to the other, and there is no basis for it to be treated as invalid or set aside”. “The European contract law is to be interpreted and applied in a manner consistent with the aims and principles on which the European Union is based, including the aim of establishing an area of freedom, security and justice, and the principle of an open internal market with free and fair competition and free movement of goods, persons, services and capital between Member States, and the protection of consumers“. “Freedom of contract is a fundamental right of European citizens and enterprises. As a rule, natural and legal persons are free to both, to contract and to agree on terms of their contract. Restrictions on this freedom, whether by way of mandatory rules, avoidance of unfair contract terms or in any other form, may be justified in relation to certain situations or types of contract, particularly where there is or may be inequality of bargaining power, knowledge or understanding (examples being contracts involving consumers, SMEs and investors)”. “European contract law contains rules, in relation to the making of a contract of a particular type or in a particular situation, requiring one party (typically a business) to provide the other (typically a consumer) with specified information about its nature, terms and effect, where such information is needed for a well-informed decision and is not otherwise readily available to that other party. Such information may be required to be supplied in a particular form and language”. As to criticisms see Martin W. Hesselink, Common Frame of Reference & Social Justice, pp. 9-10, Centre for the Study of European Contract Law Working Paper Series No. 2008/04, available at SSRN: http://ssrn.com/abstract=1152222.

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detail could be elaborated further. For instance, the function of withdrawal rights, which form a very prominent feature of the acquis, could be expressed as a fundamental principle. One could say that for individual contracts, in particular if they have been concluded with the help of certain marketing techniques, the existence of a right to withdraw secures for the consumer the possibility to freely reflect and decide and therefore is part of the pre-conditions which justify that such contracts become binding.39 However, this discussion and even more the experiences made when formulating the part on fundamental principles for the DCFR (which grew longer and longer) show that comprehensiveness may not be an ideal for saying something fundamental. The alternative could be a succinct and terse formulation which condenses the core values of EC (contract) law and, accordingly, of the Acquis Principles, in a preamble. Such a preamble could consist of the following elements: The Acquis Principles are based on and intend to serve the idea of a European area of freedom, security and justice. One particular aim is to contribute to the creation and better functioning of the internal market for all European citizens by providing model rules for contract law. The Acquis Principles ban discrimination in relation to contracts that provide access to goods or services which are available to the public. The Acquis Principles seek to balance a high level of protection of weaker parties, in particular consumers, with free enterprise, freedom of contract, legal certainty, in particular the binding effect of contracts, as well as good faith and fair dealing.

We also think that a possible political CFR should have a statement of its underlying fundamental values and principles. Such a statement should be formulated in the style of explanatory recitals or like the suggested preamble, thus not in the style of applicable fundamental rules. The style would then clarify that the statement is, of course, meant to be referred to when interpreting the rules and definitions of the CFR. However, it should be clear that the (recital or preamble style) fundamental principles are not meant to be general and abstract rules which allow for overriding of the individual model rules of the articles in the CFR. Otherwise the fundamental principles which are necessarily very abstract and will have to balance conflicting values on a very abstract level would undermine the value of the detailed definitions and model rules drafted for more specific situations. As the political CFR will mainly have the function of a non-binding source of inspiration and ‘toolbox’ for legislators, an initial chapter of abstract imperative ‘rulestyle’ fundamental principles might not be very helpful in such a ‘toolbox’ (which anyway contains concrete model rules and definitions). But this is for political decision makers to decide. It is the task of the Acquis Group, to deliver material fundamental principles which constitute the underlying basis of the acquis.

39

On the justification of the right of withdrawal as an instrument to ensure material freedom of contract as a pre-condition for the principle of pacta sunt servanda see Claus-Wilhelm Canaris, Wandlungen des Schuldvertragsrechts – Tendenzen zu seiner “Materialisierung”, AcP 200 (2000), 273, 343.

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Consolidating EC Contract Law: an Introduction to the Work of the Acquis Group The European Research Group on Existing EC Private Law was founded in 2002, as a successor to smaller networks founded in the 1990ies,1 with the primary aim of formulating principles of existing European Community contract law. The short name, Acquis Group, confirms that these principles are formulated on the basis of the acquis communautaire, in particular Directives and Regulations, as applied and interpreted by the courts. The Acquis Group presently comprises some fifty scholars from most EU member states. The Acquis Group published a first instalment of its work in 2007.2 The present volume incorporates essential further work, including rules on performance and remedies, as well as on a selected number of specific contract regimes. This still falls somewhat short of covering the entire EC contract law acquis. Further research undertaken during 2009 and 2010 will be incorporated in a third and, in all likelihood, final volume of Acquis Principles on Contract Law. While the present volume, when compared with its successor, comes much closer to what the final version could look like, we nevertheless hope that it will incite further comments from which the final version will benefit.

I.

Acquis Group and the Joint Network on European Private Law

In May 2005, the Acquis Group became a founding member of the Joint Network on European Private Law, abbreviated as “CoPECL”. In general, the CoPECL network contributes to setting up a European Research Area for Private Law. The present volume relates to one particular task, namely the elaboration of a draft for a so-called “Common Frame of Reference for European Contract Law”. A rules only version of this Draft Common Frame of Reference (DCFR) was published earlier this year,3 and a fully commented version is due to appear shortly. At the core, the DCFR consist of a structured compilation of legal rules. These rules have been drafted by either the Acquis Group or the Study Group for a European Civil Code. The other members of this network include the so-called Insurance Group, the Association Henri Capitant, the Common Core Group, the Economic Impact Group, the Data1

2

3

See Hans Schulte-Nölke and Reiner Schulze (eds.), Europäische Rechtsangleichung und nationale Privatrechte (1999) and Europäisches Vertragsrecht im Gemeinschaftsrecht (2001). Principles of the Existing EC Contract Law (Acquis Principles), Contract I: Pre-Contractual Obligations. Conclusion of Contract. Unfair Terms, prepared by the Research Group on Existing EC Private Law (Acquis Group) (2007). Principles, Definitions and Model Rules on European Private Law: Draft Common Frame of Reference, Outline Edition, prepared by the Study Group on a European Civil Code and the Research Group on Existing EC Private Law (2009).

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Consolidating EC Contract Law: an Introduction to the Work of the Acquis Group

base Group and the European Law Academy. This network allows the Acquis Group to place its work within a common European context, and as the network has secured funding under the 6th Framework Programme of the EC, this has considerably contributed to the funding of the Acquis Group’s work. Within the DCFR, it has fallen on the Acquis Group to formulate those rules which are based on existing EC contract law. So the present volume serves a dual purpose. On the one hand, it formulates and explains rules based on EC contract law as it presently exists and is applied within member states. On the other hand, the same rules contain our draft contribution to the DCFR, where its provisions must dovetail with those formulated by the Study Group, mostly rules on those numerous areas of contract law which are little affected by EC law to date. The Study Group, has used (and had to use) a very different methodology. Rather than formulating existing rules based on EC law sources, as the Acquis Group, the Study Group has formulated what it thought to be particularly desirable rules, mainly on the basis of a comparative review of national laws in Europe. As chair of the Acquis Group’s Redaction Committee and of its Terminology Group, I must confess that I initially found this task rather daunting. Having joined, during its last year of existence, the “Compilation and Redaction Team” set up by Acquis Group and Study Group specifically for this task, however, I was pleasantly surprised that Acquis Principles and Study Group rules proved to combine rather smoothly in spite of the different sources and methodology. This was certainly helped by two factors. First, Acquis Group and Study Group share some of its members. Second, the style of drafting and the terminology employed for the Acquis Principles and for the Study Group rules turned out to be very similar indeed. Some of this similarity can be attributed to the largely identical preferences of the chief redactors of both groups (Eric Clive in the case of the Study Group), and much to the fact that the drafting style of both Acquis Group and Study Group has been influenced by that employed for the “Principles of European Contract Law” elaborated by the Lando Commission.4

II.

Toolbox, binding instrument, or Civil Code?

The reader will naturally want to know what the Common Frame of Reference, including Acquis Principles, is meant to be good for. The answer depends largely on the viewpoint of the observer. 1. The European Commission has repeatedly announced that it will use the Common Frame of Reference (including Acquis Principles) as “toolbox, where appropriate, when presenting proposals to improve the quality and coherence of the existing acquis and future legal instruments in the area of contract law”.5

4

5

Principles of European Contract Law, parts I and II, combined and revised, ed. by Ole Lando and Hugh Beale (2000). COM /2004/0651.

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Introductory Part

2. The European Parliament, on the other hand, wants to ensure that “the final long-term outcome could be a binding instrument; all the various possible options for the purpose and legal form of a future instrument should be kept open”.6 This partially overlaps with more recent plans of the Commission whereby framework instruments should be adopted to regulate common features of the acquis.7 3. A third, and somewhat controversial, view sees the Common Frame of Reference as a basis which could be used for drafting a future European Civil Code. Of course it will matter in more than one way whether the rules which we formulate will end up in a dustbin or in a European Civil Code or, perhaps most likely, somewhere in between. That ultimate fate, which we can hardly anticipate, has fortunately rather limited impact on the formulation of the Acquis Principles. If the Acquis Group succeeds in consolidating what is already there in terms of EC contract law into one largely coherent and consistent set of rules, it can indeed be used as “toolbox” for a revision of EC directives, or for the formulation of new directives, or as a basis for drafting a European Civil Code.8 The latter is not an ambition of the Acquis Group. Our position is reflected in the first provision within Chapter 1 of the Acquis Principles:

Art. 1 Scope and purpose of these Principles (1) The following principles and rules are formulated on the basis of the existing law of the European Community in the field of contract law. (2) These principles and rules serve as a source for the drafting, the transposition and the interpretation of European Community law. (3) They are not formulated to apply in the areas of labour law, company law, family law or inheritance law.

III. Group structure and drafting process Although the Acquis Group has produced numerous rules, none of those serve to explain how it functions. So the following offers no more than simplified observations of how the Group has actually worked.

6 7 8

Resolution 7 September 2006, P6_TA(2006)0352. Green Paper on the Review of the Consumer Acquis, COM (2006) 744, p. 7. On the use of the DCFR, see also Hans Schulte-Nölke and Fryderyk Zoll, Structure and values of the Acquis Principles: New features and their possible use for political purposes, pp. xxiii et seq. in this volume.

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Speaker & Co-ordinator

Redaction Committee

Drafting Team

Drafting Team

– Joint Chair –

Drafting Team

Terminology Group

Drafting Team

Drafting Team

Plenary Meeting

The Speaker of the Acquis Group, Gianmaria Ajani from the University of Torino, represents the Group to the outside world, except for day to day dealings with the Commission and within CoPECL. That task falls on the Group’s Co-ordinator, Hans Schulte-Nölke from the University of Osnabrück. Both together take much responsibility for the practical organisation of our work. They are also the main founders of the Acquis Group. The Plenary Meeting is a meeting of all members of the Group, presently convened twice a year. Its most important task is to discuss and adopt all Acquis Principles, and it has the final say in this matter. While full debate and majority voting in a plenary can make the decision-making process cumbersome and time-consuming, it also offers considerable advantages. It ensures that we benefit from the combined expertise of our members, and provides transparency within the Group. The first full meeting of Acquis Group members took place at the European Law Academy at Trier in January 2003, followed by meetings held at the University of Torino (July 2004), the University of Helsinki (March 2005), again at the European Law Academy at Trier (November 2005), at the University of Hull (March 2006), the Autonomous University of Barcelona (November 2006), the University of Paris (March 2007), the University of Cracow (October 2007), the Copenhagen Business School (April 2008), the Catholic University of Leuven (November 2008), and the University of Prague (February 2009). The last eight meetings were devoted to the discussion and adoption of rules. Drafting occurs in stages which involve individual Drafting Teams, the Redaction Committee, the Terminology Group, and the Plenary Meeting. Drafting Teams are set up for particular topics or areas, such as rules on pre-contractual information duties, unfair contract terms, or rules relating to payment services. They will produce a first draft of rules with comments for their topic or area. Drafting Teams will undertake a survey of existing EC law in their area and formulate their proposals for Acquis Principles on that basis. They are assisted by a short written Drafting Guide, and the glossary which is appended to the present book.

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Once a Drafting Team has completed a first draft, this is passed on to the Redaction Committee. The main task of this Committee is to formulate proposals for making the various drafts by different teams dovetail with each other. The Redaction Committee also generally prepares drafts for discussion and decision by the Plenary Meeting, in particular by ensuring that different options are available for discussion where policy issues are involved. If possible, a member of the Drafting Team concerned will be present during the meeting of the Redaction Committee. This Drafting Team will then amend the draft in light of the views expressed by the Redaction Committee. The Redaction Committee was formed following the Helsinki Plenary Meeting in March 2005, where the present author was appointed Chair of that Committee. The Committee also includes the Speaker, the Co-ordinator, and initially other members from Belgium, Finland, France, Germany, Poland and the UK. A certain amount of fluctuation amongst members has since shifted the balance between different legal traditions represented in the Committee. Moreover, my initial attempts to achieve a certain gender balance were unsuccessful, as all female colleagues I invited to join were wise enough to turn me down. Any resulting shortcomings in the representativity of the Redaction Committee have fortunately done little to affect the quality of its work. It has increasingly also been used as a general decision making body between Plenary Meetings. The Redaction Committee has to date held fourteen meetings, six at the Humboldt University at Berlin (September and December 2005, January and September 2007, March 2008, January 2009), and one each at the University Foundation at Brussels (February 2006), the University of Bielefeld (June 2006), the University of Oxford (October 2006), the University of Torino (February 2007), the Royal Academy of Dutch Language and Literature, Gent (January 2008), the University of Münster (July 2008), the University of La Rochelle (September 2008) and the University of Osnabrück (April 2009). The draft is then passed on to the Terminology Group. This group will edit the draft with a view towards harmonising the use of terminology and of improving the language and consistency of drafts. Time permitting, it will pass on its recommendations to the Drafting Team concerned for further consideration and comment before the draft is finalised for discussion and decision by the Plenary Meeting. A substantial number of drafts went through several cycles of deliberation by the Redaction Committee and/or Terminology Group and the Drafting Team. The Terminology Group was formed at the Torino Plenary Meeting in July 2004, with initially two members, Silvia Ferreri from the University Torino, and the present author as chair. Michele Graziadei, now also from the University of Torino, joined soon afterwards. The Terminology Group meets on frequent demand, mostly in cyberspace, and occasionally at Plenary Meetings.9 Keeping the tasks of the Terminology Group and the Redaction Committee separate has been an efficient way of allocating the human resources of the Acquis Group, which in

9

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See below pp. l et seq. for a short introduction to the work of the Terminology Group.

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turn has helped both groups to perform their tasks with focus and consistency. The fact that both are chaired by the same person has facilitated the necessary co-ordination between the two bodies. As mentioned above, all draft principles and rules are debated at, and adopted by Plenary Meetings of the Acquis Group. For some of the provisions in the present book, we have indicated that they still await adoption by a Plenary Meeting. Those rules were provisionally adopted by the Redaction Committee and included in this book in order to give a more complete picture of the scope of Acquis Principles. Several drafts which were adopted by Plenary Meetings (in particular those on pre-contractual information duties, unfair terms and withdrawal) have subsequently been presented and discussed at so-called Stakeholder Meetings. These are attended by various interest groups and experts. Their comments have been considered within a second cycle of drafting and consolidation of Acquis Principles. Stakeholder Meetings were initially required for the entire work contained in the above-mentioned Draft Common Frame of Reference. These meetings have produced a number of helpful comments, some of which have found their way into the Acquis Principles.10 Stakeholder Meetings were nevertheless discontinued, which is regrettable from our perspective. We have formulated comments which explain our principles and rules. Time does not permit a discussion and adoption of those comments by Plenary Meetings. The cumbersome task of ensuring that comments follow the same outline, the same citation rules and a similar style required much more time. Christoph Busch and Martin Werneburg, both from the University of Osnabrück, Filip Wejman from the University of Krakow, and Irene Maier from the Humboldt University at Berlin have been instrumental in assisting Hans Schulte-Nölke, myself and the entire Redaction Committee with this task. Thanks are due to Irene Maier also for having expertly minuted the discussions of the Redaction Committee and of most Plenary Meetings, and to Elisabeth Lege, Leonie MeyerSchwickerath and Daniel Reiner for their valuable help in organising our meetings.

IV. Methodology A.

The setting

The previous section explains the drafting process for Acquis Principles in chronological sequence. A more difficult question in the drafting process relates to methodology. How can one formulate EC contract law rules from a compilation of directives, regulations and case law which is not best known for clarity and consistency? And how can one formulate such rules if most of EC law in the area of contracts is primarily concerned with consumer protection?

10

One example are the lists of information to be provided in particular situations (Articles 2:A-01 to 2:E-01 ACQP) which establish a presumption that a business has complied with its general information duties.

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In dealing with this difficult task, the Acquis Group had to be wary of two potential pitfalls. The first pitfall would be to insist that EC contract law is confined to several dozen directives (plus the private international law rules in the Rome I and Brussels I Regulations), and that there is nothing in them or in their application by the courts which transcends those statutes and is capable of being formulated at a more general level. This would leave as the only feasible product of the Acquis Group a list of existing EU legislation, to which we could add a digest of cases which apply this legislation. The second pitfall would be to construct a comprehensive EC contract law by generalising consumer protection rules to general rules of contract law. This would clearly overstretch what is there. The Acquis Group has sought to strike the right balance between those two extremes.

B.

The questions

When restating EC contract law, the Acquis Group was faced in particular with the following four questions. (1) Can EC provisions on a particular topic which are dispersed over a variety of existing Directives be reformulated and simplified by revealing their common denominators? For example, numerous directives in the area of contract law contain provisions on pre-contractual information duties relating e. g. to name and identity of a business, or to information about price; these have been reformulated as general rules (Art. 2:205 and 2:206 ACQP). (2) Can EC provisions on a particular topic which are equally dispersed over a variety of existing Directives be interpreted and reformulated as an expression of a more general principle? For example, several directives establish the right of a consumer to withdraw from a contract during a cool-off period; we have generalised the requirements for such a right to withdraw from a contract negotiated away from business premises in Art. 5:A-01 ACQP. (3) Can, on the contrary, other EC provisions on a particular topic which are also dispersed over a variety of existing directives be understood as exceptions which, when taken together, reveal a more general principle? For example, several directives establish certain form requirements for particular situations; we have interpreted these as exceptions to a general principle of freedom of form in Art. 1:304 ACQP. (4) Can we follow from the imposition of certain rights or duties under EC law that their violation must be sanctioned under the doctrine of effet utile? For example, many directives establish pre-contractual information duties or form requirements. We have con-

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cluded that such violations must normally have some consequences, and have attempted to formulate those, e. g. in Art. 2:208 ACQP on remedies for breach of information duties.

C.

The yardstick

The answers to all four types of questions above depends on the interpretation of existing EC provisions and judgments. The Acquis Group has for this purpose relied on general methods of interpretation of EC law. Particular emphasis has been placed on purposive interpretation and the doctrine of effet utile. This is particularly evident when dealing with questions of type no. (4). EC directives often leave it to domestic law not only to incorporate their provisions, but also frequently to provide sanctions and remedies for the case that the rules contained in those directives are not adhered to. While the Acquis Group has consistently taken note of incorporation practice in the Member States, the question which it tried to answer in order to define the limits of EC contract law in this context was as follows: if the national legislator had done nothing or very little to incorporate EC law, what consequences would the ECJ and domestic courts be likely to impose? For example, twenty-five years ago, if somebody had been discriminated on the ground of gender in violation of EC law, all that person could claim under German law was reliance damage, calculated at the cost for copying and posting the application documents. In the landmark case of von Colson und Kamann, the ECJ held that this sanction was entirely insufficient.11 The ECJ stated that where the national legislator had failed to provide an adequate remedy, courts were empowered and obliged to override the insufficient provision and replace the measure of damages by one which was adequate in relation to the damage sustained – in order to give effet utile to the EC provision which had been violated. The Acquis Group has adopted this as its yardstick for the limits of formulating rules which transcend the existing piecemeal legislation approach but which at the same time can realistically claim to be based on the acquis communautaire.

The doctrine of effet utile can thus help to decide which gaps remain open, and which can and must be filled. Gaps can and need to be filled to the extent that this is required in order to give an effet utile to black letter norms. This applies to the above-mentioned examples of EC norms which require certain information to be given, or a certain form to be observed. These would be deprived of their effect if a violation of these provisions had no consequences whatsoever, or consequences which are so limited that they provide no meaningful incentive. In this way, the Acquis Group has developed some existing EC provisions into standalone rules, i. e. which do not depend on a particular domestic law in order to be effective. Where a common pattern arises from implementing legislation in Member States, this has frequently been adopted.

11

ECJ 14/83, 10. April 1984 (von Colson and Kamann).

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Introductory Part

D.

Policy decisions taken by the Acquis Group

The Acquis Group is aware that the answers to the questions (1)-(4) above involve, to a larger or lesser degree, policy questions. We would argue that this holds true for any interpretation which must occur when a given provision of EC law is applied to a case. Blank refusal to engage in any such decisions would essentially mean that EC law is incapable of being restated in a more simple, coherent and principled fashion, or of being developed by the courts. This is why the Acquis Group decided to engage in policy decisions to the degree outlined above, and at the same time to be open about the policy choices which it has thus taken. This is reflected in the comments.

E.

Policy decisions not taken by the Acquis Group

While the Acquis Group has often answered questions (1)-(4) above in the affirmative, it has frequently also decided that the acquis provides insufficient basis for necessary policy decisions by way of purposive interpretation. In these situations, a political decision through the appropriate organs is required in order to solve a particular problem within the acquis. Where this is the case, this is expressly mentioned in the comments (under heading A.3). We have also sometimes indicated our disagreement with particular policies which are clearly evidenced in EC legislation, but have nevertheless based our restatement on this questionable policy – again on the ground that any change would require a political decision.

F.

Meeting expectations

While we hope that many will consider the Acquis Principles to be an improvement on the existing situation, we are aware that they will not meet everybody’s expectations. Sometimes, this will doubtlessly be due to mistakes we have made, and we are grateful to anybody who points these out to us. However, judging from the responses we have received to date, much of the gap between what the Acquis Princples represent, and what some of our readers would have expected, is due to a different understanding of what our terms of reference should have been, and to a similar degree to what can and what cannot be achieved when drafting rules at a European level. If we had chosen different terms of reference, we could of course have undertaken a much more critical review of existing EC legislation in the area of contract law. Some would have preferred us to rewrite the existing EC law to the hymn sheet of the Chicago Business School. We could not meet these expectations. Others would have preferred us to do more to please consumer rights groups. These are also expectations we had to disappoint. Some would have preferred us to soak the entire EC contract law in notions of good faith. We chose otherwise, because this is not the current state of EC contract law. Some would, on the contrary, have preferred us to eliminate all references to good faith. This was equally not feasible because there is considerable acquis on this principle. The fact that the Acquis Principles remain within the middle ground in Europe on these (and many

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Consolidating EC Contract Law: an Introduction to the Work of the Acquis Group

other) issues is not coincidental, but a likely result of our methodology and of the balance in the composition of our membership. We see this middle ground position as an advantage of the Acquis Principles, not because the middle ground is necessarily right as a matter of legal policy, but because this gives more prominence to our main concern: how can existing EC contract law be restated to make it clearer and more coherent? As far as drafting style and techniques are concerned, we had to discover that any attempt to formulate rules which must dovetail with national legal systems of 27 Member States is prone to fail at the outset when measured against expectations. We can easily agree that our rules should be clear, short, and precise. It is therefore most unfortunate that these simple and evident demands cannot be reconciled with each other. We expect rules to be clear, so that even a person who has no legal training will understand what they are meant to say. They should be as clear as “A person who by his fault causes damage to another must compensate for this loss”, a modernized version of the famous Art. 1382 of the French Code civil. Rules should be short. Users should not be required to read through pages of detailed provisions which, for example, could provide exceptions and refinements to the above rule on liability. Rules should be precise. What every reader expects is that the very case which he or she has in mind is expressly covered and given a clear answer. However, there are many potential readers throughout the European Union and beyond, and the number of contract law cases which all potential readers taken together will expect to be covered in this way could easily go into the tens of thousands. Similarly, there are hundreds, perhaps thousands of cases which involve delictual liability and where the appropriate solution is not expressly contained in the wonderfully clear and short provision mentioned above. In summary, what readers may by default expect is a law which is as short as Arts. 13821386 Code civil, covering the entire law of delict in five provisions spread over one single page, and as precise as the UK Companies Act 2006 with its 1,300 provisions spread over 600 pages. Given that these two expectations (and drafting styles) are irreconcilable, we had to limit our ambition to improving on the existing law by making EC provisions on contract law clearer and shorter without losing any precision. All we ask from our readers is to be measured against this ambition. It should be mentioned in this context that it has been suggested that we should remove all terms which give leeway in practical application, such as “reasonable” (which we have used on 15 occasions), or “good faith” (which we have employed in 5 provisions, both not counting “grey rules”, see below). This is an advice which we have not followed for two reasons. First, this would have necessitated us to spell out in detail (and more detail than is evidenced in the acquis) all possible exceptions, counter-exceptions and counter-counGerhard Dannemann

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Introductory Part

ter exceptions, making our provisions very lengthy and cumbersome. Second, the notion that statutory provisions must not give any leeway to judges is without precedence in EC law or the current law of its member states. An attempt to eliminate any such leeway would have set the Acquis Principles apart from all modern European contract laws.12 Historic evidence also demonstrates that past attempts to this effect have been futile. More will be said below about another difficulty faced by all European contract law rules, namely that they must be comprehensible to lawyers who have been trained in very different legal systems, that they should attempt to stay neutral between these legal systems, but at the same time be capable of interacting with all of them. Readers will also find below a separate introduction to issues involved in the consolidation of terminology.13

G.

Legitimation

When I explained in the introduction to Vol. I the democratic nature of decision making in the Acquis Group Plenary Meetings, some readers mistook this for a claim that the Acquis Group is democratically legitimated for enacting EC contract law rules. I am pleased that I now have the opportunity to allay those fears: no such claim has ever been made by the Acquis Group. Any legitimacy which this project carries is based on freedom of research. What we claim is that, on the basis of the methodology explained above, our Acquis Principles represent a plausible and clearer restatement of rules which have been enacted by the appropriate legislative organs of the European Community, and applied by the ECJ and national courts. This book is therefore as legitimate (or otherwise) as other books on EC law. To this, our voting procedure in Plenary Meeting will only add a certain element of plausibility in that every rule adopted has gained support of the majority of our members present and voting as being an expression of the acquis communautaire. And although our membership is rather diverse in terms of nationality, legal traditions, and business or consumer orientation, we have certainly made no claim that our members are representative for all legal scholars, let alone all Europeans.

V. Gaps and “grey rules” The Acquis Principles offer fairly consolidated rules not only in core areas covered by EC legislation, in particular consumer protection law, but also in general contract law areas such as pre-contractual duties, discrimination, unfair terms, and withdrawal. They present rules with considerable gaps in the areas of formation, form, performance and remedies. There are some areas where we can find individual rules surrounded by large gaps, e. g. in the area of validity. And there are some other areas of law for which we felt unable to formulate any Acquis Principles.

12

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See also Simon Whittaker and Reinhard Zimmermann (eds.), Good Faith in European Contract Law (2000). Gerhard Dannemann/Silvia Ferreri/Michele Graziadei, Consolidating EC Contract Law Terminology: the Contribution of the Terminology Group, pp. l et seq. in this volume.

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The Acquis Group makes no attempt to fill such genuine gaps in the acquis communautaire with rules of its own choice. Within the Draft Common Frame of Reference, this has been the task of the Study Group. Nevertheless, the present set of Acquis Principles contains some bridges which are referred to as “grey rules”, because they are indicated in grey print. These grey rules are other Draft Common Frame of Reference Rules, formulated by the Study Group (usually on the basis of the Principles of European Contract Law), which we have reproduced in order to show the reader the context in which particular Acquis Principles can operate. For instance, the acquis contains a number of rules on how a contract is formed, but too little on what amounts to an offer for formulating an Acquis Principle. We therefore decided to adopt the appropriate Draft Common Frame of Reference Rule as such a grey letter rule. In this way, the reader is presented with a more comprehensive set of rules, but also made aware of which of those rules are not based on the acquis communautaire. In order to save time and keep our own tasks separate from those of the Study Group, we decided not to reformulate any grey letter rules. This has one slight disadvantage, namely that the terminology used for those grey rules may occasionally differ from that adopted for Acquis Principles. Fortunately, most of those deviations have been eliminated during the final stages of the elaboration of the DCFR.

VI. Generalisation and domestic pre-understanding Most lawyers have been trained in one particular legal system, and thus tend to see EC law from the perspective of that system. So we approach EC contract law rules through what Hans-Georg Gadamer has called Vorverständnis or pre-understanding.14 We see everything through spectacles tinted in a particular shade, and are normally not even aware of wearing those spectacles. It was inevitable that proposed rules, and often other contributions to our debate, would be affected by a particular pre-understanding of those who drafted or contributed in another way. Collectively, such contributions do much to enrich the debate, but they can also make drafting more difficult. Readers may be familiar with a piece by the Hungarian scholar Gyula Eörsi, entitled ‘Unifying the Law. A Play in One Act, With a Song’.15 The delegate from a country with centuries of case law tradition proposes a rule according to which “The dog shall bark”. A delegate from a country proud of its civil code makes a counter-proposal of “The cat shall mewl”. A conciliatory and generalising proposal is then put forward, according to which “An animal shall make a noise”. This is warmly welcomed by functional comparativists (who always look at the output, in this case the sound), but considered incorrect when looking at fish, who make no noise, and also dangerously broad. A compromise whereby “An animal shall make a non-human noise” is rejected because parrots will do just that. 14

15

On the issue of Vorverständnis in European law, see also Hans Schulte-Nölke and Fryderyk Zoll, Structure and values of the Acquis Principles: New features and their possible use for political purposes, p. xxiii, atp. xxix in this volume. 25 American Journal of Comparative Law, 658-662 (1977).

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After many more helpful comments, the Drafting Party comes up with a provision of which it will presently suffice to reproduce the first two paragraphs: Article 1 1. A noise [sound] shall be made [emitted] by any kind of a non-human [ahuman] being capable of [and fit for] making noise [emitting a sound], including dogs and cats [cats and dogs]. 2. A noise [sound] under paragraph 1 may be made [emitted] expressly or impliedly. It shall be of such a nature as can in the given circumstances reasonably be expected to be made [emitted] by the non-human [ahuman] beings of a different kind from the one which has actually made the noise [emitted the sound] as well as noises made [sounds emitted] by human beings, provided that such noises [sounds] sound non-human [ahuman] included, and subject to usages widely known to and regularly observed by [any particular branch of] [the branch involved of] the non-human [ahuman] community capable of [and fit for] making noises [emitting sounds]. Such imitation shall, subject to fraud, be deemed proper, if a reasonable non-human [ahuman] being could under the circumstances reasonably be deceived by the said imitation. In Eörsi’s example, attempts to rise above domestic pre-understanding result in a highly complex, yet rubbery rule which is largely void of content. Our readers will have to judge for themselves whether we have been able to escape that fate. It will come as no surprise that our first drafts did indeed contain some fine examples of “The cat shall mewl”. A draft rule whereby consumer credit contracts must be authenticated by notaries or similar public authorities could have brought banking business in the UK and in Scandinavia to a grinding halt, because no such public authorities exist in those countries. A mandatory rule whereby all contracts of unspecified duration can be terminated for the future at the free choice of either party was similarly on the questionable side. Rules like those were ultimately not adopted for reasons which show how the Acquis Group has been coping with the issue of pre-understanding. First, we have a built-in personalised comparison by having everything discussed by a large group of scholars from different legal traditions. Issues of pre-understanding are often picked up within Drafting Teams, and otherwise get noticed as a draft moves through Redaction Committee, Terminology Group and Plenary Meeting. Thus, a few years of exchange and debate within the Acquis Group have done much to reduce pre-understanding, and to turn all our active members into comparative lawyers. Second, closer inspection will usually reveal that there is no basis in the acquis communautaire for any particular domestic perspective. One feature which distinguishes the Acquis Group from other international groups aimed at the harmonisation of law is that our primary sources have been drafted with a view towards solving particular problems in a

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Consolidating EC Contract Law: an Introduction to the Work of the Acquis Group

way which can be implemented in very different legal systems. The acquis communautaire does generally not attempt to take side in those issues which continue to divide contract laws in Europe. Nevertheless, system neutrality can be difficult to achieve. In our case, this concerned for example the question as to which of our contract rules are so general that they rise above the chronological pattern of negotiation, formation, policing, performance and remedies. The form rules proved particularly difficult to accommodate in this way. We tried pushing those into formation, splitting them over different areas (pre-contractual information, formation, withdrawal), and relocating most of them to definitions, until we finally decided to use a rather small “general part” which defines the scope of our rules, contains key rules on consumers and businesses, and on notice and form. In comparison, between the extremes of German law with its oversized “General Part” in Book 1 of the Civil Code, and of English law which practically does without such general rules, we are perhaps a little closer to the English side. This marks a certain contrast to the DCFR, which includes more general provisions, i. a. on “juridical acts” (Art. II. – 1:101 DCFR), provision we thought not to be necessary for the Acquis Principles. Another related issue concerns the interaction with other contract law regimes. For instance, consumer protection provisions must be able to work in a legal environment where a business can, by providing standard terms, solicit from a consumer an offer which is binding on the consumer for several weeks before the business will eventually decide whether or not to accept, as is possible in German law. This necessitates a provision such as Art. 4:109 (2) ACQP, which will be wholly incomprehensible to those who come from a legal system where offers cannot be made binding, or which generally does not recognise unilateral promises.

VII. Call for comments While for the reasons explained above we have not been able to incorporate every suggestion which has been made for improving the Acquis Principles, we have nevertheless amended various provisions (as for example those on pre-contractual information duties) in response to constructive criticisms or other helpful suggestions which have been made. We are grateful to anyone who points out remaining flaws, or who contributes other comments on our work. You may contact us using our website at www.acquis-group.org.

Gerhard Dannemann

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Introductory Part

Consolidating EC Contract Law Terminology: The Contribution of the Terminology Group I.

The working team

Looking back at the life of European institutions during the last fifty years is an instructive exercise. In the course of time, these institutions have faced difficult communication problems which have been caused by the lack of a common European language. The ingenious policies and techniques which have been developed to overcome these problems are a telling testimony to the richness of the experience which has matured under the European flag. By and large, the complex linguistic dimension of the European experience is now a constituent factor of its identity.1 It is against this background that one should appreciate the choice of the Acquis Group, which has used English as its sole language for drafting, to entrust the delicate task of checking all the draft principles and rules which have been formulated by the Group to three members who are not native speakers of English. In the discussions which led to the Terminology Group being established it appeared that, next to fluency in English, the most important qualification required for this job was an appreciation of the variety of the linguistic experiences and problems involved in the development of European contract law at every level.2 All members of the trio which was eventually recruited to form the Terminology Group are comparative lawyers, who have regularly published in English over the years. As it happened, two members of this group are Italian, and the third is German. The Plenary Meeting of the Acquis Group decided that this small unit was to revise all draft Acquis Principles for terminological consistency and linguistic quality before they would be submitted to the Plenary Meetings for discussion and adoption. The Terminology Group was also entrusted with a final terminological and linguistic revision of all Acquis Principles, and with compiling a glossary of the legal terms used in the Acquis Principles, which can be found on p. 513.

1

2

l

Bruno de Witte, Language Law of the European Union: Protecting or Eroding Linguistic Diversity?, in: Craufurd Smith (ed.), Culture and European Union Law, Oxford 2004, p. 205. On the development of the language of the law in this new dimension, in: Sacco/Castellani (eds.), Les multiples langues du droit européen uniforme, Torino 2006; Gianmaria Ajani, Alcune considerazioni su comparazione giuridica, traduzione e “coerenza” del diritto private europeo, in: Ioriatti Ferrari (ed.), La traduzione del diritto comunitario ed europeo: Riflessioni metodologiche, Trento 2007, p. 113; Barbara Pozzo/Valentina Jacometti (eds.), Multilingualism and the Harmonisation of European Law, Alphen aan den Rijn 2006; Piercarlo Rossi, The Language of the Law between the European Union and the member States, in: Ajani/Ebers (eds.), Uniform Terminology for European Contract Law, Baden-Baden 2005, pp. 23 et seq.

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Consolidating EC Contract Law Terminology: The Contribution of the Terminology Group

II.

The tasks of the Terminology Group

The aim of the Acquis Group is to provide a more coherent approach to the development of European private law, based on the principles and rules of existing EC law. The very notion of ‘coherence’ employed in this context requires clarification.3 From a general point of view, the idea of coherence of the law can be linked to fundamental assumptions about what law is for, and what lawyers should achieve when they take part in the lawmaking process. In a broad sense, every approach that prizes equality before the law values the idea of deciding similar cases in accordance with the same rule. Naturally, the question whether fidelity to this principle is actually possible (or practised) in the light of the plurality of principles and values that the law accommodates is of the greatest importance for legal theory. Nonetheless, this first, general idea of coherence is a starting point for legal development throughout Europe today. Beyond this common ground, however, any discussion about coherence and the law unveils particular attitudes that different legal traditions exhibit with respect to that elusive yardstick. At this level, the notion of coherence involves essentially two aspects of law that are only loosely related to the idea of equality before the law. The first concerns the feasibility of developing general categories and concepts that should carry a consistent meaning throughout different areas and layers of the law. Thus, when moving from the top level domain of general legal categories and concepts to levels of lower generality, one may still rely on the concepts and categories that are provided by the upper level of generality. This type of coherence is often considered – and especially in Germany – as manifestation of a desirable systematic and ‘organic’ dimension of the law.4 The other aspect of coherence that is relevant in this context is linked to the notion of precision, which in turn requires a univocal relationship between word and concept. The highest degree of terminological precision is therefore obtained when the same word is always used to denote the same concept, and the same concept is always associated with the same word. Lack of coherence is in this case the result of the inability to establish that univocal relationship between word and concept which is required for precise expressions. To give a concrete example of this problem, legal English traditionally had difficulty in obtaining this result, hence such couplets as “null and void”.5 3

4

5

Cf. Duncan Kennedy, ‘Thoughts on Coherence, Social Values and National Traditions in Private Law’, in: Hesselink (ed.), The Politics of a European Civil Code, The Hague 2006, pp. 9 et seq., who notes the contrast with the U. S. experience, where the notion of coherence does not occupy a central place in the everyday discourse of private law. The reasons why legal terminology raises issues of coherence unknown in other fields of EC action is explored by Antonio Gambaro, The Plan d’Action of the European Commission – A Comment, European Review of Private Law (ERPL) 2003, 768. The role that the notion of ‘legal system’ plays in this respect is highlighted by Valerie LasserreKiesow, La technique législative. Études sur les codes civils français et allemand, Paris 2002, pp. 93 et seq. The importance of a systematic approach to the law is clearly not the same across Europe. National lawyers often have very different attitudes towards this issue. On the ways to overcome these attitudes, see Nicholas Kasirer, The Common Core of European Private Law in Boxes and Bundles, European Review of Private Law (ERPL) 2002, 437. As for other European languages, the creation of the language of the law in England has been a complex process: John H. Baker, The Three Languages of the Law, 43 McGill Law Journal, 5

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One can suspect that attitudes towards ‘coherence’ in the law across Europe are not necessarily the same in countries where there is a civil code and in countries where legislation does not occupy central ground. Thus, for example, under a codified legal system, the technique of setting out definitions of legal terms associated with specific legislative instruments is usually considered to be unnecessary, since the civil code provides a general reference tool that should be used unless otherwise provided.6 However, even within the field of codified legal systems – assuming for a moment that this rough label makes sense – the attitudes towards ‘coherence’ in law-making are far from being uniform. It is well known, for example, that the German Civil Code is a monument to precision in the use of legal terminology, while other civil codes have other qualities, but fall short of that exacting standard.7 Working on the acquis communautaire within the framework of the Acquis Group, the Terminology Group has been committed to contributing towards the development of a more coherent contract law. But the tasks entrusted to the Terminology Group involved only the restricted sense of ‘coherence’ that covers linguistic aspects of norms. The task of the Terminology Group was to help to prepare drafts that achieved a higher level of terminological coherence, and, possibly, a more satisfactory relationship between general and specific concepts than the ones emerging from the fragmented landscape of the existing Acquis. However, the Terminology Group was not to suggest substantive changes to the drafts. Whenever the Terminology Group has found substantive issues hidden behind vague terminology, it referred them to the Drafting Team, to the Redaction Committee, or eventually to the Plenary Meetings of the Acquis Group (see p. xxxvi for an introduction to the working method of the Acquis Group). Rather than revising content, the Terminology Group had to ensure that drafts met those linguistic and terminological standards that apply to the drafting of European legislation. These standards are now contained in the Interinstitutional Agreement of 22 December 1998 on common guidelines

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(1998). According to Barbara J. Beveridge, Legal English, How it Developed and Why it is not Appropriate for International Commercial Contracts, available at http://www.tradulex.org/Hier onymus/Beveridge.pdf the transition from law French to English may explain the origins of couplets such as those mentioned in the text above. Peter M. Tiersma, Legal Language, Chicago (1999), pp. 13 et seq., notes that Anglo-Saxon also exhibited a propensity for alliteration that has left a trace in the language of the law (“residue and remainder,” “to have and to hold”, “any and all”, “each and every”). Jeremy Bentham, Traité de legislation civile et pénale, I, (trans. by Etienne Dumont 1802), p. 368, must have had in mind these aspects of legal English when he gave the following advice to the legislator: “Mêmes idées, mêmes paroles. Ne vous servez jamais que d’un seul mot et même mot, pour exprimer une seule et même idée”. Gérard Cornu, Les définitions dans la loi, in: Mélanges dédiées à Jean Vincent, Dalloz 1981, p. 77, pp. 79 et seq., marks a related difference between the English and French approach to legislative definitions. English legislative texts usually opt for nominal definitions that fix the meaning of the words employed by the legislature. On the other side of the Channel, legislative definitions aim instead to determine the essential features of the object that is defined. These definitions tend to be real definitions. The spread of techniques of legislative drafting inspired by the English model is changing this picture, however. Valerie Lasserre-Kiesow, La technique législative. Études sur les codes civils français et allemand, Paris 2002, pp. 151 et seq., pp. 188 et seq., pp. 200 et seq.

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Consolidating EC Contract Law Terminology: The Contribution of the Terminology Group

for the quality of drafting of Community legislation,8 a text that in our experience is familiar only to those who take an active interest in how European legislation is drafted. The first part of this document could just as well have been written to set out the tasks assigned to the Terminology Group, and provides the guidelines that were essential for its work. It reads as follows: 1. Community legislative acts shall be drafted clearly, simply and precisely. 2. The drafting of Community acts shall be appropriate to the type of act concerned and, in particular, to whether or not it is binding (Regulation, Directive, Decision, Recommendation or other act). 3. The drafting of acts shall take account of the persons to whom they are intended to apply, with a view to enabling them to identify their rights and obligations unambiguously, and of the persons responsible for putting the acts into effect. 4. Provisions of acts shall be concise and their content should be as homogeneous as possible. Overly long articles and sentences, unnecessarily convoluted wording and excessive use of abbreviations should be avoided. 5. Throughout the process leading to their adoption, draft acts shall be framed in terms and sentence structures which respect the multilingual nature of Community legislation; concepts or terminology specific to any one national legal system are to be used with care. 6. The terminology used in a given act shall be consistent both internally and with acts already in force, especially in the same field. Identical concepts shall be expressed in the same terms, as far as possible without departing from their meaning in ordinary, legal or technical language. The very fact that such an Interinstitutional Agreement was considered to be necessary reflects the reality of a lack of terminological coherence in European law. To no small degree, this has to do with the fact that, as far as European private law is concerned, European legislation to date bears little similarity to codifications of civil law, but resembles, amongst its Member States, more closely the common law tradition of having islands of legislation in a sea of other legal rules – this sea being case law in the common law traditions of England and Ireland, and national law of the Member States in the case of European law. How necessary and successful has the Interinstitutional Agreement been in the area of EC private law? It would be grossly unfair to say that the legal instruments which had been enacted by EC institutions before this Agreement entered into force had systematically fallen short of its guidelines. There are, however, parts of the Acquis that fail to meet those standards. Needless to say, these were the first targets for revision by the Acquis Group and, more particularly, by its Terminology Group. Revolution was not on the agenda. We did not consider abandoning linguistic expressions upon which settled inter8

Official Journal, C 073, 17/03/1999, 1-4. See also the Joint Practical Guide of the European Parliament, the Council and the Commission for Persons Involved in the Drafting of Legislation in the Community Institutions (2003), available at http://europa.eu/eur-lex/en/about/techl eg/guide/pdf/en.pdf. Cf. Miriam Aziz, Mainstreaming the Duty of Clarity and Transparency as Part of Good Administrative Practice in the EU, European Law Journal 2004 (ELJ), 282.

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Introductory Part

pretations of the law have developed. A clean, fresh terminological start with the Acquis would have unsettled the law and would not have helped to obtain the degree of confidence in the meaning of our Principles which the Acquis Group intends to achieve.

III. Some examples for problems and their treatment There are many reasons for the poor quality of some of the Community enactments which provide the primary sources for the Acquis Group. It has been noticed that the sheer amount of work handled by translation services working under heavy time pressure explains why linguistic mischief can occur in the law-making process. But occasional deviations from the standard were not our greatest concern. 9 Instead, major challenges to our work were posed by two factors that cannot be explained by chance alone. The first relates to the introduction of new vocabulary and the second to the fact that directives need to be transposed into the laws of Member States. Community legislation often introduces new vocabulary, for instance by using more recently “on paper” rather than “in writing”, presumably in order to show that electronically stored texts are excluded (see comment to Art. 1:307 ACQP). Such a change can lead to instability of usage even in a single language environment, as the new term is restricted to new legislation, whereas the older legislation continues to use the old term. So it is left to others to figure out whether “in writing” under older legislation means the same as “on paper” in more recent provisions.10 As a matter of fact, consistency in the use of new vocabulary is seldom achieved instantly, but requires firm commitment over time. Moreover, the difficulty of maintaining consistency is aggravated by the multilingual character of Community legislation, and by the need to transpose directives into national laws. Community legislation in the field of contract law offers some glaring examples of this problem, which sometimes arises even between English language versions. For instance, the Doorstep Selling D. defines the consumer as a natural person who is acting for purposes: “which can be regarded as outside his trade or profession”. For the purposes of the Price Indications D., the consumer is any natural person “who buys a product for purposes that do not fall within the sphere of his commercial or professional activity”. The Unfair Contract Terms D. refers to purposes which are outside the consumer’s “trade, business or 9

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Even the Action Plan on a More Coherent Contract Law (COM (2003) 68 final) presents problems in this respect. Viola Heutger, Law and Language in the European Union, Global Jurist Topic: 3 (2003), Article 3, 1-17, notes: “the Action Plan of the Commission speaks of an optional instrument, the German translation is not following this one term approach, but offers three different expressions. The optional instrument is translated into a optionelles Instrument, a freiwilliges Instrument and a optionelles Rechtsinstrument. Something similar happened to the translated term of general contract term. The German translation offered Allgemeine Geschäftsbedingungen as well as Standardvertragsklauseln”. The Terminology Group decided to use the older “in writing” rather than the more recent “on paper” in Art. 1:307, because written information can be stored on a variety of print media made from e. g. plastic or metal, or even be proverbially ‘carved in stone’.

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Consolidating EC Contract Law Terminology: The Contribution of the Terminology Group

profession”. As concerns the counterpart of the consumer, present legislation resembles a terminological maze. There is not even a single name which would refer to this person, who features as “trader”, “seller”, “supplier” etc. depending on the directive in question. The definitions that substantiate this shadowy figure vary as well. The Distance Selling D., for instance, defines the “supplier” as “any natural or legal person who is acting in his commercial or professional capacity”. On the other hand, the Unfair Contract Terms D. refers to a “seller or supplier” as a natural or legal person who “is acting for purposes relating to his trade, business or profession, whether publicly or privately owned”. As the Proposal for a Directive on consumer rights has recently pointed out, such variations cannot seriously be justified by the specific purposes of the relevant directives. When considering the concordance between different linguistic versions of a directive, the low water mark in terms of coherence and precision is perhaps the terminology used for the consumer’s right of withdrawal in the Doorstep Selling D. and in the Timeshare D. The Doorstep Selling D. introduced the technique of the ‘cooling off’ period into community legislation. Its French, German, Italian and English versions – just to mention four key texts – exhibit inconsistent language that has attracted much criticism.11 The situation did not improve with the Timeshare D. It was only with the more recent Directives on Distance Selling and Distance Marketing of Financial Services to Consumers that the terminology relating to the consumer’s right of withdrawal was eventually settled: “right of withdrawal” in English, “droit de rétractation” in French, “Widerrufsrecht” in German and “diritto di recesso” in Italian. When there is significant progress in precision (as in the case just mentioned), the words chosen by the most recent instrument settle the terminological problem, a solution achieved through a process of trial and error. However, learning by doing does not always occur. Hence, in several cases the Terminology Group has felt obliged to point out inconsistent usage and has proposed a common solution for the entire Acquis. The definition of ‘business’ which features in Art. 1:202 ACQP represents the outcome of such an effort. According to this article, “Business means any natural or legal person, irrespective of whether publicly or privately owned, who is acting for purposes relating to this person’s self-employed trade, work or profession, even if this person does not intend to make profit in the course of this activity.” The term “business” is to replace the variety of above-mentioned terms such as “trader”, “professional supplier”, etc. At the same time, this definition overrides distinctions of doubtful utility that have developed either because of the specific nature of a particular Directive, or in order to take into account and to facilitate the solution of problems related to the transpositions of directives into various national laws. One of the authors of this introduction once presented this type of approach as an at attempt at ‘noise reduction’, since distinct linguistic expressions that do not carry different meanings can be considered as a kind of background ‘noise’ that may reduce the level of attention which is usually required in the interpretation of Community law. The eventual drafting of parallel versions for the new Art. 1:202 ACQP in other languages should not strive for the most literal translation of ‘business’, but should rather put to use the 11

Valentina Jacometti, The Terminological Vicissitudes of the Consumer’s Ius Poenitendi, in: Ajani/Ebers (eds.), Uniform Terminology for European Contract Law, Baden-Baden 2005, 241 et seq.

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Introductory Part

specific resources of each particular language in order to express the same concept. Therefore, for instance, ‘business’ as used in this article could (and probably should) be translated in French as ‘professionnel’, or in Italian as ‘professionista’. The need to produce texts that can be transposed into different national laws is another major factor which causes complexity in the drafting of directives. As mentioned above, this factor reflects the degree of linguistic and legal pluralism that characterises and forms a constituent Element of European reality today. No European directive has ever been drafted in Europanto, the imaginary European language devised by Diego Marani, a linguistic jest with a hodge-podge vocabulary from many European languages. But many European texts show clear traces of the intensive search for those linguistic means that are needed to ensure a harmonised application of Community norms across a space – that of Europe – in which many national laws expressed in nearly as many languages must coexist.12 The impossibility of being perfect, and even more so in a language which is not your own, as exploited by Marani’s jest, looms large here, and also for the Acquis Group. On the other hand, drafting in the English language from a European rather than from an English perspective has one advantage. This somewhat reduces the risk of English law rubbing off onto European law more than the laws of non-English speaking legal systems, for the sole reason that English legal terminology is closely connected with English law. An important part of the challenge faced by the Terminology Group relates to terms which look perfectly acceptable to an English lawyer. We did, for example, our best not to use the term ‘consideration’, in order to avoid the connotations with which English law uses this term. We also avoided one expression which British legislative drafters (and also their European counterparts, as is shown inter alia by the Interinstitutional Agreement cited above) love to use, perhaps because it appears to add gravitas to any provision, namely ‘shall’. This may well be the most ambiguous word which is commonly used in legislative drafting. A rule providing that ‘A dog shall bark’13 can carry any of the following meanings: (1) a duty or obligation: dogs must bark, (2) a discretion: dogs may bark; (3) a weak or toothless duty: dogs should bark, but there are no consequences if they do not, and (4) a fact or consequence: dogs will bark. Another much-beloved English legal term which makes any legal text appear more dignified, but which also has the unwelcome tendency to obscure more than it clarifies, is “deemed”, indicating the use of a legal fiction, which in most cases is entirely unnecessary, and which we fortunately were able to avoid. Clarity was frequently achieved at the expense of elegance. Perhaps the most obvious examples are frequent repetitions. Rather than using pronouns such as ‘it’, which are 12

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The interrelationship between translation, legal drafting and the role of jurilinguists at the European level is now discussed by the instructive contributions of Giuliano Castellan/Tito Gallas/ Manuela Guggeis, in: Ioriatti Ferrari (ed.), La traduzione del diritto comunitario ed europeo: Riflessioni metodologiche, Trento 2007. The consultation of the web site of the EC Commission’s Directorate General for Translation shows that the search for adequate linguistic means has led to the development of important aids to translation. Example borrowed from Gyula Eörsi, Unifying the Law. A Play in One Act, With a Song, 25 American Journal of Comparative Law, 658 et seq. (1977).

Gerhard Dannemann/Silvia Ferreri/Michele Graziadei

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Consolidating EC Contract Law Terminology: The Contribution of the Terminology Group

sometimes not easy on the eye of English readers, or expressions such as ‘former’ and ‘latter’, which tend to confuse non-native readers, we frequently simply repeated nouns such as ‘business’, ‘consumer’, or ‘party’. Where repetitions would have been too awkward, we used the gender neutral ‘it’ for businesses, parties, etc. and reserved the use of ‘he or she’, etc., to those who are necessarily natural persons, in particular consumers. We furthermore tried to reduce technical jargon, which explains why the reader will look in vain for an ‘informed transactional decision’, and will instead find ‘an informed decision on whether to enter into a contract’ (Art. 2:202(1) ACQP). As could be expected, much of the work of the Terminology Group focussed on the need to deliver drafts which can serve a readership of mostly non-native English speakers whose expectations are reflected by the guidelines provided by the above-mentioned Interinstitutional Agreement. Some of the materials handed in by the various Drafting Teams, all of which were facing formidable tasks, were impeccable from this point of view, others left more room for improvement. In the latter case, individual Drafting Teams often struggled with the problem of having to put into plain English norms that were first conceived in the environment of non-English language patterns. The Terminology Group has aimed to improve those drafts, most frequently by suggesting simpler expressions for materially the same rule. This recipe could not be adopted when the Drafting Teams had doubts about the proposed alternative versions. In case of doubt, preference was given to a more diffuse and analytical approach, which aimed to avoid ambiguity. Of course, despite our efforts, the drafts that were eventually submitted to the Plenary Meeting quite often did not meet the ideal standard that each member of the Acquis Group had in mind from the perspective of their own national laws. The drafts were thus sometimes considered to be, in due turn, too analytical, too elliptical, too complex or too simple. The result is before the eyes of the reader. If it passed through the crossfire of the entire Acquis Group, it is probably because it usually marks a middle road. Not exciting perhaps, but hopefully not too difficult to follow.

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Acquis Principles

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Structure of the Acquis Principles Chapter 1: Introductory Provisions Section 1: Scope Section 2: Consumer and business Section 3: Notice and form

Chapter 2: Pre-contractual Duties General Provisions Section 1: General duties Section 2: Pre-contractual information duties Specific Provisions Part A: Contracts Negotiated Away from Business Premises Part B: Contracts for the Delivery of Goods Part C: Timeshare Contracts Part D: Service Contracts Part E: Package Travel Contracts Part F: Consumer Credit Contracts Part G: Payment Services

Chapter 3: Non-Discrimination Section 1: General Rules/Definitions Section 2: Remedies

Chapter 4: Formation General Provisions Specific Provisions Part C: Timeshare Contracts Part E: Package Travel Contracts Part F: Consumer Credit Contracts

Chapter 5: Withdrawal General Provisions Specific Provisions Part A: Contracts Negotiated Away from Business Premises Part C: Timeshare Contracts

1:101 1:201 – 1:203 1:301 – 1:308

2:101 – 2:103 2:201 – 2:208 2:A-01 2:B-01 2:C-01 2:D-01 2:E-01 2:F-01 2:G-01 – 2:G-03

3:101 – 3:103 3:201 – 3:203

4:101 – 4:110 4:C-01 4:E-01 4:F-01

5:101 – 5:106 5:A-01 – 5:A-03 5:C-01, 5:C-02

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Structure of the Acquis Principles

Chapter 6: Non-Negotiated Terms Section 1: Scope of application Section 2: Inclusion and interpretation of terms Section 3: Validity of terms

Chapter 7: Content and Performance of Obligations General Provisions Section 1: General duties Section 2: Modalities of Performance Specific Provisions Part A: Contracts Negotiated Away from Business Premises Part B: Contracts for the Delivery of Goods Part E: Package Travel Contracts Part G: Payment Services Part H: Commercial Agency Contracts

Chapter 8: Remedies General Provisions Section 1: General rules Section 2: Performance and cure of non-performance Section 3: Termination and reduction of performance Section 4: Damages Specific Provisions Part A: Contracts Negotiated Away from Business Premises Part B: Contracts for the Delivery of Goods Part E: Package Travel Contracts Part G: Payment Services Part H: Commercial Agency Contracts

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6:101 6:201 – 6:204 6:301 – 6:306

7:101 – 7:105 7:201 – 7:202 7:A-01 7:B-01, 7:B-02 7:E-01 – 7:E-06 7:G-01 – 7:G-25 7:H-01 – 7:H-16

8:101, 8:102 8:201, 8:202 8:301 – 8:304 8:401 – 8:407 8:A-01 8:B-01 – 8:B-07 8:E-01 – 8:E-04 8:G-01 – 8:G-12 8:H-01

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Text of the Acquis Principles Chapter 1: Introductory Provisions Section 1: Scope Article 1:101: Scope and purpose of these Principles (1) The following principles and rules are formulated on the basis of the existing law of the European Community in the field of contract law. (2) These principles and rules serve as a source for the drafting, the transposition and the interpretation of European Community law. (3) They are not formulated to apply in the areas of labour law, company law, family law or inheritance law.

Section 2: Consumer and business Article 1:201: Consumer Consumer means any natural person who is mainly acting for purposes which are outside this person’s business activity. Article 1:202: Business Business means any natural or legal person, irrespective of whether publicly or privately owned, who is acting for purposes relating to this person’s self-employed trade, work or profession, even if this person does not intend to make profit in the course of this activity. Article 1:203: Mandatory nature of consumer rules (1) Unless provided otherwise, contract terms which are prejudicial to the consumer and which deviate from rules applicable specifically to relations between businesses and consumers are not binding on the consumer. This does not apply to contracts which settle an existing dispute. (2) Paragraph (1) applies accordingly to unilateral promises.

Section 3: Notice and form 1

Article 1:301: Means of notice Notice may be given by any means appropriate to the circumstances. 1

Grey rule from Art. II. – 1:109(2) DCFR.

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Text of the Acquis Principles 2

Article 1:302: Effectiveness of notice (1) The notice becomes effective when it reaches the addressee, unless it provides for a delayed effect. (2) The notice reaches the addressee: (a) when it is delivered to the addressee; (b) when it is delivered to the addressee’s place of business, or, where there is no such place of business or the notice does not relate to a business matter, to the addressee’s habitual residence; (c) when it is otherwise made available to the addressee at such a place and in such a way that the addressee could reasonably be expected to obtain access to it without undue delay. Article 1:303: Electronic notice A notice transmitted by electronic means reaches the addressee when it can be accessed by this person. This rule is mandatory in the sense of Article 1:203 (Mandatory nature of consumer rules) in relations between businesses and consumers. Article 1:304: Freedom of form Unless provided otherwise, no form needs to be observed in legal dealings. Article 1:305: Textual form ‘Textual form’ means a text which is expressed in alphabetical or other intelligible characters by means of any support that permits reading, recording of the information contained therein and its reproduction in tangible form. Article 1:306: Durable medium ‘Durable medium’ means any support which stores information so that it is accessible for future reference for a period of time adequate to the purposes of the information, and which allows the unchanged reproduction of this information. Article 1:307: In writing A statement is ‘in writing’ if it is in textual form and in characters which are directly legible from paper or another durable medium on which the statement is stored. Article 1:308: Signatures (1) ‘Handwritten signature’ means the name of, or sign representing, a person written by that person’s own hand for the purpose of authentication; (2) ‘Electronic signature’ means data in electronic form which are attached to or logically associated with other electronic data, and which serve as a method of authentication; (3) ‘Electronic’ means relating to technology with electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities; (4) ‘Advanced electronic signature’ means an electronic signature which meets the following requirements: (a) it is uniquely linked to the signatory; (b) it is capable of identifying the signatory; 2

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Grey rule from Art. I. – 1:109(3) and (4) DCFR.

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Text of the Acquis Principles

(c) it is created using means which can be maintained under the signatory’s sole control; and (d) it is linked to the data to which it relates in such a manner that any subsequent change of the data is detectable.

Chapter 2: Pre-contractual Duties General Provisions Section 1: General duties Article 2:101: Good faith In pre-contractual dealings, parties must act in accordance with good faith. Article 2:102: Legitimate expectations In pre-contractual dealings, a business must act with the special skill and care that may reasonably be expected to be used with regard, in particular, to the legitimate expectations of consumers. Article 2:103: Negotiations contrary to good faith (1) A party is free to negotiate and is not liable for failing to reach an agreement. (2) However, a party who has conducted or discontinued negotiations contrary to good faith is liable for loss caused to the other party. (3) In particular, a party acts contrary to good faith if it enters into or continues negotiations with no real intention of reaching an agreement.

Section 2: Pre-contractual information duties Article 2:201: Duty to inform about goods or services Before the conclusion of a contract, a party has a duty to give to the other party such information concerning the goods or services to be provided as the other party can reasonably expect, taking into account the standards of quality and performance which would be normal under the circumstances. Article 2:202: Information duties in marketing towards consumers (1) Where a business is marketing goods or services to a consumer, the business must, with due regard to the limitations of the communication medium employed, provide such material information as the average consumer can reasonably expect in the given context for a decision on any steps to take towards concluding a contract for those goods or services. (2) Where a business uses a commercial communication which gives the impression to consumers that it contains all the relevant information necessary to make a decision about concluding a contract, it must in fact contain all the relevant information. All the relevant infor7

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Text of the Acquis Principles

mation must be provided in the same language. Where it is not already apparent from the context of the commercial communication, the information to be provided comprises: (a) the main characteristics of the goods or services, the identity and address, if relevant, of the business, the price, and any available right of withdrawal; (b) peculiarities related to payment, delivery, performance and complaint handling, if they depart from the requirements of professional diligence; (c) the language used for communications between parties after the conclusion of the contract, if this differs from the language of the commercial communication.

Article 2:203: Information duties towards disadvantaged consumers (1) In the case of transactions that place the consumer at a significant informational disadvantage because of the technical medium used for contracting, the physical distance between business and consumer, or the nature of the transaction, the business must, as appropriate in the circumstances, provide clear information about the main characteristics of the goods or services, the price including delivery charges, taxes and other costs, the address and identity of the business with whom the consumer is transacting, the terms of the contract, the rights and obligations of both contracting parties, and any available redress procedures. This information must be provided at the latest at the time of conclusion of the contract. (2) Where more specific information duties are provided for specific situations, these take precedence over general information duties under paragraph (1). Article 2:204: Clarity and form of information (1) A duty to provide information imposed on a business is not fulfilled unless the information is clear and precise, and expressed in plain and intelligible language. (2) In the case of contracts between a business and a consumer concluded at a distance, information about the main characteristics of the goods or services, the price, the address and identity of the business with whom the consumer is transacting, the terms of the contract, the rights and obligations of both contracting parties, and any available redress procedures, as may be appropriate in the particular case, needs to be confirmed in writing at the time of conclusion of the contract. (3) Where more specific formal requirements for the provision of information are provided for specific situations, these take precedence over general requirements under paragraphs (1) and (2). Unless stated otherwise, writing may be replaced by another textual form on a durable medium, provided this is reasonably accessible to the recipient. (4) Failure to observe a particular form will have the same consequences as breach of information duties. Article 2:205: Information about address and identity (1) For the purposes of this chapter, the address and identity of the business include: (a) the name of the business; (b) any trading names relevant to the contract in question; (c) the registration number in any official register, and name of that register; (d) its geographical address; (e) contact details; (f) where the business has a representative in the consumer’s country of residence and this is a Member state, the address and identity of that representative;

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Text of the Acquis Principles

(g) where the activity of the business is subject to an authorisation scheme, the particulars of the relevant supervisory authority; and (h) where the business exercises an activity which is subject to VAT, the relevant identification number. (2) For the purpose of Article 2:202 (Information duties in marketing towards consumers) paragraph (2), the address and identity of the business include only the information indicated in paragraph (1) subparagraphs (a), (c), (d) and (e).

Article 2:206: Information about price (1) For the purposes of this chapter, the ‘price’ includes: (a) the remuneration for the goods or services; (b) any deposits payable; (c) any additional taxes and duties where these may be indicated separately; and (d) any additional charges, including those made for (i) delivery; or (ii) the use of distance communication where this exceeds the basic rate. (2) When an exact price cannot be indicated, the consumer must be given such information on the basis for the calculation which enables the consumer to verify the price. (3) Where the price is not payable in one sum, the consumer must be informed of the payment schedule. Article 2:207: Burden of proof The business bears the burden of proof that it has provided information as required by Article 2:203 (Information duties towards disadvantaged consumers) and by the Specific Provisions of this Chapter.

Article 2:208: Remedies for breach of information duties (1) If a business is required under Articles 2:203 (Information duties towards disadvantaged consumers) and 2:204 (Clarity and form of information) above to provide information to a consumer before the conclusion of a contract from which the consumer has the right to withdraw, the withdrawal period commences when all this information has been provided. However, this rule does not postpone the end of the withdrawal period beyond one year counted from the time of the conclusion of the contract. (2) If a party has failed to comply with its duties under Articles 2:201 (Duty to inform about goods or services) to 2:204 (Clarity and form of information), and a contract has been concluded, this contract contains the obligations which the other party could reasonably expect as a consequence of the absence or incorrectness of the information. (3) Whether or not a contract is concluded, a business which has failed to comply with any duty imposed by the preceding Articles of this section is liable to the other party for reliance damages. The rules on damages for non-performance of a contractual obligation apply accordingly.

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Text of the Acquis Principles

Specific Provisions Part A: Contracts Negotiated Away from Business Premises Article 2:A-01: Specific pre-contractual information duties for distance selling of Placeholder financial services

Part B: Contracts for the Delivery of Goods Article 2:B-01: Pre-contractual information on consumer guarantees

Placeholder

Part C: Timeshare Contracts Article 2:C-01: Specific pre-contractual information duties for Placeholder timeshare contracts

Part D: Service Contracts Article 2:D-01: Specific pre-contractual information duties for service contracts

Placeholder

Part E: Package Travel Contracts Article 2:E-01: Specific pre-contractual duties for package travel contracts (1) In the case of a package travel contract, as defined in Article 7:E-02 (Definition of package travel contract) paragraph (1), a business is presumed to have complied with the information duties imposed by Articles 2:202 (Information duties in marketing towards consumers) and 2:203 (Information duties towards disadvantaged consumers) if it makes a brochure available to the customer with the information specified in paragraph (2). (2) Where the business makes available a brochure to a customer, this brochure must specify: (a) the main characteristics of the goods or services: (i) the destination(s) and the means, characteristics and categories of transport used; (ii) the type of accommodation, its location, category or degree of comfort and its main features; its approval and tourist classification; (iii) the meal plan; (iv) the itinerary; and (v) whether the package is offered only if a minimum number of bookings is reached, and the deadline for informing the consumer in the event of termination; (b) the address and identity of the organiser; (c) the price and (d) other relevant information about: (i) passport and visa requirements; and (ii) health formalities required for the journey and stay.

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Text of the Acquis Principles

(3) At a reasonable time before conclusion of the package travel contract, the customer must be given information about: (a) passport and visa requirements; and (b) health formalities required for the journey and stay. (4) The contract must specify at least: (a) the main characteristics of the goods or services, including: (i) the destination(s), including the dates of the periods of stay where multiple stays are involved; (ii) the means, characteristics and categories of transport used; (iii) dates, times and points of departure and return; (iv) the itinerary (times and places of any intermediate stops and transport connections); (v) visits, excursions or other services which are included in the total price agreed for the package; and (vi) the type of accommodation, its location, category or degree of comfort and its main features; its approval and tourist classification; (b) the price, including any possibility of price revision as provided in Article 7:E-03 (Revision of price); (c) the address and identity of the organiser and, where applicable, the retailer; (d) the terms of the contract, including any agreed special requirements of the customer; (e) the rights and obligations of both contracting parties, including (i) whether a minimum number of persons is required for the package to take place and, if so, the deadline for informing the customer in the event of termination; and (ii) the duty to communicate any failure in the performance which the traveller perceives on the spot to the supplier of the services concerned and to the business in writing or any other appropriate form at the earliest opportunity; and (f) any available redress procedures, including periods during which the customer must make any complaint concerning the performance of the contract.

Part F: Consumer Credit Contracts Article 2:F-01: Specific pre-contractual information duties for Placeholder consumer credit contracts

Part G: Payment Services Article 2:G-01: Specific pre-contractual information duties for Rules only single payment transactions (1) In the case of single payment transactions as defined in Article 7:G-02 (Definitions) subparagraph (c), a business which provides the following items of information is presumed to have complied with the information duties imposed by Articles 2:201 (Duty to inform about goods or services) to 2:203 (Information duties towards disadvantaged consumers): (a) a specification of the unique identifier or other information which the service user must provide in order for a payment order to be properly executed; (b) the time within which the payment service is to be provided; 11

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Text of the Acquis Principles

(c) the price, including a breakdown of any separate charges; (d) where applicable, the actual or reference exchange rate to be applied to the payment transaction. (2) Unless agreed otherwise by the parties, the information to be provided under paragraph (1) must be given in a language which is an official language at the place where the payment service is offered. (3) On request of the payment service user, the payment service provider must provide the information in textual form on a durable medium.

Article 2:G-02: Specific pre-contractual information duties in framework Rules only contracts for payment transactions (1) In the case of a framework contract for payment transactions, as defined in Article 7:G-02 (Definitions), a business which provides the following items of information is presumed to have complied with the information duties imposed by Articles 2:201 (Duty to inform about goods or services) to 2:203 (Information duties towards disadvantaged consumers): (a) the main characteristics of the payment service, including (i) a specification of the unique identifier or other information which the service user must provide in order for a payment order to be properly executed; (ii) the form of and procedure for authorising a payment transaction and revoking authorisation in accordance with Articles 7:G-06 (Authorisation of payment transactions) and 7:G-09 (Irrevocability of a payment order); (iii) a reference to the time of receipt of a payment order as defined in Article 7:G-10 (Receipt of a payment order) and the cut-off time, if any, established by the payment service provider; (iv) the maximum execution time for the payment services to be provided; and (v) any spending limits which the service provider requires or is willing to accept for the use of the payment instrument in accordance with Article 7:G-06 (Authorisation of payment transactions); (b) the price, including, if agreed, the immediate application of changes in reference interest or exchange rate and information requirements related to the changes in accordance with Article 7:G-04 (Changes to the framework contract); (c) where applicable, the reference exchange rate to be applied to payment transactions; (d) address and identity of the business; (e) the terms of the contract, including (i) where applicable, the means of communication, including the technical requirements for the service user’s equipment, agreed between the parties for the transmission of information or notifications; (ii) the manner in and frequency with which information under Article 7:G-21 (Information due to payee on individual payment transactions within framework contract) is to be provided; (iii) the language or languages in which the framework contract will be concluded and communication during this contractual relationship undertaken; and (iv) the service user’s right to receive a copy of the framework contract and information and conditions in accordance with Article 7:G-03 (Copy of framework contract); (v) if agreed, information that the service user will be bound by changes in the conditions in accordance with Article 7:G-04 (Changes to the framework contract), and how the service user can avoid this binding effect; 12

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(vi) the duration of the contract; and (vii) the right of the service user to terminate the framework contract and any agreements relating to termination in accordance with Article 7:G-05 (Termination); (f) the rights and obligations of both contracting parties: (i) where applicable, a description of steps which the service user must take in order to keep safe a payment instrument and how to notify the service provider of any loss, theft or misappropriation of the payment instrument or of its unauthorised use in accordance with Article 7:G-08 (Notification of loss, theft or misappropriation of the payment instrument or of its unauthorised use); (ii) if agreed, the conditions under which the service provider reserves the right to block a payment instrument in accordance with Article 7:G-07 (Service provider’s right to block the payment instrument); (iii) the liability of the payer in accordance with Article 8:G-05 (Payer’s liability for unauthorised payment transactions), including information on the relevant amount; (iv) how and within which time the service user may claim rectification by notifying the payment service provider of any unauthorised or incorrectly executed payment transaction in accordance with Article 8:G-02 (Rectification), as well as the service provider’s liability for unauthorised payment transactions in accordance with Article 8:G-04 (Payment service provider’s liability for unauthorised payment transactions); (v) the liability of the service provider for the execution of payment transactions in accordance with Articles 8:G-08 (Liability for non-performance of a payment order) and 8:G-09 (Liability for transmission of the payment order); and (vi) the conditions for refund in accordance with Articles 8:G-04 (Payment service provider’s liability for unauthorised payment transactions), 8:G-06 (Refunds for payment transactions initiated by or through a payee) and 8:G-07 (Requests for refunds for payment transactions initiated by or through a payee); (g) any clause on jurisdiction or on the law applicable to the framework contract; and (h) the out-of-court complaint and redress procedures available to the payment service user in accordance with Article 8:G-07 (Requests for refunds for payment transactions initiated by or through a payee). (2) Unless agreed otherwise by the parties, the information to be provided under paragraph (1) must be given in a language which is an official language at the place where the payment service is offered. (3) The payment service provider must provide the information in textual form on a durable medium.

Article 2:G-03: Specific pre-contractual information duties in payment contracts concluded by distance communication framework Rules only contracts for payment transactions (1) Where a single payment service contract or framework contract has been concluded using means of distance communication, a business which provides the following items of information is presumed to have complied with the information duties imposed by Articles 2:201 (Duty to inform about goods or services) to 2:203 (Information duties towards disadvantaged consumers):

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(a) the main characteristics of the services; (b) the price, including a breakdown of any additional charges in case of single payment service contracts; (c) the rights and obligations of both contracting parties, including the existence or absence of a right of withdrawal in accordance with Chapter 5; (d) the existence of guarantee funds or other compensation arrangements not covered by legislation on investor compensation schemes; and (e) on the basis of the laws of which country the business establishes pre-contractual relations with the consumer. (2) If a single payment service contract or framework contract has been concluded at the request of the service user using a means of distance communication which does not enable the service provider to comply with the requirements set out in this Article, the service provider must fulfil these duties immediately after the conclusion of the contract.

Chapter 3: Non-Discrimination Section 1: General Rules/Definitions Article 3:101: Principle of non-discrimination in contract law Any discrimination based on sex, racial or ethnic origin is prohibited. Article 3:102: Discrimination (1) “Discrimination” means: (a) a situation where one person is treated less favourably than another person is, has been or would be treated in a comparable situation; (b) a situation where an apparently neutral provision, criterion or practice would place persons with a particular feature at a particular disadvantage when compared with other persons; (2) Discrimination also includes (a) unwanted conduct which violates the dignity of a person and which creates an intimidating, hostile, degrading, humiliating or offensive environment, or which aims to do so (harassment); or (b) any form of unwanted physical, verbal, non-verbal, or psychical conduct of a sexual nature that violates the dignity of a person, or which aims to do so, in particular when such conduct creates an intimidating, hostile, degrading, humiliating or offensive environment (sexual harassment). (3) Any instruction to discriminate also amounts to discrimination. Article 3:103: Exception Unequal treatment which is justified by a legitimate aim does not amount to discrimination if the means used to achieve that aim are appropriate and necessary.

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Section 2: Remedies Article 3:201: Remedies (1) A person who is discriminated against on the grounds of sex, ethnic or racial origin in relation to contracts that provide access to, or supply goods or services which are available to the public, including housing, is entitled to compensation. (2) Where appropriate, the discriminated person is entitled to other remedies which are suitable to undo the consequences of the discriminating act, or to prevent further discrimination. Article 3:202: Content of the remedies (1) Compensation under Article 3:201 (Remedies) paragraph (1) may include damages for pecuniary and non-pecuniary losses. (2) The amount of any damages for non-pecuniary losses, and remedies granted under Article 3:201 (Remedies) paragraph (2), must be proportionate to the injury; the deterrent effect of remedies may be taken into account. Article 3:203: Burden of proof (1) If a person who considers himself or herself discriminated against on one of the grounds mentioned in Article 3:201 (Remedies) paragraph (1) establishes, before a court or another competent authority, facts from which it may be presumed that there has been such discrimination, it falls on the other party to prove that there has been no breach of the principle of non-discrimination. (2) Paragraph (1) does not apply to proceedings in which it is for the court or another competent authority to investigate the facts of the case.

Chapter 4: Formation General Provisions Article 4:101: Agreement between the parties A contract is concluded if the parties intend to be legally bound, and they reach a sufficient agreement. Article 4:102: Conclusion of contract (1) A contract can be concluded by the acceptance of an offer in accordance with the following provisions. (2) The rules in this chapter apply accordingly when the process of conclusion of a contract cannot be analysed into offer and acceptance.

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Article 4:103: Offer; public statements (1) A proposal amounts to an offer if: (a) it is intended to result in a contract if the other party accepts it, and (b) it contains sufficiently definite terms to form a contract. (2) An offer may be made to one or more specific persons or to the public. (3) A proposal to supply goods or services at stated prices made by a business in a public advertisement or a catalogue, or by a display of goods, is treated, unless the circumstances indicate otherwise, as an offer to sell or supply at that price until the stock of goods, or the business’s capacity to supply the service, is exhausted. Article 4:104: Information duties in real time communication (1) When initiating real time distance communication with a consumer, a business must provide at the outset explicit information on its name and the commercial purpose of the contact. (2) Real time distance communication includes telephone and electronic means such as voice over internet protocol and internet related chat. (3) The business bears the burden of proof that the consumer has received the information required under paragraph (1). (4) If a business has failed to comply with the duty under paragraph (1), the other party has the right to withdraw from the contract. The right of withdrawal must be exercised no later than one year after the conclusion of the contract, and not after the contract has been fully performed by both parties. The other party may also claim damages caused by the failure to comply. Article 4:105: Formation by electronic means (1) If a contract is to be concluded by electronic means, a business, before the other party makes or accepts an offer, must provide reference to any contract terms used, which must be available in textual form. This rule is mandatory in the sense of Article 1:203 (Mandatory nature of consumer rules) in relations between businesses and consumers. (2) A business which offers the facility to conclude contracts by electronic means and without individual communication must make available to the other party appropriate, effective and accessible technical means for identifying and correcting input errors before the other party makes or accepts an offer. This rule is mandatory in the sense of Article 1:203 (Mandatory nature of consumer rules) in relations between businesses and consumers. (3) If a contract is to be concluded by electronic means and without individual communication, a business must provide the following information before the other party makes or accepts an offer: (a) which technical steps must be followed in order to conclude the contract; (b) the languages offered for the conclusion of the contract; (c) the technical means for identifying and correcting input errors; (d) whether or not the concluded contract will be filed by the business and whether it will be accessible. This paragraph is mandatory in the sense of Article 1:203 (Mandatory nature of consumer rules) in relations between businesses and consumers.

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Grey rule from Art. II. – 4:201 DCFR.

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(4) If a business has failed to comply with the duties under paragraphs (2) and (3), the other party has the right to withdraw from the contract. The right of withdrawal must be exercised no later than one year after the conclusion of the contract, and not after the contract has been fully performed by both parties. The other party may also claim damages caused by the failure to comply.

Article 4:106: Unsolicited goods or services If a business delivers unsolicited goods or services to a consumer, no obligation arises from the consumer’s failure to respond. Article 4:107: Pre-contractual statements by a contract party (1) Any public statement which a business, prior to the conclusion of the contract, makes about the specific characteristics of the goods or services which it supplies is binding under the contract unless: (a) when the contract was concluded, the other party was aware, or should have reasonably been aware that the statement was incorrect; or (b) the other party’s decision to conclude the contract could not have been influenced by the statement; or (c) the statement had been corrected by the time of the conclusion of the contract. (2) Paragraph (1) is mandatory in the sense of Article 1:203 (Mandatory nature of consumer rules) in relations between businesses and consumers. Article 4:108: Pre-contractual statements by third parties (1) Article 4:107 (Pre-contractual statements by a contract party) also applies to public statements made by the producer, another person within the business chain between producer and ultimate customer, or any person advertising or marketing services or goods for the business, unless the business was not, and could not reasonably have been, aware of the statement. (2) Paragraph (1) is mandatory in the sense of Article 1:203 (Mandatory nature of consumer rules) in relations between businesses and consumers. 4

Article 4:109: Binding force of unilateral promises (1) A valid unilateral promise or undertaking is binding on the person giving it, if it is intended to be legally binding without acceptance. (2) If a unilateral promise is binding, provisions of contract law which protect one particular party apply in its favour. Article 4:110: Acknowledgment of receipt (1) A business which offers the facility to conclude a contract by electronic means and without individual communication must acknowledge by electronic means the receipt of an offer or an acceptance by the other party. Article 1:303 (Electronic notice) applies. (2) If the other party does not receive such an acknowledgment or an acceptance without undue delay, that other party may withdraw its offer or acceptance and may also claim damages. (3) Paragraphs (1) and (2) are mandatory in the sense of Article 1:203 (Mandatory nature of consumer rules) in relations between businesses and consumers. 4

Partial grey rule from Art. II. – 1:103 DCFR.

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Specific Provisions Part C: Timeshare Contracts Article 4:C-01: Timeshare contracts (1) Timeshare contracts with consumers must be made in writing and must include all information required under Article 2:C-01 (Specific pre-contractual information duties for timeshare contracts). The consumer must be given a copy of the contract. (2) They must be formulated at least in an official language of the European Union which is either an official language at the place of residence of the consumer, or of the state of which the consumer is a national, at the consumer’s choice. This rule applies only to consumers who are nationals or residents of a Member State. (3) The consumer is entitled to a certified translation of the contract into an official language of the European Union which is the official language or one of the official languages of the Member State in which the immovable property is situated. (4) Articles 2:204 (Clarity and form of information) paragraph (4) and 2:207 (Burden of proof) apply.

Part E: Package Travel Contracts Article 4:E-01: Package travel contracts (1) Package travel contracts must be made in writing and include all information required under Article 2:E-01 (Specific pre-contractual duties for package travel contracts) paragraph (4). Writing may be replaced by another textual form on a durable medium, provided this is reasonably accessible to the customer. The customer must be given a copy of the contract. (2) Articles 2:204 (Clarity and form of information) paragraph (4) and 2:207 (Burden of proof) apply.

Part F: Consumer Credit Contracts Article 4:F-01: Consumer credit contracts

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Chapter 5: Withdrawal General Provisions Article 5:101: Mandatory nature Where a party has a statutory right of withdrawal from a contract, the provisions in this section apply as mandatory rules.

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Article 5:102: Exercise of a right of withdrawal A right of withdrawal is exercised by notice to the other party. No reasons need to be given. Returning the subject matter of the contract is considered a notice of withdrawal unless the circumstances indicate otherwise. Article 5:103: Withdrawal period (1) Unless provided otherwise, the right of withdrawal must be exercised within fourteen days after both the contract has been concluded and notice of the right pursuant to Article 5:104 (Information on the right of withdrawal) has been given, and no later than one year after the conclusion of the contract. If the subject matter of the contract is the delivery of goods, the period lapses not earlier than fourteen days after the goods have been received. (2) The notice of withdrawal is timely if dispatched within this period. Article 5:104: Information on the right of withdrawal The entitled party must receive adequate information of the right of withdrawal from the other party. Such information must be brought appropriately to the entitled party’s attention, and provide in textual form on a durable medium and in plain and intelligible language information about the right of withdrawal, the withdrawal period, and the name and address of the person to whom the withdrawal must be communicated.

Article 5:105: Effects of withdrawal (1) Withdrawal from a contract terminates the obligations to perform the contract. Each party has to return at its own expense to the other what it received under the contract, unless the contract provides otherwise in favour of the entitled party. The withdrawing party is not liable to pay any other costs and does not incur any other liability through the exercise of its rights of withdrawal. The other party must return any payment received from the party that has withdrawn free of charge and as soon as possible, and in any case not later than thirty days after the withdrawal becomes effective. (2) The party withdrawing from the contract is not liable for damage to the received goods, provided that it exercised reasonable care. The same party is not liable for diminished value of the received goods caused by inspecting and testing. It is liable for the diminished value that results from their normal use, unless the party had not received adequate information of its right of withdrawal. Article 5:106: Linked contracts (1) If a consumer exercises a right of withdrawal from a contract for the supply of goods or services by a business, the effects of withdrawal extend to any linked contract. (2) Contracts are linked if they objectively form an economic unit. (3) If a contract is partially or exclusively financed by a credit contract, they form an economic unit in particular: (a) if the business supplying goods or services finances the consumer’s performance or (b) if the supplier of credit uses the supplier of goods or services for the formation of the credit contract or (c) if the credit contract refers to specific goods or services to be financed with this credit, and if this link between both contracts was suggested by the supplier of goods or services, or by the supplier of credit, unless other circumstances indicate that these two contracts do not form an economic unit. 19

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(4) Article 5:105 (Effects of withdrawal) applies accordingly to the linked contract. (5) Paragraph (1) does not extend the effect of withdrawal from a credit contract to a contract for goods or services whose price depends on fluctuations in the financial market outside the control of the business, and which may occur during the withdrawal period.

Specific Provisions Part A: Contracts Negotiated Away from Business Premises Article 5:A-01: Right to withdraw from contracts negotiated away from business premises (1) A consumer has the right to withdraw from the contract under which a business supplies goods or services, including financial services, if the consumer’s offer or acceptance was expressed away from the business premises. (2) Unless the business has exclusively used means of distance communication for concluding the contract, paragraph (1) applies only to contracts under which a consumer has to pay at least a statutory minimum amount. (3) Paragraph (1) does not apply to (a) contracts concluded by means of automatic vending machines or automated commercial premises, (b) contracts concluded with telecommunications operators through the use of public payphones, (c) contracts concluded for the construction and sale of immovable property or relating to other immovable property rights, excluding tenancy contracts, (d) contracts for foods, beverages or other goods intended for everyday consumption supplied by regular roundsmen to the home, residence or workplace of the consumer, (e) contracts concluded by means of distance communication, but outside of an organized distance sales or service-provision scheme run by the business, (f) contracts for goods or services whose price depends on fluctuations in the financial market which may occur during the withdrawal period and which are outside the control of the business, (g) contracts concluded at an auction, (h) travel and baggage or similar short-term insurance policies of less than one month’s duration. (4) If the business has exclusively used means of distance communication for concluding the contract, paragraph (1) does also not apply to contracts (a) for accommodation, transport, catering or leisure services, where the business undertakes at the time of conclusion of the contract to supply these services on a specific date or within a specific period, (b) for the supply of services other than financial services if performance has begun, at the consumer’s express and informed request, before the end of the withdrawal period referred to in Article 5:103 (Withdrawal period) paragraph (1), (c) for goods made to the consumer’s specifications or which are clearly personalised or which, by reason of their nature, cannot be returned or are liable to deteriorate or expire rapidly,

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(d) for audio or video recordings or computer software (i) which were unsealed by the consumer, or (ii) which can be downloaded or reproduced for permanent use, in case of supply by electronic means. (e) for newspapers, periodicals and magazines, (f) for gaming and lottery services. (5) With regard to financial services, paragraph (1) does also not apply to contracts that have been fully performed by both parties, at the consumer’s express and informed request, before the consumer purports to exercise a right of withdrawal.

Article 5:A-02: Effects of withdrawal in case of supply of equivalent goods or services If a consumer exercises a right of withdrawal from a contract after a business has made use of a contractual right to supply goods or services of equivalent quality and price (Article 7:A-01 (Goods or services of equivalent quality)), Article 5:105 (Effects of withdrawal) applies with the modification that the business must bear the cost of returning what the consumer has received under the contract. Article 5:A-03: Effects of withdrawal from financial services contracts

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Part C: Timeshare Contracts Article 5:C-01: Right to withdraw from timeshare contracts (1) A consumer who acquires a right which allows him or her to use immovable property under a timeshare contract with a business has the right to withdraw from this contract. (2) The business must not demand or accept any advance payment by the consumer during the period in which the latter may exercise the right of withdrawal. Article 5:C-02: Effects of withdrawal from timeshare contracts Where a consumer exercises the right of withdrawal under Article 5:C-01 (Right to withdraw from timeshare contracts), Article 5:105 (Effects of withdrawal) applies with the modification that the contract may require the consumer to reimburse those expenses which: (a) have been incurred as a result of the conclusion of and withdrawal from the contract, and (b) correspond to legal formalities which must be completed before the end of the period referred to in Article 5:103 (Withdrawal period) paragraph (1), and (c) are reasonable and appropriate, and (d) are expressly mentioned in the contract, and (e) are in conformity with any applicable rules on such expenses. The consumer is not obliged to reimburse any expenses when exercising the right of withdrawal under Article 2:208 (Remedies for breach of information duties) paragraph (1).

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Chapter 6: Non-Negotiated Terms Section 1: Scope of application Article 6:101: Subject matter (1) The following provisions apply to contract terms which have not been individually negotiated, including standard terms. (2) A term supplied by one party (the user) is not individually negotiated if the other party has not been able to influence its content because it has been drafted in advance, in particular as part of a pre-formulated standard contract. In contracts between a business and a consumer, if terms have been drafted by a third person, the business is considered to be the user, unless the consumer introduced those terms to the contract. (3) A “standard term” is a term which has been formulated in advance for several transactions involving different parties and which has not been individually negotiated by the parties. (4) If it is disputed whether a term supplied as part of standard terms has been individually negotiated, the user bears the burden of proving that it has been individually negotiated.

Section 2: Inclusion and interpretation of terms Article 6:201: Acquaintance with terms not individually negotiated (1) Contract terms which have not been individually negotiated bind a party who was unaware of them only if the user took reasonable steps to draw the other party’s attention to them before or when the contract was concluded. (2) Terms are not brought appropriately to the other party’s attention by a mere reference to them in a contract document, even if that party signs the document. (3) If a contract is to be concluded by electronic means, contract terms are not binding on the other party unless the user makes them available to the other party in textual form. (4) Consumers are not bound to terms to which they had no real opportunity to become acquainted before the conclusion of the contract. Article 6:202: Preference to negotiated terms Terms which have been individually negotiated take preference over those which have not.

Article 6:203: Interpretation of terms (1) Where the meaning of a term is unclear, that term is to be interpreted against the party who supplied it. (2) Paragraph (1) does not apply to collective proceedings for injunctions against the use of particular terms.

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Article 6:204: Conflicting standard terms (1) If the parties have reached agreement except that the offer and acceptance refer to conflicting standard terms, a contract is nonetheless formed. The standard terms form part of the contract to the extent that they are common in substance. (2) However, no contract is formed if one party: (a) has indicated in advance, explicitly, and not by way of standard terms, an intention not to be bound by a contract on the basis of paragraph (1); or (b) without undue delay, informs the other party of such an intention.

Section 3: Validity of terms Article 6:301: Unfairness of terms (1) A contract term which has not been individually negotiated is considered unfair if it disadvantages the other party, contrary to the requirement of good faith, by creating a significant imbalance in the rights and obligations of the parties under the contract. Without prejudice to provisions on collective proceedings, when assessing the unfairness of a contractual term, regard is to be given to the nature of the goods or services to be provided under the contract, to all circumstances prevailing during the conclusion of the contract, to all other terms of the contract, and to all terms of any other contract on which the contract depends. (2) A term in a contract between businesses which has not been individually negotiated is considered unfair only if using that term would grossly deviate from good commercial practice. Article 6:302: Transparency of terms Not individually negotiated terms must be drafted and communicated in plain, intelligible language. Article 6:303: Scope of the unfairness test (1) Contract terms which are based on statutory provisions or on international conventions to which the Member States are parties, or to which the European Union is a party, particularly in the transport area, are not subject to an unfairness test. (2) For contract terms which are drafted in plain and intelligible language, the unfairness test extends neither to the definition of the main subject matter of the contract, nor to the adequacy of the price to be paid. Article 6:304: List of unfair terms The following is a non-exhaustive list of terms which are unfair in contracts between a business and a consumer if they have not been individually negotiated: – terms conferring exclusive jurisdiction for all disputes arising under the contract on the court for the place where the business is domiciled.

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Grey rule from Art. II. – 4:209 DCFR.

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Article 6:305: Indicative list of unfair terms (1) The following is an indicative and non-exhaustive list of terms which may be regarded as unfair in contracts between a business and a consumer if they have not been individually negotiated. This list comprises terms which would: (a) exclude or limit the liability of a business for death or personal injury caused to a consumer through an act or omission of that business; (b) inappropriately exclude or limit the remedies, including any right to set-off, available to the consumer against the business or a third party for non-performance by the business; (c) make a contract binding on a consumer which is subject to a condition whose realization depends solely on the intention of the business; (d) permit a business to keep money paid by a consumer if the latter decides not to conclude or perform the contract, without providing for the consumer to receive compensation of an equivalent amount from the business in the reverse situation; (e) require a consumer who fails to fulfil his or her obligations to pay a disproportionately high amount of damages; (f) entitle a business to withdraw from, or terminate the contract on a discretionary basis without giving the same right to the consumer, or terms which entitle a business to keep money paid for services not yet supplied in the case that the business withdraws from, or terminates the contract; (g) enable a business to terminate a contract of indeterminate duration without reasonable notice, except where there are serious grounds for doing so; this does not affect terms in financial services contracts where there is a valid reason, provided that the supplier is required to inform the other contracting party or parties thereof immediately; (h) automatically extend a contract of fixed duration unless the consumer indicates otherwise, in cases where such terms provide for an unreasonably early deadline; (i) enable a business to alter the terms of the contract unilaterally without a valid reason which is specified in the contract; this does not affect terms under which a supplier of financial services reserves the right to change without notice the rate of interest to be paid by, or to, the consumer, or the amount of other charges for financial services where there is a valid reason, provided that the supplier is required to inform the consumer at the earliest opportunity and that the consumer is free to terminate the contract with immediate effect; neither does it affect terms under which a business reserves the right to alter unilaterally the conditions of a contract of indeterminate duration, provided that the business is required to inform the consumer with reasonable notice, and that the consumer is free to terminate the contract; (j) enable a business to alter unilaterally without a valid reason any characteristics of the goods or services to be provided; (k) provide that the price of goods is to be determined at the time of delivery, or which allow a business to increase the price without giving the consumer the right to withdraw from the contract if the increased price is too high in relation to the price agreed at the conclusion of the contract; this does not affect price-indexation clauses, where lawful, provided that the method by which prices vary is explicitly described; (l) give a business the right to determine whether the goods or services supplied are in conformity with the contract, or which give the business the exclusive right to interpret any term of the contract; (m) limit the obligation of a business to respect commitments undertaken by its agents, or which make its commitments subject to compliance with a particular formality; 24

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(n) oblige a consumer to fulfil all his or her obligations where the business fails to fulfil its own; (o) allow a business to transfer its rights and obligations under the contract without the consumer’s consent, if this could reduce the guarantees available to the consumer; (p) exclude or impede a consumer’s right to take legal action or to exercise any other remedy, in particular by referring the consumer to arbitration proceedings which are not covered by legal provisions, by unduly restricting the evidence available to the consumer, or by shifting a burden of proof onto the consumer. (2) Subparagraphs (g), (i) and (k) do not apply to: (a) transactions in transferable securities, financial instruments and other products or services where the price is linked to fluctuations in a stock exchange quotation or index or a financial market rate beyond the control of the business; (b) contracts for the sale of foreign currency, traveller’s cheques or international money orders denominated in foreign currency.

Article 6:306: Effects of unfair terms (1) Unfair terms are not binding on a party who did not supply them. (2) If the contract can be maintained without the unfair terms, it remains otherwise binding on the parties.

Chapter 7: Content and Performance of Obligations General Provisions Section 1: General duties Article 7:101: Duty to perform (1) The debtor must perform its obligations in accordance with good faith. (2) A business must perform its obligations with the special skill and care that may reasonably be expected to be used with regard, in particular, to the legitimate expectations of consumers. Article 7:102: Good faith in the exercise of rights The creditor must exercise its rights to performance and remedies for non-performance in accordance with good faith.

Article 7:103: Duty of loyalty If an obligation by its nature requires the debtor to manage the creditor’s affairs, the debtor must give due regard to the creditor’s interests related to those affairs. Article 7:104: Duty to co-operate The debtor and the creditor must co-operate with each other to the extent that this can reasonably be expected for the performance of an obligation.

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Article 7:105: Language of communications Unless provided otherwise, parties can expect to communicate with each other in the language used for conclusion of the contract.

Section 2: Modalities of Performance 6

Article 7:201: Time of performance (1) If the contract does not fix the time of performance, the debtor must perform without undue delay. (2) Unless the parties have agreed otherwise, a business must execute the obligations incurred under contracts concluded at a distance no later than 30 days after the contract was concluded. (3) If a business must reimburse money received from a consumer, such reimbursement must be carried out as soon as possible and in any case no later than 30 days after the reimbursement obligation arose. (4) If the order of performance of reciprocal obligations cannot be otherwise determined from the terms regulating the obligations then, to the extent that the obligations can be performed simultaneously, the parties are bound to perform simultaneously unless the circumstances indicate otherwise. 7

Article 7:202: Place of performance (1) If the place of performance of an obligation cannot be otherwise determined from the terms regulating the obligation it is: (a) in the case of a monetary obligation, the creditor’s place of business; (b) in the case of any other obligation, the debtor’s place of business. (2) For the purposes of the preceding paragraph (a) if a party has more than one place of business, the place of business is that which has the closest relationship to the obligation; and (b) if a party does not have a place of business, or the obligation does not relate to a business matter, the habitual residence is substituted. (3) If, in a case to which paragraph (1) applies, a party causes any increase in the expenses incidental to performance by a change in place of business or habitual residence subsequent to the time when the obligation was incurred, that party must bear the increase.

Specific Provisions Part A: Contracts Negotiated Away from Business Premises Article 7:A-01: Goods or services of equivalent quality A contract term whereby the business may supply goods or services of equivalent quality and price is invalid if the consumer has not been informed, in accordance with Article 2:204 (Clarity 6 7

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Partially grey rule from Art. III. – 2:104 DCFR. Grey rule from Art. III. – 2:101 DCFR.

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and form of information), of this possibility and of the fact that the business must bear the expense of returning what the consumer has received under the contract if the consumer exercises a right of withdrawal under Article 5:A-01 (Right to withdraw from contracts negotiated away from business premises).

Part B: Contracts for the Delivery of Goods Article 7:B-01: Conformity of goods to the contract (1) When determining whether goods conform to the contract, regard is to be given in particular to whether the goods: (a) comply with the description given by the debtor and possess the qualities of the goods which the debtor has held out to the other party as a sample or model; (b) are fit for any particular purpose for which the creditor requires them, which the creditor made known to the debtor at the time of conclusion of the contract and which the debtor has accepted; and (c) are fit for the purposes for which goods of the same type are normally used. (2) Where the goods are to be installed by the debtor, the goods conform to the contract only if they are installed correctly. (3) Where the installation of goods is left to the creditor, the goods conform to the contract only if the installation instructions are sufficient. Article 7:B-02: Mandatory nature for consumer contracts In a contract under which a business sells goods, including goods to be manufactured or produced, to a consumer, Articles 7:101 (Duty to perform) and 7:B-01 (Conformity of goods to the contract) are mandatory in the sense of Article 1:203 (Mandatory nature of consumer rules).

Part E: Package Travel Contracts Article 7:E-01: Mandatory nature Contract terms which are prejudicial to the customer and which deviate from the provisions of this Part are not binding on the customer. Article 7:E-02: Definition of package travel contract (1) ”Package travel contract” means a contract under which a business is to provide a pre-arranged combination of travel services such as transport or accommodation or other related services. (2) A contract term according to which the business acts only as an intermediary for contracts concluded between the customer and other suppliers is not binding on the customer if the customer can reasonably expect, having regard to the circumstances of the conclusion of the contract, that the business itself is obliged to provide the travel services.

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Article 7:E-03: Revision of price (1) Revision of price in a package travel contract requires an express contractual term which must also state precisely how the revised price is to be calculated. The reasons for revision must be limited to variations in: (a) transportation costs, including the cost of fuel; (b) dues, taxes or fees chargeable for certain services, such as landing taxes or embarkation or disembarkation fees at ports and airports; or (c) the exchange rates applied to this package. (2) The price may be increased only until the twenty-first day before departure. (3) The customer may (a) terminate the contract; or (b) accept the revised price. (4) If the customer does not notify the business of its decision without undue delay, an appropriate price revision is considered as accepted. Article 7:E-04: Duty to notify of proposed modifications (1) If, before departure, it becomes impossible or excessively burdensome for the business to perform the contract without significant modifications, the business must immediately notify this to the customer, indicating proposed modifications. (2) The customer may (a) terminate the contract and claim damages for non-performance under Chapter 8; or (b) accept the proposed modifications. (3) If the customer does not notify the business of its decision without undue delay, proposed appropriate modifications are considered as accepted. Article 7:E-05: Business’s right of termination (1) The business may terminate the package travel contract without incurring liability if the number of persons enrolled is less than the required minimum number set out in the contract in accordance with Article 2:E-01 (Specific pre-contractual duties for package travel contracts) paragraph (4)(e). The notice of termination must be made in writing and communicated to the customer within the period specified in the contract. Writing may be replaced by another textual form on a durable medium, provided this is reasonably accessible to the customer. (2) Article 8:303 (Effects of termination) applies accordingly. Article 7:E-06: Information before departure Before departure, the business must inform the customer about: (a) times and places of intermediate stops and transport connections and travel accommodation details, e.g., cabin or berth on ship, or sleeper compartment on train; (b) the address and identity of the organiser and of the organiser’s and/or retailer’s local representative; or the address of local agencies on whose assistance a traveller in difficulty could call; (c) where the representatives or local agencies referred to in (b) above do not exist, the customer must be provided with an emergency telephone number or other contact information that enables the traveller to contact the business; (d) if minors are travelling on their own, the address or contact details to reach them or the person responsible for them; and (e) the optional conclusion of a travel insurance policy. 28

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Part G: Payment ServicesRules only Article 7:G-01: Mandatory nature of the provisions of this Part The provisions of this sub-section are mandatory.

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Article 7:G-02: Definitions For the purposes of this Part, the following definitions apply: (a) ”payment order” means any instruction by a payer or payee to its payment service provider requesting the execution of a payment transaction; (b) ”payment transaction” means an act, initiated by the payer or by the payee, of placing, transferring or withdrawing funds, irrespective of any underlying obligations between the payer and the payee; (c) ”single payment transaction” means a payment transaction not covered by a framework contract; (d) ”individual payment transaction” means a payment transaction covered by a framework contract; (d) ”framework contract” means a payment service contract which governs the future execution of individual and successive payment transactions and which may contain the obligation and conditions for setting up a payment account. (e) ”payer” means a person who holds a payment account and allows a payment order from that payment account, or, where there is no payment account, a person who gives a payment order; (f) ”payee” means a person who is the intended recipient of funds which have been the subject of a payment transaction; (g) ”payment service user” means a person making use of a payment service in the capacity of either payer or payee, or both; (h) ”payment service provider” means credit institutions, electronic money institutions, post office giro institutions or other persons that are entitled under EC law or national law to provide payment services. (i) ”payment instrument” means any personalised devices such as banking cards or set of procedures, e.g. for online banking, agreed between the payment service user and the payment service provider and used by the payment service user in order to initiate a payment order; (j) ”value date” means a reference time used by a payment service provider for the calculation of interest on the funds debited or credited to a payment account. Article 7:G-03: Copy of framework contract The payment service user is entitled to receive on request a copy of the framework contract in textual form on a durable medium.

Article 7:G-04: Changes to the framework contract (1) A term in the framework contract whereby the payment service provider may change particular terms of the framework contract is effective only if it allows the payment service user to object to such changes by notice to the payment provider before the date of their proposed entry into force.

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The mandatory character set out by this rule will be revisited on an article by article approach.

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(2) Changes proposed by the payment service provider under paragraph (1) become effective only if (a) the payment service user does not object as specified in paragraph (1), and; (b) the changes are proposed to the payment service user in textual form on a durable medium and no later than two months before their proposed date of application, together with the information that (i) the changes become effective unless the payment service user objects in accordance with paragraph (1); (ii) the payment service user may terminate the framework contract before the date of the proposed application of the changes without notice and free of any charge. (3) A term in the framework contract whereby the payment service provider may change the interest or exchange rates to the disadvantage of the payment service user immediately and without notice is effective only if such changes are to be based on a reference interest or exchange rate specified in the framework contract. (4) Changes made under paragraph (3) are effective only if they are implemented and calculated consistently for all payment service users who have the same type of framework contract with the payment service provider. (5) The payment service provider must inform the payment service user of any change made under paragraph (3) in textual form on a durable medium and at the earliest opportunity, unless the parties have agreed on a specific frequency or manner in which the payment service user is to be informed.

Article 7:G-05: Termination (1) The payment service user may terminate the framework contract at any time, unless the parties have agreed on a period of notice not exceeding one month. (2) If a framework contract concluded for a fixed period exceeding 12 months or for an indefinite period is terminated by the payment service user after the expiry of 12 months, the payment service user is not required to bear any charges. In all other cases, any charges for the termination must be appropriate and may not exceed the costs typically associated with such a termination. (3) If the framework contract allows the payment service provider to terminate a framework contract concluded for an indefinite period, notice must be given at least two months in advance in textual form on a durable medium. Articles 7:G-25 (language of information) and 2:204 (Clarity and form of information) apply accordingly. (4) If the payment service provider proposes changes to the framework contract, the payment service user is entitled to terminate the framework contract immediately and without charge. (5) Charges for payment services levied on a regular basis are payable by the payment service user proportionally up to the time when termination becomes effective. Article 8:303 (Effects of termination) paragraph (2), sentence 2 applies to charges made in advance. Article 7:G-06: Authorisation of payment transactions (1) A payment transaction may be executed only if the payer has authorised the transaction in advance. The payer and its service provider can also agree that authorisation may be given after the execution of the transaction. (2) Unless agreed otherwise for an individual payment transaction, the framework contract between a payer and its service provider regulates the requirements for giving authorisation, in30

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cluding those relating to form and to the potential limits of the transactions if a specific payment instrument is used for the purposes of giving authorisation to execute a payment transaction. (3) Failure to observe the agreed form renders the authorisation ineffective.

Article 7:G-07: Service provider’s right to block the payment instrument (1) The framework contract may give the service provider the right to block the payment instrument only for objectively justified reasons related to the security of the payment instrument, the suspicion of its unauthorised or fraudulent use or, in the case of a payment instrument with a credit line, a significantly increased risk that the payer may be unable to fulfil its liability to pay. (2) The service provider must inform the payer of any blocking of a payment instrument and of the reasons for doing so. Information must be provided before the block is applied or, if this is not possible, immediately afterwards, unless this information would compromise the security reasons which justify the block, or such information is prohibited by statute. (3) The service provider must unblock the payment instrument or replace it with a new instrument once the reasons for blocking it no longer exist. Article 7:G-08: Notification of loss, theft or misappropriation of the payment instrument or of its unauthorised use (1) The service user must notify the service provider, or the entity specified by the latter, without undue delay on becoming aware of loss, theft or misappropriation of the payment instrument or of its unauthorised use. (2) A service provider who issues a payment instrument must make appropriate means available at all times which enable the service user to make a notification under paragraph (1) or request unblocking under Article 7:G-07 (Service provider’s right to block the payment instrument) paragraph (2). On request, the service provider must make appropriate means available to the service user to prove, for 18 months after notification, that the payer made such a notification. The service provider must prevent all use of the payment instrument once notification under paragraph (1) has been made. Article 7:G-09: Irrevocability of a payment order (1) The payer may revoke a payment order only before it has been received by the payer’s service provider. (2) Where the payment transaction is initiated by or through the payee, the payer may not revoke the payment order after transmission of the order providing authorisation to execute the payment transaction to the payee. (3) However, in the case of a direct debit and without prejudice to refund rights, the payer may revoke the payment order at the latest by the end of the business day preceding the day agreed for debiting the funds. (4) In the case referred to in Article 7:G-10 (Receipt of a payment order) paragraph (2), the service user may revoke a payment order at the latest by the end of the business day preceding the agreed day. (5) After the time limits specified in paragraphs (2) to (4) have elapsed, the payment order may be revoked only if agreed between the service user and this party’s service provider. In cases covered by paragraphs (2) and (3), the payee’s agreement is also required. If agreed in the framework contract, the service provider may charge for the revocation. 31

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Article 7:G-10: Receipt of a payment order (1) Receipt of a payment order occurs when the order reaches the payer’s service provider if this is a business day for this party, and otherwise on the following business day. The service provider may establish a cut-off time near the end of a business day beyond which any payment order received is to be considered as received on the following business day. (2) If the service user initiating a payment order and its service provider agree that execution of the payment order starts on a specific day or at the end of a certain period or on the day on which the payer has set funds at the service provider’s disposal, the payment order is received on the agreed day if this is a business day for the service provider, and otherwise the following business day. Article 7:G-11: Refusal of payment orders (1) If all requirements set out in the payer’s framework contract are met, the payer’s service provider may not refuse to execute an authorised payment order irrespective of whether the payment order is initiated by the payer or by or through a payee. (2) A service provider who refuses to execute a payment order must notify the refusal to the service user immediately and at any rate no later than within the time specified in Article 7:G-12 (Time of execution of a payment order). If possible, the service provider must also state the reasons for the refusal and the procedure for correcting any factual mistakes that led to the refusal. (3) The framework contract may entitle the service provider to charge for a notification only if the refusal is objectively justified. Article 7:G-12: Time of execution of a payment order (1) The payer’s service provider must credit the amount of the payment transaction to the payee’s service provider’s account at the latest by the end of the business day which follows the date of receipt under Article 7:G-10 (Receipt of a payment order). The framework contract may provide for an extension by one additional business day for paper-initiated payment transactions. (2) The service provider of the payee must make available the amount of the payment transaction to the payee’s payment account after this service provider has received the funds. (3) If the payee does not have a payment account with the service provider, the funds must be made available to the payee by the service provider who receives the funds for the payee within the period specified in paragraph (1). Article 7:G-13: Value date and availability of funds (1) The credit value date for the payee’s payment account is no later than the business day on which the amount of the payment transaction is credited to the account of the payee’s service provider. The amount of the payment must be at the payee’s disposal immediately after it is credited to the payee’s service provider’s account. (2) The debit value date for the payer’s payment account is no earlier than the time at which the payment transaction is debited to that payment account.

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Article 7:G-14: Cash placed on a payment account Where a consumer places cash on a payment account with that service provider in the currency of that payment account, the amount must be made available and value dated immediately after receipt of the funds. If the service user is not a consumer, the amount must be made available and value dated at the latest on the next business day after the receipt of the funds.

Article 7:G-15: Prohibition of deducting charges from the amount transferred (1) Service providers and their intermediaries may not deduct charges from the amount transferred. (2) The payee and its service provider may agree that the service provider is allowed to deduct its charges from the amount transferred before crediting it to the payee. In this case, the service provider must inform the payee of both the full amount of the payment transaction and of the charges. (3) If any charges other than those referred to in paragraph (2) are deducted from the amount transferred, the service provider of the payer must ensure that the payee receives the full amount of the payment transaction initiated by the payer. For transactions initiated by or through the payee, the payee’s service provider owes the same duty. Article 7:G-16: Currency of payment A payment order must be made in the currency agreed between the service user and the service provider. Article 7:G-17: Unique identifier (1) Unless agreed otherwise, if a payment order is executed in accordance with the unique identifier provided by the service user, the payment order is considered to have been executed to the right payee. (2) If the payment has been executed in accordance with paragraph (1), but not to the intended payee, the payer’s service provider must make reasonable efforts to recover the funds involved in the payment transaction. The framework contract may entitle the service provider to charge for the recovery. Article 7:G-18: Information due to payer in single payment transaction (1) In a single payment transaction, immediately after receipt of the payment order, the payer’s service provider must inform the payer about: (a) the reference which enables the payer to identify the payment transaction and, where appropriate, details relating to the payee; (b) the amount of the payment transaction in the currency used in the payment order; (c) the amount of any charges for the payment transaction payable by the payer and, where applicable, a breakdown of those amounts; (d) where applicable, the exchange rate used in the payment transaction by the payer’s service provider and the amount of the payment transaction after that currency conversion; and (e) the date of receipt of the payment order. (2) At the payer’s request, this information must be provided in textual form on a durable medium.

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Article 7:G-19: Information due to payee in single payment transaction (1) In a single payment transaction, immediately after the execution of the payment order, the payee’s service provider must inform the payee about: (a) the reference which enables the payee to identify the payment transaction and, where appropriate, the payer and any information transferred with the payment transaction; (b) the amount of the payment transaction in the currency in which the funds are at the payee’s disposal; (c) the amount of any charges for the payment transaction payable by the payee and, where applicable, a breakdown of those amounts; (d) where applicable, the exchange rate used in the payment transaction by the payee’s payment service provider, and the amount of the payment transaction before that currency conversion; and (e) the credit value date. (2) At the payee’s request, this information must be provided in textual form on a durable medium. Article 7:G-20: Information due to payer on individual payment transactions within framework contract When under a framework contract an individual payment transaction is debited from the payer’s account or, where the payer does not use a payment account, when the payment order has been received, the payer’s service provider must inform the payer without undue delay in textual form on a durable medium about: (a) the reference which enables the payer to identify each payment transaction and, where appropriate, the payee; (b) the amount of the payment transaction in the currency in which the payer’s payment account is debited or in the currency used for the payment order; (c) the amount of any charges for the payment transaction and, where applicable, a breakdown of those amounts, or the interest payable by the payer; (d) where applicable, the exchange rate used in the payment transaction by the payer’s service provider, and the amount of the payment transaction after that currency conversion; and (e) the debit value date or the date of receipt of the payment order. Article 7:G-21: Information due to payee on individual payment transactions within framework contract When an individual payment transaction is executed within a framework contract, the payee’s service provider must inform the payee without undue delay in textual form on a durable medium about: (a) the reference which enables the payee to identify the payment transaction and, where appropriate, the payer, and any information transferred with the payment transaction; (b) the amount of the payment transaction in the currency in which the payee’s payment account is credited; (c) the amount of any charges for the payment transaction and, where applicable, a breakdown of those amounts, or the interest payable by the payee; (d) where applicable, the exchange rate used in the payment transaction by the payee’s service provider, and the amount of the payment transaction before that currency conversion; and (e) the credit value date.

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Article 7:G-22: Modification of information duty in framework contract The parties may agree that the information referred to in Articles 7:G-20 (Information due to payer on individual payment transactions within framework contract) and 7:G-21 (Information due to payee on individual payment transactions within framework contract) is to be provided periodically, at least once a month, in textual form on a durable medium.

Article 7:G-23: Limitation of information duties for low value payment instruments and electronic money For payment instruments which, according to the framework contract, concern only individual payment transactions that do not exceed J30 or that either have a spending limit of J150 or store funds that do not exceed J150 at any time, parties may agree that after the execution of a payment transaction: (a) the payment service provider must provide only a reference which enables the service user to identify the payment transaction, its amount and any charges. If several payment transactions of the same kind are made to the same payee, the reference must enable to identify the total amount and charges for those payment transactions; (b) the payment service provider cannot be required to provide information referred to in subparagraph (a) if the payment instrument is used anonymously or if this is technically impossible for another reason. The service provider must nevertheless enable the payer to verify the amount of funds stored. Article 7:G-24: Derogations for low value payment instruments and electronic money For payment instruments which, according to the framework contract, concern only individual payment transactions not exceeding J30 or which either have a spending limit of J150 or store funds which do not exceed J150 at any time, service providers may agree with their service users that: (a) the service provider is not required to notify the service user of the refusal of a payment order, if the non-execution is apparent from the context; (b) the payer cannot revoke the payment order after it is transmitted or after giving his consent to execute the payment transaction to the payee; (c) other execution periods apply. Article 7:G-25: Language ofcommunications Unless agreed otherwise by the parties, information to be provided under this part must be given in an official language of the country where the payment service is offered.

Part H: Commercial Agency ContractsRules only Article 7:H-01: Definition of commercial agency contract (1) Commercial agency is a contract under which one party, the commercial agent, is to act on a continuing basis as a self-employed intermediary to negotiate or conclude contracts on behalf of another party, the principal, and the principal is to remunerate the agent for those activities.

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(2) Commercial agency does not include: (a) a commercial agent who operates on a commodity exchange, or (b) a partner who has authority to bind the other partners.

Article 7:H-02: Mandatory nature (1) Contract terms which are prejudicial to the commercial agent and which deviate from the rules in this part are not binding on the commercial agent. (2) The parties may derogate from Articles 7:H-15 (Additional remuneration) and 7:H-16 after the commercial agency contract has ended. Article 7:H-03: Agent’s obligations (1) A commercial agent is in particular obliged to: (a) make appropriate efforts to negotiate or conclude the contracts on behalf of the principal which the agent was instructed to conclude; (b) communicate to the principal all the necessary information available to the agent and (c) follow the principal’s reasonable instructions. (2) Paragraph (1) is mandatory. Article 7:H-04: Principal’s obligations (1) A principal is in particular obliged to: (a) pay the commercial agent’s remuneration as laid down in Articles 7:H-05 (Commercial agent’s remuneration) to 7:H-11 (Information on commission); (b) provide the commercial agent with the necessary documentation relating to the goods and services concerned; and (c) warn the commercial agent within a reasonable time when the principal foresees that the volume of contracts will be significantly lower than the commercial agent could have expected. (2) A principal must, in addition, inform the commercial agent within a reasonable time of: (a) the principal’s acceptance or rejection of a contract which the commercial agent has negotiated on the principal’s behalf; or (b) any non-performance of obligations under a contract which the commercial agent has negotiated or concluded on the principal’s behalf. Article 7:H-05: Commercial agent’s remuneration (1) If the remuneration of the commercial agent is not specified in the commercial agency contract, the commercial agent is entitled to the remuneration that commercial agents appointed for the goods or services forming the subject of the commercial agency contract are customarily allowed at the place where the commercial agent performs the contract. If there is no such custom, a commercial agent is entitled to reasonable remuneration, taking into account all circumstances. (2) Any remuneration which wholly or partially depends upon the number or value of contracts is commission within the meaning of this Part. (3) Articles 7:H-06 (Commission during the commercial agency contract) to 7:H-11 (Information on commission) do not apply if the commercial agent is not remunerated wholly or partially by commission.

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Article 7:H-06: Commission during the commercial agency contract (1) A commercial agent is entitled to commission on any contract concluded with a client of the principal during the period covered by the commercial agency contract if the contract has been concluded: (a) as a result of commercial agent’s efforts; or (b) with a third party whom the commercial agent has previously acquired as a client for contracts of the same kind. (2) A commercial agent is also entitled to commission on contracts concluded with a client of the principal during the period covered by the agency contract if the commercial agent is entrusted with a specific geographical area or group of clients and the contract has been concluded with a client belonging to that area or group. (3) The principal and the commercial agent may agree that commission under paragraph (2) is due only to the extent that the commercial agent has an exclusive right to a specific geographical area or group of clients. Article 7:H-07: Commission after the commercial agency contract has ended A commercial agent is entitled to commission on any contract concluded [with a client] after the commercial agency contract has ended if: (a) in accordance with the requirements of Article 7:H-06 (Commission during the commercial agency contract), the order of the client reached the principal or the commercial agent before the commercial agency contract ended; or (b) the contract is mainly the result of the commercial agent’s efforts during the period covered by the commercial agency contract. When deciding whether the contract is mainly the result of the commercial agent’s efforts, regard may be given to the period which has elapsed between the ending of the commercial agency contract and the time of the conclusion of the contract with the client. Article 7:H-08: Conflicting entitlements to the commission (1) A commercial agent is not entitled to the commission referred to in Article 7:H-06 (Commission during the commercial agency contract) if a previous commercial agent is entitled to that commission under Article 7:H-07 (Commission after the commercial agency contract has ended), unless it is reasonable that the commission is shared between the two commercial agents. (2) Paragraph (1) is mandatory. Article 7:H-09: Due time for commission payment (1) The commission becomes due as soon as and to the extent that: (a) the principal has or should have performed the contract concluded with the client; or (b) the client has performed the contract. (2) The commission becomes due at the latest when the client has performed the contract, or when the client should have performed the contract if the principal had duly performed the contract. (3) If the contract with the client is concluded by the commercial agent on behalf but not in the name of the principal, commission becomes due when the principal acquires the economic benefit of this contract. (4) The commission is to be paid not later than on the last day of the month following the quarter in which the commercial agent became entitled to the commission. 37

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Article 7:H-10: Extinguishing of entitlement to commission (1) A contract term whereby the commercial agent’s entitlement to commission on a contract concluded with a client is extinguished is valid only if and to the extent that it provides for extinction on the basis that the client’s contractual obligations are not performed for a reason for which the principal is not accountable. (2) Upon the extinguishing of the commercial agent’s entitlement to commission, the commercial agent must refund any commission already received. Article 7:H-11: Information on commission (1) The principal is obliged to supply the commercial agent with a statement of the commercial agent’s commission not later than the last day of the month following the quarter in which the commercial agent became entitled to commission. This statement must set out how the commission has been calculated. (2) The principal must provide the commercial agent upon request with all the information available, in particular an extract from the books, which is necessary for verifying the amount of commission due. Article 7:H-12: Statement of commercial agency contract (1) Both parties are obliged to provide to the other, on request, a signed statement of the terms of the commercial agency contract including any terms which were subsequently agreed. (2) Paragraph (1) is mandatory. Article 7:H-13: Conversion of definite period contract Where both parties continue the performance of a commercial agency contract after a definite contract period has expired, parties are presumed to have entered into a contract for an indefinite period.

Article 7:H-14: Termination by notice (1) Either party to a commercial agency contract for an indefinite period may terminate the contract by giving notice to the other. (2) The minimum period of notice is one month for the first year of the commercial agency contract, two months for the second year commenced, and three months for the third year commenced and subsequent years. (3) The period of notice for subsequent years is one month for each year during which the contract has lasted, with a maximum period of six months. (4) If the parties agree on longer periods than those laid down in paragraphs 2 and 3, the period of notice to be observed by the principal must not be shorter than that to be observed by the commercial agent. (5) Unless otherwise agreed in the contract, the period of notice is extended to the next end of a calendar month. (6) Paragraphs (1) to (5) apply to a commercial agency contract which has become a contract for an indefinite period in accordance with Article 7:H-13 (Conversion of definite period contract). The earlier definite period is to be taken into account for the calculation of the period of notice. (7) Paragraphs (1) to (4) and (6) are mandatory.

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Article 7:H-15: Additional remuneration (1) Further to the remuneration due under Arts. 7:H-05 (Commercial agent’s remuneration) to 7:H-08 (Conflicting entitlements to the commission), the commercial agent is entitled to an additional remuneration on termination of the contract if and to the extent that (a) the commercial agent has brought the principal new customers or has significantly increased the volume of business with existing customers and the principal continues to derive substantial benefits from the business with such customers, and the commercial agent would without termination have obtained commission on such contracts; or (b) termination prevents the commercial agent from amortizing the costs and expenses which the commercial agent has incurred for the performance of the agency contract on the principal’s advice. (2) Unless the parties have agreed a higher figure, the amount of the remuneration under paragraph (1)(a) does not exceed one year’s remuneration calculated from the commercial agent’s average annual remuneration over the preceding five years, or if the commercial agency contract has lasted less than five years, from the average during the period in question. (3) Remedies under Chapter 8 remain unaffected. Article 7:H-16: Additional remuneration in case of commercial agent’s death (1) An entitlement to an additional remuneration under Article 7:H-15 (Additional remuneration) also arises where the commercial agency contract is terminated as a result of the commercial agent’s death. In this case, the limitations of Article 7:H-15 (Additional remuneration) paragraph (2) apply to all entitlements under Article 7:H-15 (Additional remuneration) paragraph (1). (2) The entitlement lapses if the commercial agents’ heir or heirs fail to notify the principal within one year following the termination of the commercial agency contract of their intention to rely on the entitlement. (3) Paragraphs (1) and (2) are mandatory.

Chapter 8: Remedies General Provisions Section 1: General rules Article 8:101: Definition of non-performance Non-performance is any failure to perform an obligation, including delayed performance, defective performance and failure to co-operate in order to give full effect to the obligation. Article 8:102: Exclusion or restriction of remedies The creditor is precluded from exercising remedies against the debtor to the extent that non-performance is attributable to the creditor.

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Section 2: Performance and cure of non-performance 9

Article 8:201: Monetary obligations (1) The creditor is entitled to recover money payment of which is due. (2) Where the creditor has not yet performed the reciprocal obligation for which payment will be due and it is clear that the debtor in the monetary obligation will be unwilling to receive performance, the creditor may nonetheless proceed with performance and may recover payment unless: (a) the creditor could have made a reasonable substitute transaction without significant effort or expense; or (b) performance would be unreasonable in the circumstances. 10

Article 8:202: Non-monetary obligations (1) The creditor is entitled to enforce specific performance of an obligation other than one to pay money. (2) Specific performance includes the remedying free of charge of a performance which is not in conformity with the terms regulating the obligation. (3) Specific performance cannot, however, be enforced where: (a) performance would be unlawful or impossible; (b) performance would be unreasonably burdensome or expensive; or (c) performance would be of such a personal character that it would be unreasonable to enforce it. (4) The creditor cannot recover damages for loss or a stipulated payment for non-performance to the extent that the creditor has increased the loss or the amount of the payment by insisting unreasonably on specific performance in circumstances where the creditor could have made a reasonable substitute transaction without significant effort or expense.

Section 3: Termination and reduction of performance Article 8:301: Grounds for termination and reduction (1) The creditor may reduce its own performance appropriately, or terminate the contract: (a) if the creditor has no right to performance or cure under Section 2 above or (b) if the debtor has not provided the remedy under Section 2 above within a reasonable time. The creditor is not entitled to terminate the contract if the debtor’s failure to perform amounts to a minor non-performance. (2) Regardless of paragraph (1), the creditor is entitled to terminate the contract for non-performance if the creditor cannot be reasonably expected to be bound by the contract, in particular because of the kind of non-performance or because of the nature of the obligation. 9 10

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Grey rule from Art. III. – 3:301 DCFR. Grey rule from Art. III. – 3:302 DCFR. Paragraph (4) of that provision was not adopted as grey rule for the reasons indicated below; paragraph (5) of that provision has become Art. 8:202(4) ACQP.

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(3) The creditor can terminate the contract under paragraph (1) only with respect to that part which is affected by non-performance, unless partial performance is of no utility to the creditor. Paragraph (2) applies correspondingly. (4) The creditor is entitled to reduce its own performance if the cure under Section 2 above has not restored the original value of performance. (5) The remedies provided for in the preceding paragraphs do not prejudice the creditor’s right to damages. 11

Article 8:302: Notice of termination A right to terminate under this Section is exercised by notice to the debtor. Article 8:303: Effects of termination (1) Termination of the entire contract releases both parties from their obligations to perform as from the time when termination becomes effective. In case of partial termination, both parties are released from their obligations which relate to the terminated part. (2) On termination, each party is obliged to return to the other what has been performed under the contract. In case of partial termination, both parties are obliged to return to the other what has been performed under the terminated part of the contract. 12

Article 8:304: Right to withhold performance of reciprocal obligation (1) A creditor who is to perform a reciprocal obligation at the same time as, or after, the debtor performs has a right to withhold performance of the reciprocal obligation until the debtor has tendered performance or has performed. (2) A creditor who is to perform a reciprocal obligation before the debtor performs and who reasonably believes that there will be non-performance by the debtor when the debtor’s performance becomes due may withhold performance of the reciprocal obligation for as long as the reasonable belief continues. However, the right to withhold performance is lost if the debtor gives an adequate assurance of due performance. (3) A creditor who withholds performance in the situation mentioned in paragraph (2) has a duty to give notice of that fact to the debtor as soon as is reasonably practicable and is liable for any loss caused to the debtor by a breach of that duty. (4) The performance which may be withheld under this Article is the whole or part of the performance as may be reasonable in the circumstances.

Section 4: Damages Article 8:401: Right to damages (1) The creditor is entitled to damages for loss caused by non-performance of an obligation, unless such non-performance is excused.

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Grey rule from Art. III. – 3:507(1) DCFR. Grey rule from Art. III. – 3:401 DCFR.

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(2) Non-performance is excused if it is due to circumstances beyond the control of the debtor and of any person engaged by the debtor for performing this obligation, provided that the consequences of those circumstances could not have been avoided even if all due care had been exercised.

Article 8:402: Measure of damages (1) Damages are a money payment of the amount necessary to put the creditor into the position in which it would have been if the obligation had been duly performed. (2) Damages cover the loss suffered by the creditor, including the loss of profits. (3) Without prejudice to rules on recovery of costs in judicial proceedings, damages include reasonable costs for the enforcement of an obligation. (4) Damages cover non-pecuniary losses only to the extent that the purpose of the obligation includes the protection or satisfaction of non-pecuniary interests. Article 8:403: Contributory negligence and mitigation Damages are reduced or excluded to the extent that the creditor wilfully or negligently contributed to the effects of the non-performance or could have reduced the loss by taking reasonable steps. 13

Article 8:404: Interest on delayed payment (1) If payment of a sum of money is delayed, whether or not the non-performance is excused, the creditor is entitled to interest on that sum from the time when payment is due to the time of payment at the average commercial bank short-term lending rate to prime borrowers prevailing for the contractual currency of payment at the place where payment is due. (2) The creditor may in addition recover damages for any further loss. Article 8:405: Interest in case of creditor’s non-performance The creditor is not entitled to interest to the extent that there has been non-performance of the creditor’s reciprocal obligation.

Article 8:406: Interest in commercial contracts (1) If a business delays the payment of a price for goods or services owed to a business without being excused under Article 8:401 (Right to damages), interest is due at the rate specified in paragraph (4), unless a higher interest rate is applicable. (2) Interest at the rate specified in paragraph (4) starts to run (a) on the day which follows the date or the end of the period for payment provided in the contract, and otherwise (b) 30 days after the date when the debtor receives the invoice or an equivalent request for payment; or (c) 30 days after the date of receipt of the goods or services, if the date under (b) is earlier or uncertain, or if it is uncertain whether the debtor has received an invoice or equivalent request for payment.

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(3) If conformity of goods or services to the contract is to be ascertained by way of acceptance or verification, the 30 day period under paragraph (2)(c) starts to run on the date of acceptance or verification. (4) The interest rate for delayed payment (“the statutory rate”) is the interest rate applied by the European Central Bank to its most recent main refinancing operation carried out before the first calendar day of the half-year in question (“the reference rate”), plus seven percentage points (“the margin”), unless otherwise specified in the contract. For the currency of a Member State which is not participating in the third stage of economic and monetary union, the reference rate is the equivalent rate set by its national central bank. (5) The creditor may in addition recover damages for any further loss.

Article 8:407: Unfair terms relating to interest (1) A term whereby a business pays to another business interest on a price for goods or services from a date later than that specified in the preceding Article paragraph (2)(b) and (c) and paragraph (3), or at a rate lower than that specified in paragraph (4), is not binding to the extent that the term is unfair. (2) A term whereby a business is allowed to pay to another business the price for goods or services later than the time when interest starts to run under the preceding Article paragraph (2)(b) and (c) and paragraph (3) does not deprive the creditor of interest to the extent that the term is unfair. (3) A term is unfair for the purposes of this Article if it grossly deviates from good commercial practice.

Specific Provisions Part A: Contracts Negotiated Away from Business Premises Article 8:A-01: Goods or services ordered are unavailable (1) Where a business is unable to perform its obligations under a contract concluded by means of distance communication because the goods or services ordered are unavailable, it must inform the consumer immediately and refund any sums paid by the consumer without undue delay and in any case within 30 days. The consumer’s remedies for non-performance remain unaffected. (2) Paragraph (1) is mandatory in the sense of Article 1:203 (Mandatory nature of consumer rules).

Part B: Contracts for the Delivery of Goods Article 8:B-01: Mandatory nature for consumer contracts In a contract under which a business sells goods, including goods to be manufactured or produced, to a consumer, Articles 8:101 (Definition of non-performance), 8:301 (Grounds for termination and reduction) to 8:303 (Effects of termination), 8:B-02 (Time of conformity) to 8:B-05 (Return of replaced goods) are mandatory in the sense of Article 1:203 (Mandatory nature of consumer rules).

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Article 8:B-02: Time of conformity (1) For goods sold, including goods to be manufactured or produced, any lack of conformity in the sense of Article 7:B-01 (Conformity of goods to the contract) which exists at the time when the goods are delivered amounts to non-performance. (2) Paragraph (1) applies accordingly to other contracts under which goods are to be delivered. Article 8:B-03: Presumption In a contract under which a business sells goods to a consumer, including goods to be manufactured or produced any lack of conformity which becomes apparent within six months of delivery of the goods is presumed to have existed at the time of delivery, unless such a presumption is incompatible with the nature of the goods or the nature of the lack of conformity. Article 8:B-04: Choice of cure In a contract under which a business sells goods to a consumer, including goods to be manufactured or produced, the consumer may choose between repair and replacement as cure of nonperformance in the sense of Art. 8:202 (Non-monetary obligations) paragraphs (2) and (3). Article 8:B-05: Return of replaced goods (1) Where the supplier has replaced non-conforming goods, the supplier has both the right and the obligation to take back the replaced goods at the supplier’s expense. (2) If the supplier is a business and the recipient a consumer, the recipient is not liable to pay for any use made of the replaced goods prior to the replacement. Article 8:B-06: Right of redress Article 8:B-07: Time limit

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Part E: Package Travel Contracts Article 8:E-01: Mandatory nature (1) Contract terms which are prejudicial to the customer and which deviate from the provisions of Chapter 8 are not binding on the customer. (2) The contract can reasonably limit damages for non-performance, except for damages due for personal injuries. Article 8:E-02: Alternative arrangements in case of partial non-performance (1) After departure, if non-performance of a significant proportion of the obligations of the business has occurred, or if the business realises that such non-performance will occur, the business must make suitable alternative arrangements for the continuation of the package which are to be provided at no extra costs. Where appropriate, the business must compensate the customer for the difference in value between the services owed and those supplied. The customer or the traveller may reject the alternative arrangements for good reasons. (2) If alternative arrangements are impossible, or are rejected for good reasons, the organiser must, where appropriate, provide the traveller with an equivalent return transport to the place of departure, or to another return point agreed with the traveller, at no extra cost. This does not affect the customer’s right to claim damages. 44

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Article 8:E-03: Duty of assistance If it becomes apparent that the package travel contract will not be performed properly, the business must provide prompt assistance to a traveller in difficulty. Article 8:E-04: Duty to inform about non-performance Any non-performance which the traveller perceives on the spot must be communicated at the earliest opportunity to the supplier of the services concerned or to the business.

Part G: Payment ServicesRules only Article 8:G-01: Mandatory nature of the provisions of this Part Contract terms which are prejudicial to service users and which deviate from the provisions of this Part are not binding on service users regardless of whether they are consumers. Article 8:G-02: Rectification The service user is entitled to obtain rectification from the service provider only if the service user has notified the service provider on becoming aware of any unauthorised or incorrectly executed payment transactions giving rise to an obligation, including that under Article 8:G-09 (Liability for transmission of the payment order). Notification must be made without undue delay, and no later than 13 months after the debit date, unless the service provider has failed to provide the information on that payment transaction in accordance with Article 7:G-20 (Information due to payer on individual payment transactions within framework contract) to 7:G-21 (Information due to payee on individual payment transactions within framework contract).

Article 8:G-03: Burden of proof (1) Where a service user denies having authorised an executed payment transaction or claims that the payment transaction was not correctly executed, it is for this user’s service provider to prove that the payment transaction was authenticated, accurately recorded, entered in the accounts and not affected by a technical breakdown or some other deficiency. (2) Where a service user denies having authorised an executed payment transaction, the use of a payment instrument recorded by the service provider is not necessarily sufficient proof that the payer (a) authorised the transaction; (b) acted fraudulently; (c) failed with intent or gross negligence to fulfil its obligations to keep safe the personalised security features of the payment instrument, or (d) failed to notify the service provider of the loss, theft or misappropriation of the payment instrument or of its unauthorised use. Article 8:G-04: Payment service provider’s liability for unauthorised payment transactions (1) In the case of an unauthorised payment transaction, the payer’s service provider must immediately refund to the payer the amount of the unauthorised payment transaction and, where applicable, must restore the debited payment account to the state in which it would have been had the unauthorised payment transaction not taken place. (2) The remedy provided for in paragraph (1) does not prejudice the payer’s right to damages. 45

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Article 8:G-05: Payer’s liability for unauthorised payment transactions (1) The payer is liable up to a maximum of J150 for the loss caused by an unauthorised payment transaction which results from the use of a lost or stolen payment instrument or, if the payer has failed to keep the personalised security features safe, from the misappropriation of a payment instrument. (2) The payer is liable for the loss caused by an unauthorised payment transaction which results from the payer acting fraudulently or failing to fulfil its obligations under the contract or under Article 7:G-08 (Notification of loss, theft or misappropriation of the payment instrument or of its unauthorised use) paragraph (1) with intent or gross negligence. In such cases, the maximum amount referred to in paragraph (1) does not apply. (3) The payer is not liable for any financial consequences resulting from use of the lost, stolen or misappropriated payment instrument after notification in accordance with Article 7:G-08 (Notification of loss, theft or misappropriation of the payment instrument or of its unauthorised use) paragraph (1), except where the payer has acted fraudulently. (4) If the payment service provider does not provide appropriate means for the notification as required under Article 7:G-08 (Notification of loss, theft or misappropriation of the payment instrument or of its unauthorised use) paragraph (2), the payer is not liable for the loss resulting from the use of that payment instrument, except where the payer has acted fraudulently. Article 8:G-06: Refunds for payment transactions initiated by or through a payee If an authorised payment transaction initiated by or through a payee has been executed, the payer is entitled to a refund from its service provider if: (a) the authorisation did not specify the exact amount of the payment transaction when the authorisation was made; and (b) the amount of the payment transaction exceeded the amount the payer could reasonably have expected, taking into account the payer’s previous spending pattern, the terms of the framework contract and other relevant circumstances. At the service provider’s request, the payer must present facts which relate to the circumstances specified in (a) and (b). The refund consists of the full amount of the executed payment transaction. Article 8:G-07: Requests for refunds for payment transactions initiated by or through a payee (1) A request for a refund under Article 8:G-06 (Refunds for payment transactions initiated by or through a payee) of an authorised payment transaction initiated by or through a payee must be made within eight weeks from the date on which the funds were debited. (2) Within ten business days from receiving a request for a refund, the service provider must either refund the full amount of the transaction or provide justification for its refusal. In the case of refusal, the service provider must indicate the out-of-court complaint and redress procedures for the settlement of disputes between service users and their service providers and the bodies to which the payer may refer the matter if it does not accept the justification provided. Article 8:G-08: Liability for non-performance of a payment order (1) The payer’s service provider is liable to the payer for any non-performance of a payment transaction initiated by the payer, unless the payee’s service provider received the payment 46

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in accordance with Article 7:G-12 (Time of execution of a payment order) paragraph (1). The payer’s service provider bears the burden of proof for this receipt. If the payee’s service provider has received the payment, it is liable to the payee for any non-performance of the payment transaction. (2) Where the payer’s service provider is liable under paragraph (1), it must without undue delay refund to the payer the amount of the affected payment transaction and, where applicable, restore the debited payment account to the state in which it would have been had that payment transaction not taken place. (3) Where the payee’s service provider is liable under paragraph (1), it must immediately place the amount of the payment at the payee’s disposal and, where applicable, credit the corresponding amount to the payee’s payment account. (4) In case of non-performance of a payment transaction initiated by the payer, its service provider must, on request, make immediate efforts to trace the payment transaction and notify the payer of the outcome, even if this non-performance is not attributable to this service provider.

Article 8:G-09: Liability for transmission of the payment order (1) Where a payment order is initiated by or through the payee, its service provider is liable to the payee for any non-performance relating to the transmission of the payment order to the service provider of the payer and, in case of such non-performance, must immediately retransmit the payment order in question to the service provider of the payer. (2) In addition, the service provider of the payee is liable to the payee for any non-performance relating to the handling of the payment transaction in accordance with its obligations under Article 7:G-13 (Value date and availability of funds). The service provider must ensure that the amount of the payment transaction is at the payee’s disposal immediately after it is credited to the payee’s service provider’s account. (3) The payer’s service provider is liable to the payer for any non-performance of a payment transaction for which the payee’s service provider is not liable under paragraphs (1) and (2). In this case, the payer’s service provider must, as appropriate and without undue delay, refund to the payer the amount of that transaction and restore the debited payment account to the state in which it would have been had that payment transaction not taken place. (4) In the case of non-performance of a payment transaction initiated by or through the payee, its service provider must, on request, make immediate efforts to trace that payment transaction and notify the payee of the outcome, even if this non-performance is not attributable to this service provider. Article 8:G-10: Content of damages (1) A payment service provider is liable under Article 8:G-08 (Liability for non-performance of a payment order) or Article 8:G-09 (Liability for transmission of the payment order) to its payment service user for any charges and any interest which the payment service user must pay and which have been caused by the non-performance of its payment service provider. (2) The payment service user may be entitled to further damages under Chapter 8 Section 4.

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Article 8:G-11: Right of recourse (1) Where the liability of a service provider under Articles 8:G-08 (Liability for non-performance of a payment order) or 8:G-09 (Liability for transmission of the payment order) is attributable to another service provider or to an intermediary, that service provider or intermediary must compensate the first service provider for any loss incurred under Articles 8:G-08 (Liability for non-performance of a payment order) or 8:G-09 (Liability for transmission of the payment order). (2) This provision is mandatory. Article 8:G-12: Derogation for low value payment instruments and electronic money (1) In the case of payment instruments which, according to the framework contract, solely concern individual payment transactions not exceeding J30, or have a spending limit of J150, or store funds which do not exceed J150 at any time, service providers may agree with their service users that: (a) Article 8:G-05 (Payer’s liability for unauthorised payment transactions) paragraphs (3) and (4) do not apply if the payment instrument cannot be blocked or its further use cannot be prevented; (b) Articles 8:G-03 (Burden of proof), 8:G-04 (Payment service provider’s liability for unauthorised payment transactions) and 8:G-05 (Payer’s liability for unauthorised payment transactions) paragraphs (1) and (2) do not apply if the payment instrument is used anonymously or the service provider is not in the position to prove that a payment transaction was authorised for other reasons which are intrinsic to the payment instrument. (2) Articles 8:G-04 (Payment service provider’s liability for unauthorised payment transactions) and 8:G-05 (Payer’s liability for unauthorised payment transactions) do not apply to electronic money, where the payer’s service provider does not have the ability to freeze the payment account or block the payment instrument.

Part H: Commercial Agency Contracts Article 8:H-01: Immediate termination of agency contract

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Rules and Comments Chapter 1: Introductory Provisions Section 1: Scope

Article 1:101: Scope and purpose of these Principles (1) The following principles and rules are formulated on the basis of the existing law of the European Community in the field of contract law. (2) These principles and rules serve as a source for the drafting, the transposition and the interpretation of European Community law. (3) They are not formulated to apply in the areas of labour law, company law, family law or inheritance law.

Commentary Paragraph (1): Restatement of the Existing EC Contract Law The Acquis Principles have been formulated on the basis of the existing EC contract law, 1 laid down in particular in treaties, directives and regulations, as applied and interpreted by the European Court of Justice. Other international treaties such as CISG, which have been used as models for existing EC law, have also be taken into consideration to the extent that they can help to illuminate EC law. Thus, the formulation of the Acquis Principles seeks to apply a method developed in the field of comparative law on the currently still very fragmented EC contract law. The method of restating the law in order to promote clarification and provide a clearer picture has been successfully applied already from the 1920s by the American Law Institute. Those restatements aimed at reducing the complexity and uncertainty caused by the numerous variations within the jurisdictions of the United States (cf. American Law Institute, Restatement of the Law, Second, Contracts 2d, Vol. I-III, St.Paul/Minn. (1981)). In the early 1980s this approach has been adopted by the Commission on European Contract Law (better known as the “Lando Commission”) in order to harmonise the contract law in Europe. The Principles of European Contract Law (PECL), formulated by the Lando Commission cover inter alia rules on formation of contract, validity, interpretation, contents, performance, non-performance as well as set-off and prescription (cf. Lando/Beale [eds.], Principles of European Contract law, Parts I and II, The Hague (1999); Lando/ Hans Schulte-Nölke/Christoph Busch

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Art 1:101 2–5

Chapter 1: Introductory Provisions Section 1: Scope

Clive/Prüm/Zimmermann [eds.], Principles of European Contract Law, Part III, The Hague (2003)). Since the late 1990s the work of the Lando Commission has been continued by the Study Group on a European Civil Code, which also extended the research beyond the field of general contract law e.g. into the field of non-contractual obligations and the law of moveable property as well as into the field of special law governing particular contracts (cf. von Bar, Le Groupe d’Etudes sur un Code Civil Européen, Rev. int. dr. comp. 2001, p. 127-139). The Acquis Group has transposed this methodology to the law of the European Community, i.e. EC legislation and the case law of the ECJ (cf. Schulte-Nölke, Zeitschrift für Europäisches Privatrecht (ZEuP) 2002, 893 et seq.). 2 As explained in more detail in the introductory part to the Acquis Principles (cf. p. xxxvi et seq.), the present rules and principles have been harvested primarily from the existing Community law. The core basis on which the Acquis Principles have been formulated is provided by the set of secondary EC legislation referred to in Annex I of the European Commission’s Communication on European Contract Law of 11 July 2001 (COM(2001) 398 final). However, the scope of research was not limited to the directives mentioned in this document but has been complemented by other EC legislation to be found somewhat off the beaten track such as Directive 1998/48 of 20 July 1998 amending Directive 1998/ 34 laying down a procedure for the provision of information in the field of technical standards and regulations or the Computation of Time Reg. 1182/71. 3 The future development of the Acquis Principles may extend the analysis of EC legislation to further areas of law which could broaden the basis of the present principles and may provide some further references to EC sources of contract law. Such areas of research may include fields of law characterised by case law and particularly fragmented legislation, e.g. competition law including the various block exemption regulations or EC legislation on public procurement. However, in each of these cases we must carefully consider whether the legislative material contains sector specific provisions or rules which may be generalised and lifted up to the level of general contract law. 4 On the basis of the above mentioned EC legislation and ECJ case law, overarching definitions of major legal terms (e.g. consumer (Art. 1:201 ACQP), business (Art. 1:202 ACQP), textual form (Art. 1:305 ACQP) or durable medium (Art. 1:306 ACQP)) used in Community legislation have been formulated. In some areas, the existing Community legislation on contract law issues has reached a density which allows not only the formulation of isolated definitions but the distillation of contract law rules on a slightly more general level. Such rules include e.g. provisions on pre-contractual information duties (Art. 2:201 to 2:208 ACQP) or on non-negotiated terms (Art. 6:101 to 6:306 ACQP). In the commentary to each provision, the definition and rules are juxtaposed to the existing Community legislation from which they have been derived, thus also showing whether these rules can claim general validity, or whether some deviations exist for particular areas of contract law. 5 In a later stage of development of the present work, the above-mentioned definitions and rules may be complemented by a set of general outlines or principles which formulate the

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Article 1:101 Scope and purpose of these Principles

Art 1:101 6–8

underlying political and economic intentions. These principles can be compared to the recitals within Community legislation. The analysis of the existing EC law has shown that there are considerable gaps in the 6 Acquis, e.g. in the areas of formation, form or performance of obligations. However, in some of those cases it was considered necessary to fill the gaps in order to clarify the context in which the genuine acquis provisions can operate. As explained in more detail in the introductory part to these principles (cf. p. xxxvi et seq.), the Acquis Group has made no attempt to fill these gaps by formulating “best rules” which could complement the existing acquis. Rather the gaps have been filled by provisions referred to as “grey rules”, because they are indicated in grey print (e.g. Art. 1:301 ACQP). These grey rules have been taken from the Draft Common Frame of Reference (DCFR). They have been drafted by the joint Compilation and Redaction Team of Study Group and Acquis Group, usually on the basis of the Principles of European Contract Law formulated by the Lando Group. As the grey rules are reproduced literally from the DCFR, the terminology used in these provisions may in some instances differ from that chosen for Acquis Principles. In addition, there are some other cases, where the acquis does provide a sufficient basis for formulating a “black rule”, yet the terminology used in EC legislation has been considered not very helpful for drafting a generalised rule. In such a case, the wording of the black rule has been aligned with the terminology of the DCFR (e.g. Art. 4:101, 6:101(3), 6:202 ACQP).

Paragraph (2): Purpose of the Acquis Principles The Acquis Principles provide a systematic analysis of Community legislation in the area 7 of contract law and thus give an overview of the acquis communautaire in this field of law. They make it easier to access and assess what has been achieved at Community level and what has not been accomplished by helping to identify gaps and inconsistencies in the current acquis. Consequently, the Acquis Principles serve a triple objective set out in paragraph (2): 8 They “serve as a source for the drafting, the transposition and the interpretation of European Community law”. Firstly, they can be used by the EC legislator when preparing a revision of the existing Acquis and drafting new directives or regulations in the field of contract law. In particular, they may help to increase coherency with regard to legal language and contents in the further development of EC contract law. Thus, they may contribute to avoiding inconsistencies be it by means of horizontal instruments or by a more homogenous system of sector-specific legislation. Secondly, the Acquis Principles may serve as a reference and guideline for national legislators when transposing new EC legislation into national law. In this perspective, the Acquis Principles provide useful information regarding the development of individual

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Art 1:101 9, 10

Chapter 1: Introductory Provisions Section 1: Scope

concepts in EC law as well as a coherent terminology which may help the national legislator to avoid inconsistencies in the transposition process. Thirdly, the Acquis Principles may help national courts and legal practitioners when interpreting EC directives and regulations in the field of contract law. In particular, the Acquis Principles can elucidate the regulatory context of new directives and provide valuable information about overarching concepts and underlying values. 9 Apart from these three primary objectives, the Acquis Principles can also be understood as part of the larger EC project to establish a Common Frame of Reference (CFR). In this perspective, the Acquis Principles can serve as a contribution to the CFR and provide a basis both with regard to the set of definitions and with regard to the set of rules. Moreover, the structure of the Acquis Principles, which has been developed particularly for the purposes of the presentation of EC law, might be more apt for the purposes of a CFR than the classical structure of civil codes and therefore function as a model (cf. SchulteNölke, Zoll, in this volume, p. xxiii). However, it has to be noted that the Acquis Principles are not intended to formulate elements of the CFR itself, but to provide the drafters of the CFR with genuine European content. These elements will have to be combined with common rules or principles derived from national legal orders and national case law.

Paragraph (3): Scope of the Acquis Principles 10 For most of the sectors-specific EC directives (e.g. the Timeshare D. or the Consumer Sales D.) which have a clearly defined object of regulation it is not necessary to include a provision which expressly states which areas of law are outside the scope of the directive. In contrast, such a limitation of scope is necessary in those directives which are not limited to a certain area of law but horizontally regulate issues that might affect a very broad range of contractual relationships (e.g. the E-Commerce D. or the Unfair Terms D.): Art. 9(2)(d) E-Commerce D.

“Member States may lay down that paragraph 1 shall not apply to all or certain contracts falling into one of the following categories [...] (d) contracts governed by family law or by the law of succession.”

Recital 10 Unfair Terms D.

“Whereas more effective protection of the consumer can be achieved by adopting uniform rules of law in the matter of unfair terms; whereas those rules should apply to all contracts concluded between sellers or suppliers and consumers; whereas as a result inter alia contracts relating to employment, contracts relating to succession rights, contracts relating to rights under family law and contracts relating to the incorporation and organization of companies or partnership agreements must be excluded from this Directive.”

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Article 1:101 Scope and purpose of these Principles

Art 1:101 11–14

The Rome Convention on the law applicable to contractual obligations contains a simi- 11 lar limitation of scope: Art. 1(2)(b) and (e) Rome Convention

“They [i.e. the rules of the Convention] shall not apply to: [...] (b) contractual obligations relating to: – wills and succession, – rights in property arising out of a matrimonial relationship, – rights and duties arising out of a family relationship, parentage, marriage or affinity, including maintenance obligations in respect of children who are not legitimate; [...] (e) questions governed by the law of companies and other bodies corporate or unincorporate such as the creation, by registration or otherwise, legal capacity, internal organization or winding up of companies and other bodies corporate or unincorporate and the personal liability of officers and members as such for the obligations of the company or body;”

Paragraph (1) already indicates that the scope of the Acquis Principles is limited to “the 12 field of contract law”. However, paragraph (3) follows the above models and provides for a further limitation of scope by excluding “the areas of labour law, company law, family law or inheritance law”. In fact, company law and labour law are characterised by a range of sector-specific principles and legal concepts which are reflected also at EC level by specific legislative measures. While the existing EC legislation in these areas of law may well serve in some cases as a source for rules and principles that can be lifted to the level of general contract law (e.g. the principle of non-discrimination), it is not possible to import all of the Acquis Principles into these specific areas without taking into account the particularities of labour relations or intra-company relations. This is also true for family and inheritance matters. In addition these fields of law may also be more closely related to different cultural traditions in the Member States. The areas of law excluded by paragraph (3) are defined by reference to general terms of 13 private law (labour, company, family and inheritance). In order to ensure a uniform application of the Acquis Principles, these terms have to be interpreted autonomously, not as reference to Member State laws. The interpretation of these terms may follow the understanding of similar terms such as 14 “family relationship”, “succession”, and “company” which are mentioned in other European instruments, e.g. Art. 1(2)(b) and (e) of the Rome Convention. Individual contracts of employment are mentioned, e.g. in Art. 6 of the Rome Convention and Art. 18 to 21 of the Brussels I Reg. However, paragraph (3) is not limited to individual contracts of employment but also excludes collective agreements. The following general guidelines may be given on the areas of law which are excluded from the scope of the Acquis Principles: – “family law” includes e.g. marital property, other marital questions, divorce, and maintenance rights based on marriage or on a family relationship;

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Art 1:101 15–17

Chapter 1: Introductory Provisions Section 1: Scope

– “inheritance law” includes e.g. all contracts which seek to affect the succession. In contrast, the sale of an estate or a part of an estate will fall within the scope of the Acquis Principles; – “labour law” includes both individual employment contracts and collective agreements; – “company law” relates to any rules regarding the incorporation and organisation of companies or to partnership agreements. However, it does not include shareholder agreements which only create obligations among certain shareholders of a company. Consequently, the rules e.g. on non-negotiated terms (Art. 6:101 et seq. ACQP) are applicable if such an agreement is not individually negotiated.

Examples Example 1 15 A car manufacturer offers its products to its employees at a reduced price. The Acquis Principles apply to the sales contract as this contract does not affect the obligations resulting from the employment contract between the manufacturer and the employee. Example 2 16 For tax reasons, one spouse sells parts of his or her business to the other. The Acquis Principles apply. Example 3 17 A person and a future heir have agreed on a contractual will (which is possible in some legal systems). The Acquis Principles do not apply.

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Section 2: Consumer and business Article 1:201: Consumer Consumer means any natural person who is mainly acting for purposes which are outside this person’s business activity.

A. Foundation in the Acquis 1.

Sources

The definition of “consumer” is based on Art. 2 of the Doorstep Selling D.; Art. 2(b) of 1 the Unfair Terms D.; Art. 2 of the Timeshare D. 1994; Art. 2(2) of the Distance Selling D.; Art. 2(e) of the Price Indication D.; Art. 1(2)(a) of the Consumer Sales D.; Art. 2(e) of the E-Commerce D.; Art. 2(d) of the Financial Services Distance Selling D.; Art. 2(a) of the Unfair Commercial Practices D.; Art. 4(11) of the Payment Services D.; Art. 3(a) of the Consumer Credit D. 2008; Art. 2(1)(f) of the Timeshare D. 2008 and Art. 9(b) of the Product Liability D. The consumer definitions in European procedure law (Art. 13 (1) of the Brussels Convention, now Art. 15(1) of the Brussels I Reg.) and European rules on conflict of laws (Art. 5 of the Rome Convention, now Art. 6 of the Rome I Reg.) have been considered as well. The Package Travel D. by contrast has not been taken into account, since the notion of 2 consumer used by this directive is confusing insofar as it differs from all other definitions. It describes “consumer” in Art. 2(4) as one “who takes or agrees to take the package (‘the principal contractor’), or any person on whose behalf the principal contractor agrees to purchase the package (‘the other beneficiaries’) or any person to whom the principal contractor or any of the other beneficiaries transfers the package (‘the transferee’)”. The Package Travel D. accordingly also protects those who conclude contracts for business related purposes.

2.

Development

According to the English version of the Doorstep Selling D., a consumer is “a natural 3 person who, in transactions covered by this Directive, is acting for purposes which can be regarded as outside his trade or profession”. Slightly deviating from this, the Unfair Terms D., Distance Selling D., Consumer Sales D., E-Commerce D., Financial Services Distance Selling D., Payment Services D. and the Consumer Credit D. 2008 define consumer as a natural person who is acting for purposes which are outside his “trade, business or profession”, whereas other Directives refer to “purposes that do not fall within the

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Art 1:201 4, 5

Chapter 1: Introductory Provisions Section 2: Consumer and business

sphere of his commercial or professional activity” (Price Indication D.) or to purposes which are outside his “trade, business, craft or profession” (Unfair Commercial Practices D.). In other language versions of the directives, the notion of consumer is likewise defined using deviating terms. However, they all share a common core, as they all provide that a consumer is – a natural person – who is acting for purposes which are outside this person’s trade, business or profession. 4 One could simply have used the above wording as a definition of “consumer”, and that was indeed done by an earlier draft. However, this would have produced a certain redundancy and possibly invited arguments of circularity when seen together with the definition of “business” below. This includes “purposes relating to this person’s self-employed trade, work or profession”. As “business” in the present Article carries the same meaning as “business” in Art. 1:202 ACQP, no useful purpose is served if the words “trade” and “profession” are repeated in the definition of “consumer”. The present Article thus provides a harmonised overarching definition of “consumer”. This is in accordance with the law in Member States, since many countries have harmonised the notion of consumer found in the various directives and established a definition in national law, which is equally applicable in various consumer protecting acts. Overarching consumer definitions can be found in Austria (§ 1(1)(2) in conjunction with § 1(2)(2) Consumer Protection Act), Belgium (Art. 1(7) Trade Practice Act of 14 July 1991 and Art. 2(2) Liberal Professions Act of 2 August 2002), Czech Republic (CC Art. 52(3)), Estonia (§ 34 of the Law of Obligations Act and Art. 2(1) of the Consumer Protection Act), Finland (Chapter 1 § 4 of the Consumer Protection Act 20. 1. 1978/38), Germany (CC § 13), Greece (Art. 1(4)(a) of the Consumer Protection Act 2251/94), Italy (Art. 3(1)(a) and (b) of the Consumer Code), Latvia (Art. 1(1) Sec. 3 of the Consumer Rights Protection Law), Lithuania (CC Art. 6.350(1) and Art. 2(1) of the Law on Consumer), Malta (Art. 2 of the Consumer Affairs Act), Netherlands (CC Book 7 Art. 5(1)), Poland (CC Art. 221), Portugal (Art. 2(1) of the Consumer Protection Act No. 24/96), Slovakia (CC 52), Slovenia (Art. 1(2) of the Consumer Protection Act), Spain (Art. 3 of the Royal Legislative Decree 1/2007 of November 16, by which the revised text of the General Law for the Protection of Consumers and Users is approved). In some countries, a general notion of consumer has emerged from a combined regulation of doorstep and distance selling in a single statute; e.g. in Denmark (Art. 3 (1) of the Act 451 of 9 June 2004 on Certain Consumer Contracts), Portugal (Art. 1 (3)(a) of the Decree-Law 143/2001 of April 26), Slovakia (Art. 1, 2nd part of the Act 108/2000 on Consumer Protection in Doorstep Selling and in Distance Selling) and Sweden (Art. 2 of the Law on Consumer Protection on Distance Contracts and Doorstep Selling Contracts). Other Member States (above all France) abstain from express definitions, relying instead on their case law for developing an overarching definition of “consumer”. 5 The present Article contains a clarification for “mixed purpose transactions”, i.e. contracts that serve both a private and business purpose (e.g. the acquisition of a motor vehicle for a freelancer). In those cases it should be decisive whether the person is mainly acting for purposes, which are outside this person’s trade, business or profession. This clarification is in line with Art. 9(b)(ii) of the Product Liability D. (“used by the injured 56

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Article 1:201 Consumer

Art 1:201 6–8

person mainly for his own private use or consumption”). It is true that the Product Liability D. mainly concerns tort law. However, since the quoted provision addresses the general problem of dual use goods, it can serve also as a source for contract law. The ECJ applied a different criterion in C-464/01 – Gruber. The Court stressed in this 6 decision that a person can invoke the special rules of jurisdiction of Art. 13 to 15 of the Brussels Convention (now Art. 15 to 17 Brussels I Reg.) in respect of dual use contracts only if the trade or professional purpose is so limited as to be negligible in the overall context of the transaction (para. 54). However, this decision relates to European procedural, not substantive law. One might nevertheless wonder whether the procedural notion of consumer can be useful for substantive consumer protection law. However, legal certainty should play a greater role in international jurisdiction rules, which justifies the insistence of the ECJ in Gruber that contracts must be concluded for entirely private purposes. However, in substantive consumer law, consumer protection interests merit a different solution. Thus, the Acquis Principles do not carry Gruber over to substantive law, but apply instead – in conformity with Art. 9(b) ii of the Product Liability D. – the criterion of the preponderant purpose. Member States have found different solutions for classifying mixed purpose transactions. 7 In Austria (§ 1(1) of the Consumer Protection Act) and Belgium (Art. 1(7) of the Trade Practice Act of 14 July 1991) only contracts concluded exclusively for private purposes are considered consumer transactions. In contrast, the distinction according to the primarily intended use is expressly stated in the Danish, Finnish (Chapter 1 § 4 of the Consumer Protection Act) and Swedish (Chapter 1 sec. 2 of the Law 2005:59 on Consumer Protection on Distance Contracts and Doorstep Selling Contracts) provisions. German courts also focus on the question of whether the private or business use is predominant (OLG Naumburg (German Court of Appeal), judgment of 11 December 1997, Neue Juristische Wochenschrift-Rechtsprechungsreport (NJW-RR) 1998, 1351, on the applicability of the consumer credit act in relation to motor vehicle leasing). In Italy, recent case law tends towards the same direction, so that a small tobacconist was regarded as a consumer when concluding a contract for hire of a vehicle, which was for both private and business use (Giudice di pace Civitanova Marche, 4 December 2001, Gius 2002, 1188). However, it is not clear from this judgment whether the private use was predominant. The DCFR follows in Art. I. – 1:105(1) and (2) the definitions of “consumer” and “busi- 8 ness” as defined by the ACQP, but furthermore points out in Art. I. – 1:105(3) DCFR that a “person who is within both of the preceding paragraphs is regarded as falling exclusively within paragraph (1) [definition of consumer] in relation to a rule which would provide protection for that person if that person were a consumer, and otherwise as falling exclusively within paragraph (2) [definition of business]”. This clarification is owed to the fact that under the present wording, a person can fall both under the definition of “consumer” and “business”. Example: A lawyer sells his car – used for up to 40% for his self-employed business, and otherwise for private purposes – to a buyer who intends to use this car also for only up to 40% for his business, and who refers to his standard terms. In this case, both the seller and the buyer could be regarded as consumer or business: As to the question whether the lawyer is liable for defects under the rules for consumer sales (Art. 7:B-01 et Martin Ebers

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Art 1:201 9, 10

Chapter 1: Introductory Provisions Section 2: Consumer and business

seq., Art. 8:B-01 et seq. ACQP), the seller qualifies as “business” and the buyer as “consumer”. In contrast, as to the question whether to apply the B2C-rules for terms not individually negotiated (e.g. Art. 6:305 ACQP) the seller qualifies as “consumer” and the buyer as “business”. However, as the example shows, this case seems highly theoretical. Against this background, the Acquis Group decided not to add any clarification to the definition of consumer and/or business.

3.

Political Issues

9 A series of Member States have not transposed the notion of consumer word for word, but rather based their notion of consumer on deviating concepts, which extend the protection of the directives to further groups of persons and/or transactions. This concerns above all the protection of businesspersons concluding atypical contracts (cf. infra, No. 10-11), the notion of the final addressee which is employed in some Member States (cf. infra, No. 12), the extension to legal persons (cf. infra, No. 13) as well as the incorporation of employees into the sphere of protection of the Community law provisions (cf. infra, No. 14), and furthermore the question whether activities associated with founding a business are covered by the notion of consumer (cf. infra, No. 15-16). The following gives an overview: Protection of businesspersons concluding atypical contracts

France, Luxembourg, Latvia, Poland

Notion of the final addressee

Greece, Hungary, Luxembourg

Protection of certain legal persons

Austria, Belgium, Czech Republic, Denmark, Greece, Spain, France, Hungary, Slovakia

Protection of employees

Germany

Protection of business founding activities

Austria

A detailed analysis shows that the Member States’ definitions are in accordance with the minimum requirements of Community law. However, such notions cannot be carried over to the Community level, as there is no sufficient basis in the acquis. 10 Protection of businesspersons concluding atypical contracts: In France, according to well established case law, a consumer is a (natural or legal) person concluding contracts which are not directly related (qui n'ont pas de rapport direct) with his or her profession; cf. Cass. Civ. 24 January 1995, Recueil Dalloz Sirey 1995, 327-329; Cass. Civ. 23 November 1999, Jurisclasseur, Contrats-Concurrence-Consommation 2000, commentaires, 25; Cass. Civ. 23 February 1999, Dalloz 1999, informations rapides, 82. Protection for businesses who conclude contracts outside of their usual field of business also exists in Latvia, Luxembourg and Poland. The practical relevance of this group of persons depends on the respective interpretation of the notion of “usual field of business”. If this is limited to ele58

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Article 1:201 Consumer

Art 1:201 11–14

mentary core activities, then businesses will frequently profit from consumer protection rules. Conversely, if “usual field of business” comprises all transactions, which are not completely atypical, businesses will rarely be considered consumers. The ECJ has construed the notion of consumer under the Doorstep Selling D. narrowly in 11 C-361/89 – Di Pinto. The ECJ regarded the French notion of consumer as permissible, but at the same time highlighted that community law does not “draw a distinction between normal acts and those which are exceptional in nature” (para. 15). This view is also confirmed by the preparatory work for the Consumer Sales D.: whereas the original proposal for the Consumer Sales D. of 18 June 1996 (COM 1995, 520 final) regarded as consumer a person who “is acting for purposes which are not directly related to his trade, business or profession”, the amended directive proposal (COM 1998, 217 final) omitted the words “not directly”. Notion of the final addressee: In Greece (Art. 1(4) of the Consumer Protection Act 12 2251/1994), Hungary (Art. 2(i) of the Consumer Protection Act) and to some extent in Luxembourg (Art. 1 and Art. 2(20) of the Consumer Protection Act) all “final addressees” are protected as consumers. This notion offers in most cases a wider protection than Community law, since it also includes atypical transactions that are not related to a further transfer. However, according to the decision of the ECJ in Di Pinto, this extension has no basis in the acquis (cf. supra, No. 10). Against this background, the Spanish legislator decided in 2007 to refrain in Art. 3 of the Royal Legislative Decree 1/2007 (Consumer Protection Act) from the former notion of the final addressee. Protection of certain legal persons: Under the above-mentioned directives only natural 13 persons are regarded as consumers. However, a number of Member States extend the scope of consumer protecting provisions to certain legal persons: Austria, Belgium, Czech Republic, Denmark, France, Greece, Hungary, Slovakia (with some exceptions) and Spain. Hungary is currently planning to limit the notion of consumer to natural persons. In Portugal, it is unclear whether legal persons can be protected as “consumers”. However, a draft of a new Consumer Code acknowledges that legal persons may, in certain circumstances, benefit from the protection conferred to consumers. In contrast, the ECJ has expressly stated that Community law is not to be given such a wide interpretation: “It is thus clear from the wording of Art. 2 of the Directive that a person other than a natural person who concludes a contract with a seller or supplier cannot be regarded as a consumer within the meaning of that provision” (joined cases C-541/ 99 and C-542/99 – Idealservice, para. 16, concerning the consumer definition of Art. 2 Unfair Terms D.). Protection of employees: A peculiarity of German law is that it generally regards an em- 14 ployee who is also acting within his professional capacity as “consumer”. According to CC § 13 “consumers” are those persons who “enter into a transaction which can be attributed neither to their business nor their self-employed capacity”. Accordingly, the German Federal Labour Court (BAG) considered an employee to be a consumer (BAG, judgment of 25 May 2005, 5 AZR 572/04, Neue Juristische Wochenschrift (NJW) 2005,

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Art 1:201 15–18

Chapter 1: Introductory Provisions Section 2: Consumer and business

3305). Whether the European notion of consumer also includes employed persons is not entirely clear and should be the object of further discussion. 15 Protection of founding activities: Some Member States regulate expressly whether a person who enters into contracts in the course of setting up a professional activity (founding activities) is likewise a “consumer”. § 1(3) of the Austrian Consumer Protection Act provides that transactions by which a natural person, prior to commencing a business, obtains the necessary goods or services do not qualify as business transactions. Founders of new businesses therefore enjoy the protection of consumer laws. In Germany, by contrast, courts have regarded founders of businesses not as consumers, but as businesses; BGH (German Supreme Court), judgment of 24 February 2005, III ZB 36/04, Neue Juristische Wochenschrift (NJW) 2005, 1273-1275 on the Unfair Terms D. However, the BGH also decided that transactions with the aim of taking a decision whether to found a business (here: expertises) are not to be regarded as founding activities and therefore very well covered by the notion of consumer (BGH, judgment of 15 November 2007, III ZR 295/06, NJW 2008, 435 concerning doorstep sales). 16 The ECJ decided in C-269/95 – Benincasa, (ECJ judgment of 3 July 1997, C-269/95 – Francesco Benincasa v Dentalkit Srl) that Art. 13 Brussels Convention (now Art. 15 Brussels I Reg.) is not applicable if a party has concluded a contract for future professional or business activity. In its reasoning, the ECJ stated that “[t]he specific protection sought to be afforded by those provisions is unwarranted in the case of contracts for the purpose of trade or professional activity, even if that activity is only planned for the future, since the fact that an activity is in the nature of a future activity does not divest it in any way of its trade or professional character” (para. 17). Thus, for Community law the predominant view is that transactions which serve the founding of a business are generally not to be regarded as consumer contracts. This view is confirmed by the Financial Services Distance Selling D. In Recital 29 of this Directive it is stated that “[t]his Directive is without prejudice to extension by Member States, in accordance with Community law, of the protection provided by this directive to non-profit organisations and persons making use of financial services in order to become entrepreneurs.”

B.

Commentary

1.

Meaning and Purpose

17 This Article defines “consumer”, using a general notion.

2.

Context

18 The consumer definition applies to all Acquis Principles which are directed at business to consumer transactions, e.g. mandatory nature of consumer rules (Art. 1:203, 1:303, 7:B02, 8:A-01, 8:B-01, 8:G-01 ACQP), protection of the legitimate expectations of consumers (Art. 2:102 and 7:101(2) ACQP), pre-contractual information duties (esp. Art. 2:202, 2:203, 2:204(2), 2:208(1) ACQP), information duties in real time communi-

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Article 1:201 Consumer

Art 1:201 19, 20

cation (Art. 4:104 ACQP), inertia selling (Art. 4:106 ACQP), rights of withdrawal in specific consumer contracts (Art. 5:A-01 et seq. ACQP), effects of withdrawal to linked contracts (Art. 5:106 ACQP), specific rules for terms not individually negotiated (Art. 6:101(2)(2), 6:201(4), 6:304 and 6:305 ACQP), time of performance (Art. 7:201 (3) ACQP).

3.

Explanation

Consumers must be natural persons. Legal persons are not considered as being consumers 19 (cf. supra, No. 13). A consumer is a person who is acting for purposes which are not related to a trade, business or profession. Business is defined in Art. 1:202 ACQP and includes “self-employed trade, work or profession”. Contracts which are concluded for personal, family or household use are thus considered consumer transactions. The definition of consumer also covers cases where the consumer has the intention of making profit. However, if the purpose of e.g. a sales contract is to immediately resell the goods, the buyer cannot be regarded as consumer if he acts on a more regular basis, e.g. if he carries out several such transactions during a relatively short period of time. Transactions which serve the founding of a business are not to be regarded as consumer contracts; (cf. supra, No. 16). Transactions that serve both a private and business purpose (so called “mixed purpose transactions”) are consumer transactions only if the person is mainly acting for a purpose which is outside this person’s business (cf. supra, No. 5-8, and infra, No. 22). It is not entirely clear in Community law whether consumer protection rules apply if the 20 consumer negligently creates the impression that he is acting in the course of a business. In contrast, Art. 2(a) CISG states that the convention is not applicable to sales of goods “bought for personal, family or household use, unless the seller, at any time before or at the conclusion of the contract, neither knows nor ought to have known that the goods were bought for any such use”. The ECJ decision in C-464/01 – Gruber has not clarified this matter. The ECJ held in this case that a person cannot claim the protection of the provisions contained in Art. 13 to 15 of the Brussels Convention if this person by his own conduct negligently created the impression that he was acting in the course of a business (para. 51 et seq.). For jurisdiction issues, the ECJ thus made the perspective of the other party decisive for the issue whether or not a party is a consumer. The reasonable perception of the other party may indeed be helpful for defining jurisdiction, and in order to limit multiple jurisdictions. In substantive consumer protection law, however, the mandatory character of consumer-protecting provisions must prevail. A party who e.g. buys goods for private purposes should also be protected by mandatory consumer law even if he negligently does not make those private purposes sufficiently clear to the seller. No general requirement must be placed on the consumer to inform the business about his purposes.

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Art 1:201 21–23

Chapter 1: Introductory Provisions Section 2: Consumer and business

21 However, the rules on consumer protection do not apply if a would-be consumer deliberately deceives the other party by pretending to act in a business capacity. This view is supported by the requirement of good faith in pre-contractual dealings, especially from the prohibition of venire contra factum proprium (cf. Art. 2:101 ACQP, comment No. 7). It is also in line with case law of at least some Member States. According to the BGH (German Supreme Court, judgment of 22 December 2004) the German provisions on sales of consumer goods (CC Art. 474 et seq.) based upon the Consumer Sales D. do not apply where the buyer (“consumer”) purchases a good for private purposes yet misrepresents to the seller (business) that he is acting in the course of a business. In its reasoning the court referred inter alia to the principle of good faith (CC § 242 – venire contra factum proprium) and mentioned that this principle is acknowledged in numerous EC directives and in the jurisprudence of the ECJ.

4.

Examples

Example 1 22 Freelancer A buys a laptop from business B in a distance sale. A intends to use the laptop for up to 30% for his self-employed business, and otherwise for private purposes. A has a right of withdrawal under Art. 5:A-01(1) ACQP if he qualifies as “consumer”. This is the case, since A was mainly acting for purposes which are outside this person’s business. Example 2 23 B, a professional vendor, sells used cars to other businesses only, because he wants to exclude any liability for non-performance by way of standard terms. A buys a used car from B for his family. In order to conclude the contract, he misrepresents to B that he is acting in the course of a business. The car is defective. B refuses to accept any liability and refers to the exemption clause. A total exclusion of liability for non-performance in standard terms contravenes Art. 6:305(1)(b) ACQP. The exemption clause is therefore invalid if A is to be treated as a consumer. A was acting for private purposes (family use), and it is normally irrelevant whether the business knew that A was a consumer, cf. supra, No. 20. However, according to the principle of good faith in pre-contractual dealings (Art. 2:101 ACQP) the rules on consumer protection do not apply, where a “consumer” has deliberately deceived the professional; cf. supra, No. 21. Therefore, the exemption clause is not invalid under Art. 6:305(1)(b), 6:306 ACQP, but only requires review under Art. 6:301 (2) ACQP.

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Article 1:202 Business

Art 1:202 1, 2

Article 1:202: Business Business means any natural or legal person, irrespective of whether publicly or privately owned, who is acting for purposes relating to this person’s self-employed trade, work or profession, even if this person does not intend to make profit in the course of this activity.

A. Foundation in the Acquis 1.

Sources

The definition of “business” is based on Art. 2 of the Doorstep Selling D.; Art. 2(c) of 1 the Unfair Terms D.; Art. 2 of the Timeshare D. 1994; Art. 2(3) of the Distance Selling D.; Art. 2(d) of the Price Indication D.; Art. 1(2)(c) of the Consumer Sales D.; Art. 2 (b) of the E-Commerce D.; Art. 2(c) of the Financial Services Distance Selling D.; Art. 2(b) of the Unfair Commercial Practices D.; Art. 3(b) of the Consumer Credit D. 2008 and Art. 2(1)(e) of the Timeshare D. 2008.

2.

Development

Unlike for “consumer”, Community law does not use a uniform term for the other party 2 to a consumer contract. That party (the business) is variously described as “trader” (Doorstep Selling D.; Price Indication D.; Unfair Commercial Practices D.), “supplier” (Unfair Terms D.; Distance Selling D.; Financial Services Distance Selling D., Timeshare D. 2008) “seller” (Unfair Terms D.; Consumer Sales D.), “vendor” (Timeshare D. 1994), “service provider” (E-Commerce D.) or “creditor” (Consumer Credit D. 2008). A common feature of these directives, however, is that the business can be either a natural or a legal person, who is acting for purposes relating to this person’s self-employed trade, work or profession. The present Article provides a uniform, overarching definition of “business”. This corresponds to the law in many Member States. A series of Member States have introduced a uniform definition for the counterpart of the consumer, in particular Austria (§ 1(2) Consumer Protection Act), Czech Republic (CC Art. 52(2)), Finland (Chapter 1 § 5 of the Consumer Protection Act), Germany (CC § 14), Italy (Art. 3(1)(c) of the Consumer Code), Slovenia (Art. 1(3) of the Consumer Protection Act) and Spain (Art. 4 of the Royal Legislative Decree 1/2007 of November 16, by which the revised text of the General Law for the Protection of Consumers and Users is approved). Latvia (Art. 1(1) Sec. 4-5 of the Consumer Protection Act) and Lithuania (Art. 2(2) and (3) of the Consumer Protection Act) define the terms “seller” and “service provider” generally for all kinds of consumer contracts. Slovakia introduced general definitions for “seller” and “supplier” in Art. 2(1)(b) and (e) of the Consumer Protection Act. Other Member States by contrast (above all France) abstain from express definitions, relying instead on their case law developing an overarching definition of business.

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Art 1:202 3–6

Chapter 1: Introductory Provisions Section 2: Consumer and business

3 The wording of the present Article, “irrespective of whether publicly or privately owned”, clarifies that public bodies can also qualify as “business”. This clarification was derived from the Unfair Terms D. and Financial Services Distance Selling D. The Unfair Terms D. emphasises in Recital 14 that the directive also applies “to trades, businesses or professions of a public nature”. Article 2(c) of the directive additionally makes clear that the nature of ownership of the “trader or supplier” is immaterial; cf. e.g. the English language version of the directive (“whether publicly owned or privately owned”), the German version (“auch wenn diese dem öffentlich-rechtlichen Bereich zuzurechnen ist”) and the French version (“activité professionnelle, qu'elle soit publique ou privée”). In the same line, Art. 2(c) of the Financial Services Distance Selling D. defines as “supplier” “any natural or legal person, public or private”. 4 A series of Member States have also gone beyond the scope of application of the Unfair Terms D. and Financial Services Distance Selling D. in providing expressly that “business” includes legal persons under public law. In Austria, legal persons under public law always qualify as businesses (§ 1(2), sent. 2 of the Consumer Protection Act). In Belgium, the term “seller” (used in the Trade Practices Act for doorstep and distance selling and price indication) includes governmental institutions that pursue commercial, financial or industrial activity and sell or offer for sale products or services. In Cyprus, according to Art. 2 of the Consumer Protection Act, the word “business” includes “a trade or profession and the activities of any government department or local or public authority”, “courts” and “directors”. Legal provisions in Greece (Art. 1(3) of the Consumer Protection Act) and Spain (Art. 4 of the Royal Legislative Decree 1/2007) also emphasise that public sector suppliers qualify business. Italian law includes (for sales contracts) under the definition of “seller” every natural or legal person of private and public law (Art. 128 (2)(b) of the Consumer Code). In Slovenia, a business is defined as a legal or natural person “regardless of its legal form or ownership” (Art. 1(3) of the Consumer Protection Act). Similarly in the United Kingdom in the context of transposing the Consumer Sales Directive it is clarified that “business” includes the profession and activity of any government department (including a Northern Ireland department) or local or public authority (Sec. 61(1)(b) of the Sale of Goods Act 1979). In other member states such as Germany it follows from the general definition of legal person that public bodies are also included. 5 The Article furthermore clarifies that persons who do not intend to make profit are included in the notion of business. Several reasons support the view that a profit motive is irrelevant for the notion of business. First, the intention to make a profit relates to an internal business factor, which in some circumstances can be proven only with difficulty and which businesses can manipulate (for example by transferring profits within a corporate group). Second, the Unfair Terms D. and the Financial Services Distance Selling D. also support the view that a profit motive is immaterial, since this directive relates to public bodies (cf. supra, No. 3-4). Internal factors of the business should therefore have no bearing on whether consumers are protected. 6 Support for this view can be found in the law of some Member States. In Austria, “business” is described in § 1(2) of the Consumer Protection Act as “every organisation on a continuing basis of independent economic activity”, even if this organisation does not

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Article 1:202 Business

Art 1:202 7–9

intend to make a profit. In Germany, the BGH (German Supreme Court) recently clarified for consumer goods sales that the only relevant factors for qualifying as business are whether the seller offers products on the market against payment, normally over a certain period of time. The court stated expressly that it does not matter whether the seller pursues his business activity with the intention of making profit (BGH, judgment of 29 March 2006, VIII ZR 173/05 Neue Juristische Wochenschrift (NJW) 2006, 2250). In Greece, it is likewise recognised that non-profit-making organisations or institutions as well as public corporations and local authorities can act as suppliers. In the Netherlands and Sweden the notion business /corporation also includes those enterprises that have no profit motive. The position is different, however, in Finland and Slovenia. According to Chapter 1 § 5 of the Finnish Consumer Protection Act the trader has to act “in order to gain income or with another economic interest.” According to Art. 1(3) of the Slovenian Consumer Protection Act, a business is defined as a legal or natural person, who is “engaged in a profitable activity” regardless of its legal form or ownership. The Acquis Principles employ the wider notion of “business” because the profit making motive of the business does little to affect the interest of the consumer, and also in order to avoid unnecessary litigation on whether or not a party aims to make profit.

B.

Commentary

1.

Meaning and Purpose

The present Article defines business, using a general notion.

2.

7

Context

The definition of business applies to all Acquis Principles which are directed at business 8 to consumer transactions (cf. Art. 1:201 ACQP, comment No. 18). Moreover, this definition of business also applies to all Acquis Principles which are (also) aimed at business to business transactions, e.g. the requirement to act with special skill and care (Art. 2:102 and 7:101(2) ACQP), pre-contractual statements by a business (Art. 4:107 and 4:108 ACQP), review of terms not individually negotiated between businesses (Art. 6:301(2) ACQP), time of performance (Art. 7:201(2) ACQP).

3.

Explanation

A business can be either a natural or a legal person, irrespective of whether publicly or 9 privately owned. Public bodies can also be business (cf. supra, No. 3-4). Business is a person who is acting for purposes relating to this person’s self-employed trade, work or profession. The business has to act on a somewhat regular basis and in a capacity for which it normally requires remuneration. However, it is not necessary that the business intends to make profit in the course of this activity (cf. supra, No. 5-6).

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Art 1:202 10–12

Chapter 1: Introductory Provisions Section 2: Consumer and business

In transactions that serve both a private and business purpose (so called “mixed purpose transactions”) it must be decided whether the person is mainly acting for a purposes relating to this person’s self-employed trade, work or profession; cf. Art. 1:201 ACQP, comment No. 5-8). Conduct by a third party who is acting in the name or on behalf of a business is attributed to the business (cf. Art. 2 of the Doorstep Selling D.; Art. 2(b) of the Unfair Commercial Practices D.). A business therefore does not lose this quality by using a consumer as its agent or other representative. 10 Whether consumer protection law is applicable if both parties are private persons, but one of them is represented by a business, has not hitherto been clarified by Community law. Member States have found different answers to this question. In Austria, a contract between two private persons does not fall within the ambit of consumer protection provisions if it is brokered by a person acting in a business or professional capacity. By contrast, in Denmark (Art. 3(2) of the Act 234 of 2 April 1997 on consumer contracts relating to the purchase of the right of use to real estate on timeshare basis), Italy (Art. 70 (2) of the Consumer Code) and Portugal, consumer protection rules apply in favour of the buyer to timeshare contracts if the vendor is not a business, but uses a business as an agent. This solution appears to be appropriate on a general level. The unrepresented consumer enjoys full consumer protection, whereas a consumer who uses a commercial agent will normally benefit from consumer protection rules in this internal relationship, and thus will not be deprived from remedies against his agent.

4.

Examples

Example 1 11 A is an employed doctor in a hospital who wants to become a self-employed doctor. To this end, she buys several medical devices from the professional seller B. According to the standard terms of B, disputes arising under the contract are to be exclusively determined by courts of the place where B is domiciled. The jurisdiction clause is not per se unfair under Art. 6:304 ACQP because A is considered to be a business under Art. 1:202. Whether a person qualifies as business does not depend on the business experience but rather to the purposes of the transaction. Transactions in the course of setting up a professional activity (like buying medical devices in order to become a self-employed doctor) are clearly directed at business activity (cf. Art. 1:201 ACQP, comment No. 16). Therefore, the jurisdiction clause is only subject to review under Art. 6:301(2) ACQP. Example 2 12 A applies to the council of his city – a non-profit public body – for accommodation at a cheap rate as homeless person. According to the standard terms of the contract, the place of the agreed accommodation can be changed unilaterally by the council without reasons. The terms of the contract are subject to review under Art. 6:305(1)(j) ACQP. A is acting for private purposes and therefore a “consumer” under Art. 1:201 ACQP. The council qualifies as “business” under Art. 1:202, since non-profit public bodies acting for business purposes are covered as well, cf. supra No. 3, 4. 66

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Article 1:203 Mandatory nature of consumer rules

Art 1:203 1–3

Article 1:203: Mandatory nature of consumer rules (1) Unless provided otherwise, contract terms which are prejudicial to the consumer and which deviate from rules applicable specifically to relations between businesses and consumers are not binding on the consumer. This does not apply to contracts which settle an existing dispute. (2) Paragraph (1) applies accordingly to unilateral promises.

Commentary 1.

Sources

Most of the consumer law directives contain a rule which intends to avoid that a con- 1 sumer waives the rights conferred on him or her by the respective directive. However, the wording used to express the imperative nature of the consumer law provisions is not always consistent. The main type of such provisions – which is used with minor variations in the Doorstep 2 Selling D., the Distance Selling D., the Financial Services Distance Selling D., the Consumer Credit D. 2008 and the Timeshare D. 2008 – simply states that consumers may not waive the rights conferred to them: Art. 6 Doorstep Selling D.

“The consumer may not waive the rights conferred on him by this Directive.”

Art. 12 Distance Selling D.

“The consumer may not waive the rights conferred on him by the transposition of this Directive into national law.”

Art. 12(1) Financial Services Distance Selling D.

“Consumers may not waive the rights conferred on them by this Directive.”

Art. 22(2) Consumer Credit D. 2008

“Member States shall ensure that consumers may not waive the rights conferred on them by the provisions of national law implementing or corresponding to this Directive.”

Art. 12(1) Timeshare D. 2008

“Member States shall ensure that, where the law applicable to the contract is the law of a Member State, consumers may not waive the rights conferred on them by this Directive.”

The Timeshare D. 1994 and the Unfair Terms D. use a different wording to express the 3 same concept: Art. 8 Timeshare D. 1994

“The Member States shall make provision in their legislation to ensure that any clause whereby a purchaser renounces the enjoy-

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Art 1:203 4, 5

Chapter 1: Introductory Provisions Section 2: Consumer and business

ment of rights under this Directive or whereby a vendor is freed from the responsibilities arising from this Directive shall not be binding on the purchaser, under conditions laid down by national law.” Art. 6(1) Unfair Terms D.

“Member States shall lay down that unfair terms used in a contract concluded with a consumer by a seller or supplier shall, as provided for under their national law, not be binding on the consumer and that the contract shall continue to bind the parties upon those terms if it is capable of continuing in existence without the unfair terms.”

A very similar provision is Art. 7 of the Consumer Sales D. It follows from Art. 6(1) of the Unfair Terms D. that the directive provides for mandatory consumer protection provisions in the Member State laws. In consequence, Art. 6(1) of the Unfair Terms D. leads to the same result as the other provisions mentioned above. 4 A third way of expressing the imperativeness of EC law provisions in B2C-relations is to be found in the E-Commerce D.: Art. 11(1) and (2) E-Commerce D.

“(1) Member States shall ensure, except when otherwise agreed by parties who are not consumers, that in cases where the recipient of the service places his order through technological means, the following principles apply: [...] (2) Member States shall ensure that, except when otherwise agreed by parties who are not consumers, the service provider makes available to the recipient of the service appropriate, effective and accessible technical means allowing him to identify and correct input errors, prior to the placing of the order.”

Surprisingly, the Package Travel D. has no mandatory law rule at all. Nevertheless it is beyond doubt that the provisions of this directive are also mandatory in favour of consumers. 5 Finally, it might be noted that mandatory law provisions in secondary EC legislation are not limited to directives but are also to be found in regulations, such as Reg. 261/2004 (Overbooking etc. of Flights): Art. 15 Reg. 261/ 2004

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“Obligations vis-à-vis passengers pursuant this Regulation may not be limited or waived, notably by a derogation or restrictive clause in the contract of carriage.”

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Article 1:203 Mandatory nature of consumer rules

2.

Art 1:203 6–9

Development

Although the mandatory law provisions are formulated in different ways, their substance 6 seems to be the same. Thus, the proposed rule takes the wording of Art. 7 of the Consumer Sales D. as a starting point. This provision reads: “Any contractual terms or agreements concluded with the seller before the lack of conformity is brought to the seller’s attention which directly or indirectly waive or restrict the rights resulting from this Directive shall, as provided for by national law, not be binding on the consumer.” This model is amended in two respects: First, the wording is changed in order to make it 7 applicable not only for sales contracts but for all kinds of contracts (and for pre-contractual and other extra-contractual relationships). Second, the time limit during which the imperativeness of consumer protection provisions applies is adapted to the extended scope of the rule. Art. 7 of the Consumer Sales D. only applies to contractual terms and agreements which are prejudicial to the consumer and which have been concluded “before the lack of conformity is brought to the seller’s attention”. This time limit is based on the idea that the consumer needs protection only until a performance problem arises. Once a dispute between the parties has emerged, the consumer is aware (or at least should be aware) what he or she is giving away if the consumer waives his or her contractual rights in a settlement or any kind of alternative dispute resolution. Therefore, the mandatory law rule does not apply to contracts which settle an existing dispute (cf. paragraph (1) sent. 2).

3.

Context

Some provisions of the Acquis Principles expressly state that they are mandatory in the 8 meaning of the present Article (cf. Art. 1:303, 4:105, 4:107(2), 4:108(2), 4:110(3), 7:B02, 8:A-01, 8:B-01 ACQP). However, it would be wrong to conclude by argumentum e contrario that all other B2C-rules that contain no such reference are always not mandatory. For example, the rules on non-negotiated terms are mandatory in B2C-relations albeit Art. 6:101 ACQP does not contain an express reference to the present Article (cf. comment No. 10 on Art. 6:101 ACQP). In addition, the Acquis Principles contain several rules which are explicitly marked as generally mandatory rules, e.g. Art. 4:105(1) ACQP regarding formation of a contract by electronic means, or Art. 5:101 ACQP according to which the provisions of Chapter 5 Section 1 apply as mandatory rules where a party has a statutory right of withdrawal from a contract. Furthermore, several rules that are not limited to B2C-relations are mandatory without 9 stating this explicitly. For example, unlike Art. 1:201(2) PECL, Art. 2:101 ACQP does not provide expressly that the duty to act in accordance with good faith in pre-contractual dealings is mandatory. Nevertheless, parties cannot exclude by their agreement this

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Art 1:203 10

Chapter 1: Introductory Provisions Section 2: Consumer and business

duty (cf. comment No. 18 on Art. 2:101 ACQP). Similarly, parties may not exclude the principle of non-discrimination in contract law (cf. Art. 3:101 ACQP). 10 Article 7:G-01 ACQP according to which the provisions of subsection 7:G are mandatory does not refer to the present Article. The Redaction Committee refrained from making such a reference because in some cases the consumer friendly approach of the present Article does not work. Article 7:G-17 ACQP, for example, which begins with “unless agreed otherwise” has to be mandatory. Another problem with this provision is that it does not indicate the minimum standard of protection but a certain procedure. It is thus not always possible to say what is more beneficial to the customer. For a future version of chapter 7:G the mandatory character set out by Art. 7:G-01 ACQP will be revisited on an article by article approach.

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Section 3: Notice and form Article 1:301: Means of notice

1

Notice may be given by any means appropriate to the circumstances.

Provisional Comments Although the general notion of freedom of form is common to all legal systems of the 1 Member States, the acquis itself does not provide a sufficient basis for formulating such a general rule on means of notice. Therefore, the above “grey rule” rule, which is taken from Art. II. – 1:109(2) DCFR, is reproduced in order to show the context in which the Acquis Principles can operate. There are, however, at least some direct indications in the acquis, which support the idea expressed by this rule. Article 9(1) of the E-Commerce D. imposes on the Member States an obligation to ensure that the legal requirements applicable to the contractual process neither create obstacles for the use of electronic contracts nor result in such contracts being deprived of legal effectiveness and validity only because they have been made by electronic means. This provision more or less amounts to a non-discrimination rule for electronic legal statements. Yet, Art. 9(2) authorises the Member States to set up exceptions from Art. 9(1) for some categories of contracts, which are specified by Art. 9(2). Article 9(1) does not prejudice the level of protections for consumers arising from Community legislation and national legislation implementing Community law (see also Recital 11 of the E-Commerce D.). The present Article may also find a justification in Art. 5(2) of the E-Signatures D., which expresses the idea of non-discrimination of electronic signatures. There is a partial overlap between the present Article and Art. 1:304 ACQP, the latter 2 explicitly expresses the principle of the freedom of form. However, Art. 1:304 ACQP tries to express the idea that the legal effect of the notice cannot be questioned only because of the means of its presentation. Even if there is a form requirement, its violation does not always lead to invalidity. In such a case there is still a need to determine, whether a notice has been given. However, the present Article does not define the moment of the effectiveness of the notice. This problem, with respect to electronic notices, is governed by Art. 1:303 ACQP. The Article at hand applies to all possible notices, including offer and acceptance, pre-contractual information, notice of withdrawal and termination etc.

1

Grey rule from Art. II. – 1:109(2) DCFR.

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Art 1:301, 3 Art 1:302, 1, 2

Chapter 1: Introductory Provisions Section 3: Notice and form

The Article is complemented by the more specific provision of Art. 2:204 ACQP. According to this provision, it is appropriate to replace written pre-contractual information by information provided in textual form on a durable medium, if the information provided in such form is “reasonably accessible to the recipient” (Art. 2:204(3) ACQP).

Example 3 A consumer writes the following text message via mobile phone to a business: “I withdraw from the contract concluded yesterday”. Although the means of communication chosen by the consumer may be uncommon and possibly not recommendable, such a notice would produce legal consequences, if the means used can be considered appropriate to the circumstances. This would be the case e.g. if the text message is sent to a mobile phone number indicated on the business card of the other party.

Article 1:302: Effectiveness of notice

2

(1) The notice becomes effective when it reaches the addressee, unless it provides for a delayed effect. (2) The notice reaches the addressee: (a) when it is delivered to the addressee; (b) when it is delivered to the addressee’s place of business, or, where there is no such place of business or the notice does not relate to a business matter, to the addressee’s habitual residence; (c) when it is otherwise made available to the addressee at such a place and in such a way that the addressee could reasonably be expected to obtain access to it without undue delay.

Provisional Comments 1 There is no sufficient basis for this provision in the acquis. However, it seemed necessary to determine when a person can rely on a notice. According to paragraph (1) of the present Article a person cannot rely on a notice sent to another person unless and until the notice reaches that person. It is not usually necessary that the notice should actually have come to the addressee’s attention provided that it was delivered in the normal way, e.g.a letter placed in the letter box or a message sent to the addresee’s fax machine. 2 Paragraph (2) makes clear that the notice need not actually reach the addressee in person. Under sub-paragraph (b) it is regarded as reaching the addressee when delivered to the addressee’s place of business or, if there is no such place of business or the notice relates to a personal matter, to the addressee’s habitual residence. Sub-paragraph (c) covers 2

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Article 1:303 Electronic notice

Art 1:302, 3 Art 1:303, 1, 2

other situations in which a notice could be regarded as having reached the addressee – such as, for example, leaving a message in a place that the addressee is known to check regularly. A notice transmitted by electronic means reaches the addressee when it can be accessed by the addressee (Art. 1:303 ACQP).

Example A notice to extend a charterparty must be given to the owner’s office, which is open 3 round the clock, by 17.00 on April 1. The charterer telephones at 16.59 to give such a notice. The owners are expecting the call but do not want to extend the charter. Therefore they deliberately let the phone ring until after 17.00; they then answer the call and say that the notice is late. The notice is treated as having been given in time.

Article 1:303: Electronic notice A notice transmitted by electronic means reaches the addressee when it can be accessed by this person. This rule is mandatory in the sense of Article 1:203 (Mandatory nature of consumer rules) in relations between businesses and consumers.

A. Foundation in the Acquis 1.

Sources

This Article restates Art. 11(1) 2nd indent of the E-Commerce D. According to this pro- 1 vision the order and acknowledgment of receipt are deemed to be received when the parties to whom they are addressed are able to access them. Article 11(1) 2nd indent is, according to the first sentence of Art. 11(1), a mandatory rule in consumer contracts. Article 11(1) 2nd indent also applies to contracts concluded exclusively by exchange of electronic mail or by an equivalent individual communication, since the exclusion of Art. 11(3) applies only to the Art. 11(1) 1st indent and Art. 11(2) of the E-Commerce D.

2.

Development

Article 11(1) 2nd indent of the E-commerce D. is confined to the “order” and acknowl- 2 edgment of its receipt. In ACQP terminology, it would be applied to offers, acceptances, and acknowledgments of their receipt. This is, however, a specific application of the more general rule concerning when a notice by electronic means is considered to be received. There is nothing particular about offers or acceptances which would justify treating other notices differently.

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Art 1:303 3–6

3.

Chapter 1: Introductory Provisions Section 3: Notice and form

Political Issues

3 An alternative wording for the present Article, which has been discussed, could be “Any declaration is deemed to be received when the party to whom it is addressed is able to access it”. Such a rule would not be confined solely to electronic means of communication. It would be a rule close to the concept underlying Art. 15(1) CISG, which is familiar to some European jurisdictions but different from the common law based “mailbox rule”. However, whether such a rule can be extracted from Art. 11(1) 2nd indent of the E-Commerce D is an open question.

B.

Commentary

1.

Meaning and Purpose

4 This rule states whether and when electronic notices are considered as having been received by the addressee. It is relevant to assess whether a notice has been given and when it has been given. The rule determines the risk of loss of the notice on its way from the sender to the addressee.

2.

Context

5 The rule applies to all kinds of notices given by electronic means. It concerns, for example, offers and acceptances, notices of withdrawal and termination, pre-contractual statements, etc. For example, the present Article applies in the context of Art. 5:102 ACQP, determining when a notice of withdrawal is considered as having been received by the party. A general provision on the question whether and when a notice (be it electronic or not) reaches the addressee is Art. II. – 1:109(4) DCFR.

3.

Explanation

6 A notice transmitted by electronic means is received when the addressee can have access to it. The notion of electronic means is defined by EC law. Directive 98/48, Art. 1(2) ‘by electronic means’ intends that the service is sent initially and received at its destination by means of electronic equipment for the processing (including digital compression) and storage of data, and entirely transmitted, conveyed and received by wire, by radio, by optical means or by other electromagnetic means (see also Art. 1:308(3) ACQP). The ability to access the notice means that the notice must have reached the system of the addressee, who is thus given an opportunity to take note of its content. However, the addressee bears the risk of the malfunctioning of its system of communication. So if the notice has made its way to the server which hosts the addressee’s electronic mailbox, the

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Article 1:304 Freedom of form

Art 1:303, 7 Art 1:304, 1–3

risk that the information actually failed to reach the addressee is run by the adressee, and the same applies if the notice only reached the addressee e.g. two weeks later.

4.

Example

A is renting an apartment from B. B uses an internet based e-mail account provided by C, 7 an e-mail service provider. A and B exchange all relevant notices via e-mail. A dispatches a notice of termination to B.The notice reaches the server of C, located in another country, but because of a temporary malfunctioning of the server of C, B could not read the e-mails. The notice of termination becomes effective when it has reached the server of C. B bears the risk of the server’s malfunctioning.

Article 1:304: Freedom of form Unless provided otherwise, no form needs to be observed in legal dealings.

A. Foundation in the Acquis 1.

Sources

With regard to the Commercial Agents D. the ECJ has held that the Directive “starts 1 from the principle that the [agency] contract is not subject to any formal requirement, whilst leaving it open to the Member States to require it to be in writing” (C-215/97 – Bellone, para. 14). This reasoning relates to Art. 13(2) of the Directive that permits Member States to “provide that an agency contract shall not be valid unless evidenced in writing”. Consequently, the ECJ argues that “if Art. 13(2) of the Directive leaves it open to the Member States to require only that the document be in writing, it therefore follows that other derogations from the principle of freedom of form are contrary to the Directive” (C-215/97 – Bellone, para. 15). Although no EC legislative provision explicitly establishes the general principle of free- 2 dom of form, there are some provisions that more or less implicitly express that principle. For example, Art. 3(1) of the Financial Collateral Arrangements D. stipulates that “Member States shall not require that the creation, validity, perfection, enforceability or admissibility in evidence of a financial collateral arrangement or the provision of financial collateral under a financial collateral arrangement be dependent on the performance of any formal act”. However, according to Art. 1(5) of the directive, this provision only applies to financial collateral arrangements if the arrangement can be evidenced “in writing or in a legally equivalent manner”. Article 9(1) of the E-Commerce D. limits the possibility of Member States to introduce 3 such formal requirements that create specific obstacles for the use of electronic contracts. Esther Arroyo i Amayuelas/Barbara Pasa/Antoni Vaquer Aloy

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Art 1:304 4

Chapter 1: Introductory Provisions Section 3: Notice and form

This extension into the field of electronic contracts underlines the importance of the principle of freedom as part of the acquis. By contrast, the majority of provisions regarding form in the acquis do not state the principle of freedom of form but rather its exceptions by imposing some up formal requirements, be it for the communication of contract terms, brochures or other kinds of information (cf. Annex III of the Communication of the Commission to the Council and the European Parliament of 11 July 2001, on European Contract law (COM (2001) 398)). For example, Art. 10(1) of the Consumer Credit D. 2008 requires that credit agreements are drawn up on paper or another durable medium and that the consumer receives a copy of the credit agreement. A corresponding provision can be found in Art. 4(2)(b) of the Package Travel D. and in Art. 4 of the Timeshare D. 1994 as well as in Art. 5(1) of the Timeshare D. 2008. Other directives set up formal requirements regarding the fulfilment of information duties, e.g. Art. 3(1) and Art. 36(1) of the Payment Services D., Art. 5(1) of the Distance Selling D., Art. 12(1) to (3) of the Insurance Mediation D., Art. 5(1) of the Financial Services Distance Selling D. In addition, Art. 23(1)(a) and (b) of the Brussels I Reg. stipulates that a prorogation agreement is to be in writing, or evidenced in writing (lit. (a)), or in a form which accords with practices established by the parties between themselves (lit. (b)).

2.

Development

4 Freedom of form is a general principle of European contract law (Peter Bydlinski, Formgebote für Rechtsgeschäfte und die Folgen ihrer Verletzung, in: Schulze/Ebers/Grigoleit (eds.), Informationspflichten und Vetragsschluss im Acquis Communautaire, Tübingen 2003, 141, 143; Reiner Schulze, Precontractual Duties and Conclusion of Contract in European Law, ERPL 2005 841, 843). The lack of a general requirement of form implies that a contract may be concluded in any form. A contract is concluded if the parties intend to be legally bound and they reach a sufficient agreement without any further requirement (Art. 4:101 ACQP). It is thus clearly stated that neither cause nor form are requirements of a contract. In European Contract Law the regulation of form is based on minimal legal harmonisation, for the Community legislator maintains the forms required in national laws and their traditional functions: in relation to the transaction (ad solemnitatem and ad probationem), to its effects (ad exercitium), and to the registration of the transaction (ad inscriptionem). Obviously, Community law respects the general rule of freedom of form recognised in most national laws (Nils Jansen/Reinhard Zimmermann, Restating the Acquis Communautaire? A Critical Examination of the ‘Principles of the Existing EC Contract Law’, (2008) 71 Modern Law Review, 518).

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Article 1:304 Freedom of form

Art 1:304 4

Consequently, one could say that a provision merely saying that contracts are not subject to requirements of form would be superfluous. But, on the basis of the exceptional character of provisions that establish requirements of form with regard to some specific consumer contracts (Art. 4 first indent of the Timeshare D. 1994; Art. 10 of the Consumer Credit D. 2008), a general principle of freedom of form can be distilled. Although no explicit provision establishes it, the principle of freedom of form is underlying the acquis. The main goal of the present Article is to underline that the law can establish formal requirements (Fryderyk Zoll, Die Grundregeln der Acquis-Gruppe im Spannungs-Verhältnis zwischen acquis commun und acquis communautaire, Zeitschrift für Gemeinschaftsprivatrecht (GPR) 2008, 109). In Community law, most of the hypothesis of formal requirements refer to information duties. Information duties are formal because information must be given in textual form, in a durable medium or in writing (see Art. 1:305 to 1:307 ACQP), with a legal content (Art. 2:202 and 2:203 ACQP), and in a predetermined way (Art. 2:204 ACQP). The Proposal for a Consumer Rights D. seems to go further. Article 10 introduces a formal requirement which affects the validity of the contract (cf. Art. 10(2): “An off-premises contract shall only be valid if the consumer signs an order form and in cases where the order form is not on paper, receives a copy of the order form on another durable medium.”). However, the same article declares that Member States can not impose any formal requirements other than those provided for in it (Art. 10(3)). The principle of freedom of form is not confined to contract law, but also governs the means of proof. It is recognized in PECL (Art. 2:101(2): “a contract need not to be concluded or evidenced in writing, nor is it subject to any other requirement as to form”) as well as in CISG (Art. 11: “a contract of sale need not to be concluded or evidenced by writing”) and in the Unidroit Principles (Art. 1.2). It has been inserted in the DCFR as Art. II. – 1:106. The general principle of freedom of form is thus in the background of the European Private Law. In addition to the ECJ case law already quoted, freedom of form is taken into consideration as the leitmotif on which the market is based in other cases, such as for example, case C-411/04 P, of 25 January 2007, Salzgitter Mannesmann GmbH v. Commission, para. 45, and case C-407/04 P, of 25 January 2007, Dalmine v. Commission, para. 49. This decision relates the principle of freedom of form to the means of proof in the following terms: “[. . .] [t]he prevailing principle of Community law is the unfettered evaluation of evidence and the sole criterion relevant in that evaluation is the reliability of the evidence”. In the case C-56/98, of 29 September 1999, Modelo SGPS SA v. Director-Geral dos Registos e Notariado, freedom of form is related to contract law in more generic terms (in this case the essential formality is somehow connected with the legal form of the company). It is the principle on which the internal market is based, which encourages the free movement of capital (para. 24): “Article 10(c) of the Directive [69/335] prohibits, in addition to capital duty, taxes in respect of registration or any other formality required before the commencement of business, to which a company may be subject by reason of its legal form. That prohibition is justified by the fact that even though the taxes in question are not levied on capital contributions as such, they are nevertheless levied on account of formalities connected with the company’s legal form, Esther Arroyo i Amayuelas/Barbara Pasa/Antoni Vaquer Aloy

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Art 1:304 5, 6

Chapter 1: Introductory Provisions Section 3: Notice and form

that is to say, on account of the instrument employed for raising capital, so that their continued existence would similarly risk frustrating the aims of the Directive (Case C-2/94 – Denkavit Internationaal and Others, para. 23).” As set out above, in the case C-215/97 – Bellone the ECJ has concluded by argumentum a contrario that it follows from Art. 13(1) of the Commercial Agents D. that derogations from the principle of freedom of form other than those mentioned in this provision are contrary to the directive. The ECJ has thus acknowledged the principle of freedom of form, which is also recognised by Art. 11 CISG and – at least as a general rule – by the laws of the Member States. The ECJ’s reasoning can be applied to other provisions of the acquis which provide specific formal requirements for communication between parties, whether regarding contractual declarations or the fulfilment of information duties. From this perspective, these provisions can be understood as exceptions to a general principle of freedom of form. 5 Given the variety of contexts in which the principle of freedom of form and its manifold exceptions appear within the acquis (e.g. contract terms, brochures, specific information duties), it is neither possible nor necessary to develop a general rule with regard to the remedies applicable in case of breach of form. This question has to be dealt with in the context of the individual exceptions to the principle taking into consideration the specific purpose of the respective formal requirement. Finally, it has to be kept in mind that the balance between freedom of form and formal requirements has to be continuously reassessed taking into account the technological development e.g. in the field of e-commerce.

3.

Particular formal requirements – Introduction

6 Although numerous provisions relating to form can be found in the acquis, the terminology has not been used consistently throughout. Earlier legislation (e.g., Preamble and Art. 5 of the Doorstep Selling D.; Art. 4 of the Consumer Credit D. 1987) refers to ‘in writing’ or ‘written’, assuming rather than providing that writing is always on paper or a similar medium which can store the information permanently and which allows immediate reading. However, with the advance of electronic communications, ‘in writing’ or ‘written’ are increasingly complemented by other formal requirements which relate to any information, transformed into characters which can be read and understood by a recipient. Terms such as ‘durable means of communication’ and ‘durable medium’ are then used to ensure, at least for some situations, that this information either can be, or actually is, stored for a long time, or permanently (cf. Art. 7 of the Consumer Sales D.; Art. 5 of the Distance Selling D.; Annex II, E-Signatures D.; Art. 10(1) of the Consumer Credit D. 2008; Art. 23(2) of the Brussels I Reg.). In other situations, ‘in writing’ or ‘written’ can be replaced by ‘any other appropriate form’ or ‘such other form as is comprehensible and accessible to the consumer’ (Art. 4(1)(a) of the Package Travel D.), but even then there 78

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Article 1:304 Freedom of form

Art 1:304 7, 8

are some situations where ‘in writing’ cannot be replaced (Art. (4)(6)(b)(i) of the Package Travel D.). Similarly, under the Timeshare D. 1994 (Art. 3 and Art. 4), certain information must be provided in a ‘document’, or a contract made ‘in writing’, thus presumably excluding other durable media. Under the Timeshare D. 2008 (Art. 5(1)), the contract must be ‘in writing, on paper or on another durable medium’. The acquis thus contains form requirements below ‘in writing’ and above informal, in particular oral communications, but they are not spelled out consistently. The Acquis Priniples seek to consolidate those requirements to the following corresponding different levels. The first, ‘textual form’, relates to all information which has been transformed into char- 7 acters which can be read and understood by a recipient, and which can somehow be (but need not be) recorded or stored. The second, ‘durable medium’, requires that information is already provided in a form which is, or allows for, permanent or at least long-term reproduction. ‘In writing’ amounts to the third level of form, requiring that the text is stored on the medium permanently and in characters which are directly legible to human senses, as is text written on paper. The acquis also provides for a fourth level, i.e. ‘signature’ as a stricter form requirement, in particular in the Electronic Signature D. The acquis itself does not impose stricter levels of form (e.g. notarisation) in the field of 8 contract law. However, the acquis does acknowledge the existence of such requirements in the law of the Member States (cf. Recital 36 and Art. 1(5)(d) 1st indent of the E-Commerce D.). Moreover, in the field of company law and insurance supervision the acquis even requires notarised documents as one option for providing certain certificates (cf. Art. 25(2) Regulation on the European Company, Art. 29(2) Regulation on the Statute of the European Cooperative Society, Art. 61(2) of the Life Assurance D.) Further references to notarised documents can be found in the field of procedural law (cf. Annex II of the Brussels I Reg.). Stricter form requirements may apply as part of national law e.g. in transactions covered by the Timeshare D. 1994. The provision of four levels of form requirements – textual form, durable medium, in writing, signature – within the acquis should raise few political issues. Providing definitions does not imply that they have to be used frequently or sparingly. Whether or not a certain statement or transaction should be subjected to any form requirement at all, and if yes, to which, can involve political issues, but these need to be addressed in the particular context of the statement or transaction to which a form requirement should or should not apply. The general position can be found in the present Article.

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Art 1:304 9–11

B.

Commentary

1.

Meaning and Purpose

Chapter 1: Introductory Provisions Section 3: Notice and form

9 The Article serves mainly clarification purposes: Although the acquis contains many provisions stipulating formal requirements for communication between parties, it should be made clear that these provisions are exceptions to a general rule.

2.

Context

10 As the Article concerns a broad variety of communications between parties, e.g. contractual agreements, unilateral promises as well as the fulfilment of information duties, it has to be considered inter alia within the context of Chapter 2 Section 2 regarding pre-contractual information duties and Chapter 4 on the formation of contracts.

3.

Explanation

11 The present Article sets out the general principle of freedom of form. However, as the wording of the Article at hand indicates, the principle of freedom of form is subject to a number of exceptions. Such formal requirements may serve various functions. In addition to the usual functions of formal requirements (e.g. proof, warning), the possibility to store and reproduce information provided by the other party is a key objective of several formal requirements stipulated by the acquis for B2C contracts. The consequences of violating a formal requirement may therefore vary in accordance to the different types and functions of such requirements. In this sense, Art. 10(1) sent. 2 of the Consumer Credit D. 2008 clearly states that the consequences of violation of form are left to the Member States. Consequently, the present Article does not establish any rules regarding the consequences of infringements of formal requirements; but see Art. 2:204(4) and Art. 2:208 ACQP concerning the consequences of breach of form in information duties.

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Article 1:305 Textual form

Art 1:305 1–3

Article 1:305: Textual form ‘Textual form’ means a text which is expressed in alphabetical or other intelligible characters by means of any support that permits reading, recording of the information contained therein and its reproduction in tangible form.

A. Foundation in the Acquis 1.

Sources

The acquis does not contain a definition of ‘textual form’. Numerous provisions in the 1 acquis require certain statements or information to be provided on ‘durable medium’ (cf. infra Art. 1:306 ACQP, No. 1 et seq.) or ‘in writing’ (cf. infra Art. 1:307 ACQP, No. 1 et seq.).

2.

Development

The existence of ‘textual form’ as lowest form level can be inferred from the fact that in 2 some situations, the acquis allows for a formal requirement which is below those of ‘durable medium’ or ‘in writing’. For example, Art. 4(1)(a) and (b) of the Package Travel D. allows a party to replace ‘in writing’ by ‘another appropriate form’ . Similarly, Art. 10(3) of the E-Commerce D. requires that ‘contract terms and general conditions provided to the recipient must be made available in a way that allows him to store and reproduce them’. Both provisions show that some form requirement must be observed, and both do not insist on ‘durable medium’ or ‘in writing’. We propose that ‘textual form’ is that lower level. We can thus distinguish four form levels within the acquis:

3

a) The lowest level in the hierarchy of formal requirements is the textual form of a statement. This is characterised by the fact that it is expressed in alphabetical or other characters, and that it can be reproduced in a tangible form, which could be electronic or on paper. What qualifies this basic form of statement is the possibility of recording the information or the declaration of the party, and its reproduction in a tangible form (cf. the present Article). b) The second lowest level is that of a ‘durable medium’. In contrast to ‘textual form’, it is not sufficient that the statement is capable of being stored permanently. It must rather be already provided on a durable medium (cf. infra Art. 1:306 ACQP). c) The third level is ‘in writing’, used in a traditional sense (letters on paper being the most obvious example, cf. infra Art. 1:307 ACQP). d) The fourth level requires a signature (cf. infra Art. 1:308 ACQP).

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Art 1:305 4–6

Chapter 1: Introductory Provisions Section 3: Notice and form

4 The idea behind the drafting of such a rule on ‘textual form’ is that a statement or any other information can be either written and stored in the classical way (on a paper document) or electronically written and even incorporated in a modern durable medium capable of providing a stable and readable record of the statement (CD-ROMs, floppy disks, hard drives, memory sticks, etc.). The element of ‘permanence’ (something that continuing to exist for a long time or for all the time in the future) does not belong to the ‘textual form’ in itself, but to ‘in writing’ and to ‘durable medium’. The rule proposed in the present Article is a basic rule. It tries to cover the disparity of form requirements existing in the acquis and serves as a starting point for the rules contained in Art. 1:306 and 1:307 ACQP of this same chapter. Applications of this lowest form level within the present rules can be found e.g. in Art. 4:105 ACQP (Formation by electronic means) and 6:201 ACQP (Acquaintance with terms not individually negotiated).

B.

Commentary

1.

Meaning and Purpose

5 The Article requires the use of ‘texts’ for several reasons. Information provided in textual form rather than oral information enables the parties to ponder upon the legal consequences of e.g. entering into a contract. In addition, the use of textual form creates tangible evidence of the parties’ intent to enter into a binding legal relationship. Such a text also allows each party to reproduce and store a tangible record of the transaction. Furthermore, the existence of a text may even facilitate the subsequent control of a transaction by a third party, e.g. for accounting, tax or regulatory purposes.

2.

Context

6 The definition applies to all contracts and transactions which require at textual form, in writing, or signature. Most statements on ‘durable medium’ will also be in textual form, although a voice record could qualify as ‘durable medium’ without being in ‘textual form’, as oral messages are not expressed in ‘characters’. To oral form and other nonwritten means refer Art. 4(2) of the Distance Selling D. (‘in any way appropriate to the means of distance communication’ (oral, telephone)) and Art. 13(2) of the Insurance Mediation D. (‘[B]y way of derogation from paragraph 1(a), the information referred to in Art. 12 may be provided orally where the customer requests it, or where immediate cover is necessary’); cf. also Art. 13(3) of the Insurance Mediation D. (‘[I]n the case of telephone selling ...’); Recital 25 of the Payment Services D. (‘The payment service provider may give information orally over the counter or make it otherwise easily accessible’). Cf. also Art. 5(1) of the Distance Selling D. and Recital 13. Here the written document has the function of repeating, reiterating the same information already provided orally. It is a written confirmation of the oral information already given (cf. ECJ C-221/84 – Berghoe-

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Article 1:305 Textual form

Art 1:305 7–9

fer GmbH & Co. KG v ASA SA), for the validity of an oral jurisdiction agreement confirmed in writing only by one party. Several provisions of the Acquis Principles require information to be provided in textual form: Art. 2:204(3), 4:105(1); 5:104, 6:201(3) ACQP.

3.

Explanation

‘Textual form’ has the following requirements:

7

(a) ‘expressed in alphabetical or other intelligible characters’. Alphabetical characters are letters (e.g. Roman, Cyrillic, Greek, Arabic). Other characters include e.g., Chinese or Japanese symbols, but may extend to any set of intelligible characters in which a message can be formed. Oral messages, on the other hand, are not expressed in characters. (b) ‘expressed [...] by means of any support that permits reading’. The medium which is used for this support is irrelevant. Reading may be visual (paper, screen) or tactile (Braille letters). (c) ‘expressed [...] by means of any support that permits [...] recording of the information contained therein and its reproduction in tangible form’. ‘Textual form’ does not require that the information is available in permanent form, but it must be conveyed in a way which allows for the information to be recorded and reproduced in tangible form. This applies e.g. to textual information presented on a website, if this can be downloaded (i.e. recorded) and then later accessed and printed out (i.e. reproduced in a tangible form).

4.

Examples

Example 1 Air Company X sells tickets on the internet, referring to standard terms which are avail- 8 able and can be downloaded from the same webpage. This is sufficient for the ‘textual form’ requirement in Art. 6:201 ACQP. (cf. also judgment of the Mercantile Court n8 5 of Málaga handed down on 1 September 2006). Example 2 As above, but the website is designed in such a way that the “save page” function is dis- 9 abled. X is not heard with the argument that customers could nevertheless have recorded the terms using a special screenshot program, because X have not used a support which permits recording and reproduction.

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Art 1:306 1, 2

Chapter 1: Introductory Provisions Section 3: Notice and form

Article 1:306: Durable medium ‘Durable medium’ means any support which stores information so that it is accessible for future reference for a period of time adequate to the purposes of the information, and which allows the unchanged reproduction of this information.

A. Foundation in the Acquis 1.

Sources

1 The concept of providing information by using a medium other than ‘in writing’ can be found in a number of directives. However, the terminology is not always consistent: Art. 4(1)(a) and (b) Package Travel D.

in writing or any other appropriate form

Art. 3(1) and Art. 4(1) Cross Border Credit Transfer D.

in writing, including where appropriate by electronic means, and in a readily comprehensible form

Art 4(1) Regulation 2560/ 2001

in a readily comprehensible form, in writing, including, where appropriate, in accordance with national rules, by electronic means

Recital 6 Directive 2003/58 / EC

[...] companies should be able to choose to file their compulsory documents and particulars by paper means or by electronic means.

2 The first directive is to employ the term ‘durable medium’ for a medium that allows the consumer to store and reproduce the information provided is the Distance Selling D. Subsequently the term is also used by the Consumer Sales D. with regard to information on guarantees and by the Financial Collateral Arrangements D. The latter particularly underlines the equality of written information and information provided on a durable medium: Art. 5(1) Distance Selling D.

written confirmation or confirmation in another durable medium available and accessible to him

Art. 6(3) Consumer Sales D.

in writing or in another durable medium available and accessible to him

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Art 1:306 3, 4

Article 1:306 Durable medium

Art. 2(3) Financial Collateral Arrangements D.

References in this Directive to “writing” include recording by electronic means and any other durable medium.

Art. 36(1) Payment Services D.; Art. 6(1) Consumer Credit D. 2008

on paper or on another durable medium

The Financial Services Distances Selling D., the Payment Services D. and the Consumer 3 Credit D. 2008 do not only contain a provision similar to Art. 5(1) of the Distance Selling D. (cf. Art. 5(1) of the Financial Services Distances Selling D.), but go one step further than the Distance Selling D. by providing a definition of the term “durable medium”: Art. 2(f) Financial Services Distance Selling D.; Art. 4 (25) Payment Services D.; Art. 3(m) Consumer Credit D. 2008

‘durable medium’ means any instrument which enables the consumer to store information addressed personally to him in a way accessible for future reference for a period of time adequate for the purposes of the information and which allows the unchanged reproduction of the information stored;

According to Art. 13(1)(a) of the Insurance Mediation D. all information to be provided 4 to customers under the directive has to be communicated ‘on paper or on any other durable medium available and accessible to the customer’. Furthermore, the Insurance Mediation D. does not only repeat the definition established by Art. 2(f) of the Financial Services Distances Selling D., but adds a list of examples: Art. 2(12) Insurance Mediation D.

‘durable medium’ means any instrument which enables the customer to store information addressed personally to him in a way accessible for future reference for a period of time adequate to the purposes of the information and which allows the unchanged reproduction of the information stored. In particular, durable medium covers floppy disks, CD-ROMs, DVDs and hard drives of personal computers on which electronic mail is stored, but it excludes Internet sites, unless such sites meet the criteria specified in the first paragraph.

The same examples can also be found in the Payment Services D.: Recital 24 Payment Services D.

[. . .] another durable medium, such as printouts by account printers, floppy disks, CD-ROMs, DVDs and hard drives of personal computers on which electronic mail can be stored, and Internet

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sites, as long as such sites are accessible for future reference for a period of time adequate for the purposes of information and allow the unchanged reproduction of the information stored. The Proposal for a Consumer Rights D. slightly differs: Recital 24 Proposal for a Consumer Rights D.

The definition of durable medium should include in particular documents on paper, USB sticks, CD-ROMs, DVDs, memory cards and the hard drive of the computer on which the electronic mail or a pdf file is stored.

5 Some elements of this definition can already be found in the E-Commerce D., which, however, does not explicitly use the term ‘durable medium’: Art. 10(3) E-Commerce D.

contract terms and general conditions provided to the recipient must be made available in a way that allows him to store and reproduce them

A similar provision can be found in the Payment Services D.: Art. 47(3) Payment Services D.

2.

in an agreed manner which allows the payer to store and reproduce information unchanged.

Development

6 The overview over the acquis shows a line of development starting from the Package Travel D. which expresses the idea that written information could be substituted by ‘any other appropriate form’. Subsequently, the term ‘durable medium’ is coined by the Distance Selling D. in 1997, which, however, does not provide a definition of the term. In 2000, a clarification as to what constitutes a durable medium is contributed indirectly by the E-Commerce D., which requires the technical possibility to store the wording of the contract (cf. Art. 10(3) E-Commerce D. Yet, the E-Commerce D. does not determine the technical way or means for the transfer of other information relevant for the consumer. The current standard definition of the term ‘durable medium’ has been set out definitively in the field of B2B transactions, by the Insurance Mediation D. (Art. 2(12)). This definition (without the examples) can also be found in Art. 2(f) of the Financial Services Distance Selling D. Recital 20 of the Financial Services Distance Selling D specifies – yet in a slightly circular way – that the term ‘durable medium’ includes in particular floppy discs, CD-ROMs, DVDs and the hard drive of the consumer’s computer on which the electronic mail is stored, but they do not include Internet websites unless they fulfil the criteria contained in the definition of a durable medium. The address of a web site is something opposite to a durable medium, as it is said in Recital 25 of Payment Services D.: ‘Information should also be given on where other more detailed information is avail86

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Article 1:306 Durable medium

Art 1:306 7–10

able (e.g. the address of the website). However, if the consumer so requests, the essential information should be given on paper or on another durable medium’. Internet websites will frequently qualify as ‘textual form’ (cf. supra, Art. 1:305 ACQP No. 7 and 8). Thus the present Article tries to consolidate the two most recent definitions of the term ‘durable medium’ resulting from the line of development explained above. Durable medium is no more ‘any instrument’, but ‘any support’ and it does not ‘enable’ to 7 store information but it ‘stores’ it (cf. Art. 1:305 ACQP, Contract I version). ‘Support’ instead of ‘instrument’ is in line with terminology used in Art. 1:305 ACQP (but not in Art. I. – 1:106(3) DCFR, which uses the expression ‘any material’). The amended version of the present Article shows more clearly the difference between (simple) textual form (which must merely allow the recipient to somehow store and reproduce the information) and durable medium (where the information is already provided in stored and reproducible form).

B.

Commentary

1.

Meaning and Purpose

The Article requires an electronic medium (or record) to be retainable by a person in a 8 way which is accessible for future reference for a period of time which is adequate for the purposes of the information. It furthermore requires that the recipient can reproduce the information without the sender being able to change the information after it has been sent.

2.

Context

The requirement to provide information in textual form on a durable medium can be 9 found in Art. 2:204(3) and Art. 5:104 ACQP. Other jurisdictions adopted a more casuistic approach in defining what is stored by electronic means. Section 2 US Uniform Electronic Transactions Act (1999) defines ‘electronic record’ as a record created, generated, sent, communicated, received, or stored by electronic means. In Section 106(4) and (6) of the US Electronic Signatures in Global and National Commerce Act (2000) the term ‘electronic record’ means a contract or other record created, generated, sent, communicated, received, or stored by electronic means. The term ‘record’ means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

3.

Explanation

There has been a need to clarify what constitutes a durable medium, since, for example, 10 mobile technology has grown to an extent that items such as ring tones or music down-

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Chapter 1: Introductory Provisions Section 3: Notice and form

loads may be purchased. The definition restricts the concept of durable medium along the lines of Community law, linked to the storage of information, communications or confirmation sensible for contracts into which parties may enter or have entered. 11 The rule developed from the acquis is based on two elements: a) Durability: importance of time, the necessity of repeated access and reproducibility of the information contained. b) Unilateral non-alterability: the potential unilateral alteration by the sender would not guarantee repeated access to the same, unchanged, information. As proof is a main purpose for this form requirement, it would be ideal if the information could not be changed by any party. However, that would immediately exclude most information stored on a hard disk, on rewritable CDs or DVDs, etc.

4.

Examples

Example 1 12 Consumer C buys the PC game “War and Blood” on B’s website. She is informed inter alia about her right of withdrawal via email. After having played for two months, C feels unsatisfied with the extreme violence of the game and decides to withdraw from the contract. When B points out that the withdrawal period has elapsed, C claims that the information of her right of withdrawal (Art. 5:104 ACQP) should not have been via email but in hard copy. C is not heard with this argument because an email is stored in most cases, be it on the provider’s server or on the hard disk of the recipient. Example 2 13 Consumer D discovers that “Cybercatalanbrokers SA” offers on its website some bonds promising an interest rate of 15%. D emails the broker and receives a CD-ROM containing all the information required by Art. 3 of the Financial Services Distance Selling D. and Art. 36, 37, 41 and 42 of the Payment Services D. D cannot reject the information as being inadequate for lack of form, as CD-ROM is a durable medium.

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Article 1:307 In writing

Art 1:307 1, 2

Article 1:307: In writing A statement is ‘in writing’ if it is in textual form and in characters which are directly legible from paper or another durable medium on which the statement is stored.

A. Foundation in the Acquis 1.

Sources

The oldest form requirement in the acquis is that of a ‘written’ statement or a statement 1 ‘in writing’. It can be traced back to Art. 23 of the Brussels Convention and its interpretation (cf. Report on the association of the Kingdom of Denmark, Ireland and the United Kingdom of Great Britain and Northern Ireland to the Convention on jurisdiction and the enforcement of judgments in civil and commercial matters and to the Protocol on its interpretation by the Court of Justice (“Schlosser Report”, OJ 1979 C 59, p. 71); Geimer/ Schütze, Europäisches Zivilverfahrensrecht, München (2004), ad Art. 23; and Rauscher, Internationales Privatrecht, Heidelberg (2002), ad Art. 23): what is “expressed in alphabetical characters by means of any support that permits reading”. A number of directives – both regarding B2C and B2B transactions – refer to information 2 communicated ‘in writing’. This formal requirement can be found both in provisions establishing lists of specific information duties and more general provisions regarding the communication of contract terms. Unfortunately, these do not use ‘in writing’ consistently. Earlier legislation (e.g., Preamble and Art. 5 of the Doorstep Selling D., Art. 4 of the Consumer Credit D. 1987) refers to ‘in writing’ or ‘written’, assuming rather than providing that this must be done on paper or a similar medium which can store the information permanently and which allows immediate reading. This changed when other, in particular electronic media, became available for exchanging textual information. Unfortunately, EC provisions did not take a consistent line as to whether textual information stored on a durable electronic medium qualified as ‘in writing’. A number of provisions indicate that this is not the case, because they distinguish ‘in writing’ from ‘another durable medium’ (Art. 5(1) of the Distance Selling D., Art. 6(3) of the Consumer Sales D). This cannot be reconciled with some other provisions which set out explicitly that ‘in writing’ includes ‘recording by electronic means and any other durable medium’ (Art. 23(2) of the Brussels I Regulation: “Any communication by electronic means which provides a durable record of the agreement shall be equivalent to ‘writing’”; Art. 2(3) of the Financial Collateral Arrangements D). Moreover, some recent legislation no longer uses ‘in writing’ but distinguishes between ‘on paper’ and ‘other durable medium’ (Art. 13(1)(a) of the Insurance Mediation D.; Art. 5(1) of the Financial Services Distance Selling D.; Recital 24, 25 and Art. 36(1), 41(1), 43, 47(3) of the Payment Services D.; Art. 6(1) of the Consumer Credit D. 2008; Art. 4(2) of the Time-

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Art 1:307 3–6

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share D. 2008. If this trend continues, ‘in writing’ might either be phased out, or become identical in meaning with ‘textual form’, or ‘textual form on a durable medium’. 3 The following examples show the inconsistent use of ‘in writing’ and its occasional replacement by ‘on paper’ (for further examples, cf. Art. 1:305 ACQP, No. 1 et seq.): Art. 13(1)(a) Insurance Mediation D.

All information to be provided to customers in accordance with Art. 12 shall be communicated on paper or on any other durable medium available and accessible to the customer

Art. 36(1) Payment Services D.

At the payment service user’s request, the payment service provider shall provide the information and conditions on paper or on another durable medium.

4 The term ‘on paper’ instead of ‘in writing’ is also used in Art. 5(1) of the Financial Services Distance Selling D. Art. 5(1) Financial Services Distance Selling D.

The supplier shall communicate to the consumer all the contractual terms and conditions and the information [...] on paper or on another durable medium available and accessible to the consumer

5 The Financial Collateral Arrangements D., which also employs the term ‘in writing’, is a somewhat exceptional example. Unlike the other directives mentioned above, the Financial Collateral Arrangements D. does not set up any formal requirements for financial collateral arrangements (cf. Art. 3(1) of the Financial Collateral Arrangements D.). Yet, according to Art. 1(5) of the directive, it only applies to financial collateral arrangements if that arrangement can be evidenced ‘in writing or in a legally equivalent manner’. Article 2(3) of the Financial Collateral Arrangements D. extends the meaning of ‘in writing’ to other forms of communication: Art. 2(3) Financial Collateral Arrangements D.

References in this Directive to “writing” include recording by electronic means and any other durable medium.

6 The acquis is complemented by similar terminology in the Unidroit Principles, PECL, the Uncitral Model Law on Electronic Commerce and the DCFR: Art. 1(11) Unidroit Principles

“writing” means any mode of communication that preserves a record of the information contained therein and is capable of being reproduced in tangible form.

Art. 1:301(6)

“Written” statements include communications made by telegram, telex, telefax and electronic mail and other means of communication capable of providing a readable record of the statement on both sides

PECL

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Art 1:307 7–9

Article 1:307 In writing

Art. 6(1) Uncitral Model Law on Electronic Commerce

Where the law requires information to be in writing, that requirement is met by a data message if the information contained therein is accessible so as to be usable for subsequent reference.

Art. I. – 1:106(1)

a statement is “in writing” if it is in textual form and in characters which are directly legible from paper or another tangible durable medium

DCFR

2.

Development

In this situation, where the acquis frequently uses ‘in writing’, but in rather different 7 meanings, it was considered useless and even confusing to employ ‘in writing’ as synonym to either ‘textual form’ or ‘durable medium’. Dropping ‘in writing’ altogether (cf. supra, Art. 5(1) of the Financial Services Distance Selling D.) appeared in principle to be a realistic option. However, the alternative formulation of ‘on paper’ which was chosen inter alia in this directive for a form which excludes electronic durable media (in the same sense, Recital 26 and Art. 47(3), 48(3) of the Payment Services D.) appeared misleading, as this would exclude information that was printed on plastic or textile media, engraved, or even proverbially carved in stone. All these doubtlessly qualify as ‘in writing’, but one can hardly say that they are ‘on paper’. So the choice was made to resurrect ‘in writing’ in its traditional, pre-electronic age meaning, re-defined as requiring that “the text is stored on the medium permanently and in directly legible characters”. Electronically stored texts are not directly legible but require conversion of bits stored on e.g. hard drives into characters on screen or another legible output, and they are not necessarily as permanent as written texts. As set out above, the acquis requires written form for different purposes, be it for providing information, or as a form required for some contracts. These provisions relate to both B2C and to B2B transactions, so that the definition of ‘in writing’ can also be generalised to the entire contract law. The acquis does not require a signature (neither handwritten nor electronic) for a state- 8 ment to be ‘in writing’, or generally on a ‘durable medium’. There is some debate amongst scholars on this issue. A handwritten signature is required according to the opinion of Peter Bydlinski, in: Schulze/Ebers/Grigoleit [eds.], Informationspflichten und Vertragsschluss im Acquis Communautaire, Tübingen (2003), p. 141.; against cf. Peter Mankowski, Information and Formal Requirement in EC Private Law, ERPL 13/2005, 779-796, at 785. The more important question is: Provided that in certain cases written form includes the 9 signature, what should be the consequences of its lack? The acquis provides no answer. In C-159/97 – Trasporti Castelletti Spedizioni Internazionali SpA v Hugo Trumpy SpA. of 16 March 1999, the ECJ answers the question whether the jurisdiction clause must be contained in a written document which bears the signature of the party stipulating this clause. The European Court held that it is for the national court to refer to the commerEsther Arroyo i Amayuelas/Barbara Pasa/Antoni Vaquer Aloy

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cial usages in the branch of international trade or commerce concerned, in order to determine whether the insertion of the jurisdictional clause in a standard form, which has not been signed by the party not involved in drawing it up, is consistent with the forms according with the usages of international trade. Nevertheless, the understanding that signature is part of consent (cf. ECJ, judgment of 9 November 2000, C-387/98 – Coreck Maritime GmbH v Handelsveem BV and Others where the Court established that the purpose of the requirements as to form imposed by Art. 17 of the Brussels Convention is to ensure that consensus between the parties is in fact established) would bring the interpreter to consider signature as part of the written form. 10 National rules are not very clear. In Spain, Art. 80(1) of the new Consumer Protection Act (DLeg. 1/2007, of 16th November, por el que se aprueba el Texto Refundido de la Ley General para la Defensa de los Consumidores y Usuarios y otras leyes complementarias), lays down that standard contract terms should be accepted and signed by the consumer, although in case of phone or electronic contracts, a ‘conventional’ signature is not required. That could not mean that an electronic signature is needed, since it is unsuitable for a phone contract. By contrast, Art. 111(1) of the above mentioned Act, requires a signature by the consumer’s own hands in contracts concluded away from business psemisses. Otherwise, according to case law, the contract can be declared null and void (hence, it is a requirement for validity), cf. CA Córdoba judgment AC 2000/1716 of 9 September 2000. However, it is neither necessary to sign all the contract sheets nor every clause (TS 7 December 1989 for a lease contract). In France, Jacques Ghestin, Formation du contrat, Paris, LGDJ, 1993, § 446, p. 411 admits that “il faut à l'egard de chaque texte s'interroger sur l'opportunité de faire de la signature une condition de validité”. In Italy, legal scholars do not express a common opinion on the requirement of signature: while timesharing and consumer credit contracts require a signature by the consumer’s own hands in the contract, other kinds of consumer contracts do not require any signature, since it is possible to conclude a contract by phone, by email, etc. cf. Mara Messina, Libertà di forma e nuove forme negoziali, Giappichelli, Torino, 2005, 111-225; Elena Morelato, Nuovi requisiti di forma nel contratto, Trasparenza contrattuale e neoformalismo, Cedam, Padova, 2006, 41. However, German CC § 126(1), in the cases where written form is imposed, requires the issuing party’s name in handwriting or a notarily authentified signature: “Ist durch Gesetz schriftliche Form vorgeschrieben, so muß die Urkunde von dem Aussteller eigenhändig durch Namensunterschrift oder mittels notariell beglaubigten Handzeichens unterzeichnet werden.” Cf. also Swiss law: Article 13(I) of the Code des Obligations Suisse: “[L]e contrat pour lequel la loi exige la forme écrite doit être signé par toutes les personnes auxquelles il impose des obligations”. 11 It was decided to distinguish between simple written form (‘in writing’), which does not require a signature, and provide ‘signature’ as an additional form level for those statements which have to be signed. The old version of the present Article (Art. 1:306 in ACQP Vol. I) said: “A statement in textual form on a durable medium qualifies as having been made ‘in writing’ if the text is stored on the medium permanently and in directly legible characters”. The amended version shows that paper is just an example for a medium which allows the recipient to read the information directly. As in the old version, “on paper” and “durable medium” are 92

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Article 1:307 In writing

Art 1:307 12–14

equivalent, but not all “durable medium” means “on paper”. The text has been rephrased in order to adapt it to Art. I. – 1:106(1) DCFR.

B.

Commentary

1.

Meaning and Purpose

The definition of ‘in writing’ is provided for those situations where, according to the leg- 12 islator, it is not sufficient if textual formation is provided on any ‘durable medium’, but where it is essential that the information is stored permanently (as opposed to “accessible for future reference for a period of time adequate to the purposes of the information” for durable medium, Art. 1:306 ACQP), and directly legible, e.g. printed on paper.

2.

Context

‘In writing’ is a sub-set of both ‘textual form’ (Art. 1:305 ACQP) and ‘durable medium’ 13 (Art. 1:306 ACQP). Within the Acquis Principles, sparing use is made of ‘in writing’, as e.g. for timeshare contracts. For most purposes, ‘durable medium’ appears to be sufficient for serving the protective function of form requirements. Article 2:204 ACQP requires certain information to be provided to the consumer ‘in writing’ for distance contracts, but allows substitution by another textual form on a durable medium if this is “reasonably accessible to the recipient”.

3.

Explanation

The definition of ‘in writing’ joins two further elements to ‘textual form on a durable me- 14 dium’ (cf. Art. 1:305 and 1:306 ACQP): (1) the information must be stored permanently on the medium, and (2) the text must be in directly legible characters. As set out above, a declaration or information provided “in writing” does not require a signature. Permanent does not necessarily mean eternal. What is required is that the medium is robust enough for the information to be preserved, under normal circumstances, for as long as that information is legally, rather than historically, relevant, provided that the medium is kept with proper care. The text is in directly legible characters if the characters in which the text is stored permanently can be read without any change or conversion. Reading may be visual (letters printed on paper) or tactile (Braille letters). Sound recordings are not ‘in writing’ because they are neither in textual form (cf. Art. 1:305 ACQP), nor directly legible; they will, however, usually qualify as ‘durable medium’.

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Art 1:307, 15, 16 Art 1:308, 1

4.

Chapter 1: Introductory Provisions Section 3: Notice and form

Examples

Example 1 15 E, who leads a happy eremite life on a rural retreat without access to telecommunication, enquires mail order bookseller B about a book entitled “Meditation in the Mountains”. B gives a quote and refers to a DVD enclosed for details about their business and their standard terms. The DVD does not qualify as ‘in writing’ under Art. 2:204 ACQP, because the text stored on it is not directly legible. Moreover, ‘in writing’ cannot be replaced by ‘durable medium’ under Art. 2:204(3) ACQP, as in this case, the required information is not “reasonably accessible to the recipient”. Example 2 16 A timeshare contract is printed on paper which is not entirely acid free. There is a risk that the paper will turn yellow after a few years, and that the paper will become fragile after fifty years. The contract is nevertheless ‘in writing’.

Article 1:308: Signatures (1) ‘Handwritten signature’ means the name of, or sign representing a person written by that person’s own hand for the purpose of authentication; (2) ‘electronic signature’ means data in electronic form which are attached to or logically associated with other electronic data, and which serve as a method of authentication; (3) ‘electronic’ means relating to technology with electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities; (4) ‘advanced electronic signature’ means an electronic signature which meets the following requirements: (a) it is uniquely linked to the signatory; (b) it is capable of identifying the signatory; (c) it is created using means which can be maintained under the signatory’s sole control; and (d) it is linked to the data to which it relates in such a manner that any subsequent change of the data is detectable.

A. Foundation in the Acquis 1.

Sources

1 ‘Signature’ is not a notion generally defined in the acquis. A handwritten signature was expressly required only in Art. 2(2)(d) of the First Council Directive 68/151/ EEC of 9 March 1968 on co-ordination of safeguards which, for the protection of the interests of members and others, were required by Member States of companies within the meaning of the second paragraph of Art. 58 of the Treaty, with a view to making such safeguards equivalent throughout the Community:

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Art 1:308 2, 3

Article 1:308 Signatures

Art. 2(2)(d) of the First Council Directive 68/151/ EEC:

[...] their statutes contain a clause requiring approval by the company before the transfer of shares to third parties, except in the case of transfer in the event of death and, if the statutes so provide, in the case of transfer to a spouse, forebears or issue; transfers shall not be in blank, but shall be in writing under hand, signed by the transferor and transferee or by notarial act.

This article was suppressed by Directive 2003/58 / EC: Art. 3(3) Directive 2003/58

“Member States shall take the necessary measures to ensure that certification of electronic copies guarantees both the authenticity of their origin and the integrity of their contents, by means at least of an advanced electronic signature within the meaning of Article 2(2) of Directive 1999/93/ EC of the European Parliament and of the Council of 13 December 1999 on a Community framework for electronic signatures”.

The terms ‘electronic signature’ and ‘advanced electronic signature’ are defined in Art. 2 2 (1) and (2) E-Signatures D. Art. 2(1) E-Signatures D.

“electronic signature” means data in electronic form which are attached to or logically associated with other electronic data and which serve as a method of authentication

Art. 2(2) E-Signatures D.

‘advanced electronic signature’ means an electronic signature which meets the following requirements: (a) it is uniquely linked to the signatory; (b) it is capable of identifying the signatory; (c) it is created using means that the signatory can maintain under his sole control; and (d) it is linked to the data to which it relates in such a manner that any subsequent change of the data is detectable;

Although the E-Signatures D. makes extensive use of the term ‘electronic’, the directive 3 does not contain a definition of the term. However, Directive 1998/48 provides a definition of the term ‘by electronic means’ which can be used in the context of electronic signatures as well. Art. 1(2) Directive 1998/48

“by electronic means” means that the service is sent initially and received at its destination by means of electronic equipment for the processing (including digital compression) and storage of data, and entirely transmitted, conveyed and received by wire, by radio, by optical means or by other electromagnetic means.

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Art 1:308 4–7

2.

Chapter 1: Introductory Provisions Section 3: Notice and form

Development

4 The definitions suggested above for ‘electronic signature’ and ‘advanced electronic signature’ are strictly based on Art. 2(1) and (2) of the E-Signature D. The definition of ‘electronic’ is broadly modelled on Art. 1(2) of Directive 1998/48 yet follows the more concise wording of Sec. 106(2) US Electronic Signatures in Global and National Commerce Act 2000. Certainly, some of the technologies referred to in the Art. 1(2) of Directive 1998/48 and the cited US legislation, are not technically electronic (e.g. optical means). Consequently, the term ‘electronic’ is not used in a narrow sense but as a descriptive term for a variety of current and future data transmission technologies.

3.

Political Issues

5 As already said, handwritten signature was expressly required only in Art. 2(2)(d) of the First Company D. It could be inferred, as argumentum e contrario, that if the acquis does not require a handwritten signature, it should not be deemed necessary to provide it in this form.

B.

Commentary

1.

Meaning and Purpose

6 Requirements of separate signatures can serve several purposes. Signatures are a useful tool for authentication. Moreover, signature requirements may be used as an instrument of consumer protection legislation, where they can assure that information is not slipped past the unsuspecting consumer. Electronic signatures may serve the same purposes in electronic transactions. In an electronic environment, the potential for fraud is considerable, as the original of an electronic message is usually indistinguishable from a copy. Thus, the purpose of electronic signatures is to provide the technical means to identify the sender of an electronic message and to associate that person with the content of the message.

2.

Context

7 Currently the Acquis Principles do not contain any provisions stipulating the requirement of a signature or any electronic signature. However, at a later stage, future provisions of the Acquis Principles requiring a method of authentication may refer to the definitions provided in Art. 1:308. Thus, these definitions may serve as a basis for further development of the Acquis Principles. Such rules could be related to the formation of contract (cf. Art. 4:101 ACPQ et seq.), as signatures ensure that the parties have given their consent (cf. ECJ judgment of 16 March 1999, C-159/97 – Trasporti Castelletti Spe-

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Article 1:308 Signatures

Art 1:308 8, 9

dizioni Internazionali SpA v Hugo Trumpy SpA (para. 34)). For the time being, the present Article could serve as a sort of interpretation guide e.g. for authentication requirements stipulated in a contract. The present Article opts for a ‘non discriminatory approach’ to electronic technologies, electronic signatures and authentication methods, like other jurisdictions (i.e. US) did. Moreover, it is suggested to adopt a general definition of “electronic”, like other jurisdictions have done. An example are Section 106(1) and (2) of the US Electronic Signatures in Global and National Commerce Act 2000 which define the terms ‘electronic’ and ‘electronic signature’. The Uncitral Model Law on Electronic Signatures 2001 gives a definition of ‘electronic signature’ that deserves high consideration. “Electronic signature” means data in electronic form in, affixed to or logically associated with, a data message, which may be used to identify the signatory in relation to the data message and to indicate the signatory’s approval of the information contained in the data message (Art. 2(a)). Article 6 equates in general electronic and handwritten signatures.

3.

Explanation

The Article provides only definitions. It neither establishes that handwritten and elec- 8 tronic signatures are equivalent (but cf. Recitals 16, 17 and Art. 5(1) E-Signatures D.), nor regulates the effects of signature on documents (cf. supra Art. 1:307 ACQP, No. 10). As mentioned above, the Article does not provide that handwritten signatures can always be substituted by electronic signatures. The present Article does not provide a legal definition of ‘electronic agent’. It has to be borne in mind that when a statement requires a signature, this can be provided either by the parties or by electronic agents, as the case may require.

4.

Example

A uses a so-called signature file which is attached to all email messages sent by A. It in- 9 dicates A’s name, address, and telephone number. This provides information about A, but no authentication. So this is not an ‘electronic signatures’, just as the use of stationery with a printed name and address cannot replace a handwritten signature.

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Chapter 2: Pre-Contractual Duties General Provisions Section 1: General duties

Article 2:101: Good faith In pre-contractual dealings, parties must act in accordance with good faith.

A. Foundation in the Acquis 1.

Sources

The present Article is based on Art. 2(h) of the Unfair Commercial Practices D.; Art. 4 1 (2) of the Distance Selling D.; Art. 3(2) of the Financial Services Distance Selling D.; ECJ and CFI case law. Recital 16 and Art. 3(1) of the Unfair Terms D.; Art. 3(1) and Art. 4(1) of the Commercial Agents D. have been considered as well.

2.

Development

The principle of good faith is explicitly mentioned in the directives quoted supra 2 (No. 1): Art. 2(h) Unfair Commercial Practices D.

“‘professional diligence’ means the standard of special skill and care which a trader may reasonably be expected to exercise towards consumers, commensurate with honest market practice and/or the general principle of good faith in the trader’s field of activity.”

Art. 4(2) Distance Selling D. and Art. 3(2) Financial Services Distance Selling D.

“The information referred to in paragraph (1), the commercial purpose of which must be made clear, shall be provided in a clear and comprehensible manner in any way appropriate to the means of distance communication used, with due regard, in particular, to the principles of good faith in commercial transactions (...)”

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Recital 16 Unfair Terms D.

“(...) whereas, in making an assessment of good faith, particular regard shall be had to the strength of the bargaining positions of the parties, whether the consumer had an inducement to agree to the term and whether the goods or services were sold or supplied to the special order of the consumer; whereas the requirement of good faith may be satisfied by the seller or supplier where he deals fairly and equitably with the other party whose legitimate interests he has to take into account.”

Art. 3(1) Unfair Terms D.

“A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer.”

Art. 3(1) Commercial Agents D.

“In performing has [sic!] activities a commercial agent must look after his principal’s interests and act dutifully and in good faith.”

Art. 4(1) Commercial Agents D.

“In his relations with his commercial agent a principal must act dutifully and in good faith.”

3 In Community law, the duty to act in accordance with good faith applies especially in pre-contractual dealings. The pre-contractual phase is governed both by rules regarding general contract law and trade practices law. The acquis often does not draw an exact line between those two fields of law. Since both areas address the pre-contractual phase, Community law frequently combines “good faith” (usually understood as a principle of contract law) and “fair trading” (commonly more connected with trade practices law). The overlapping of those two concepts in EC law becomes apparent by looking at the different language versions of Art. 4(2) of the Distance Selling D.: Whereas some versions refer to the principle of fair trading (German: “Lauterkeit”, Dutch: “beginselen van eerlijkheid”, French: “principes de loyauté”; Italian: “principi di lealtà”, Portuguese: “princípios da lealdade”), the English and the Spanish version use the notion of “good faith” or “buena fe”. By contrast, Art. 3(2) of the Financial Services Distance Selling D. – although following otherwise Art. 4(2) of the Distance Selling D. – uses in all of the before mentioned language versions the term “good faith” (German: “Treu und Glauben”, Dutch: “goede trouw”, French: “bonne foi”, Italian: “buona fede”, Portuguese: “boa fé”, Spanish: “buena fe”). The Unfair Commercial Practises D., on the other hand, explicitly combines the principles of “good faith” and “fair trading”. According to Art. 5(2)(a) a commercial practice shall be unfair if it is contrary to the requirements of professional diligence, i.e. contrary to the standard of special skill, incommensurate “with honest market practice and/or the general principle of good faith” (Art. 2(h)). Nevertheless, Art. 3 (2) states that the Unfair Commercial Practices D. “is without prejudice to contract law and, in particular, to the rules on the validity, formation or effect of a contract.”

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Article 2:101 Good faith

Art 2:101 4–6

In fact, from a contract law perspective one may argue that many of the commercial fair- 4 ness rules could also be understood as a concretisation of the duty to act in accordance with good faith in pre-contractual dealings. This kind of interference and interdependency between contract law rules and the provisions regarding commercial fairness is especially obvious in the field of information requirements, since both fields of law oblige a business, under certain circumstances, to provide information (cf. Micklitz/Keßler, Gewerblicher Rechtsschutz und Urheberrecht/Internationaler Teil (GRURInt) 2002, 885, 890 et seq.; Schulze/Schulte-Nölke [eds.], Analysis of National Fairness Laws Aimed at Protecting Consumers in Relation to Precontractual Commercial Practices and the Handling of Consumer Complaints by Business, p. 91; Busch, in: Ajani/Ebers [eds.], Uniform Terminology for European Contract Law, Baden-Baden (2005), p. 219 et seq.). The interaction between contract law and fair practices law is close at hand with regard to aggressive marketing selling as well: Harassment, coercion or undue influence may constitute an unfair commercial practice (leading to collective proceedings such as administrative penalties or claims of consumer associations) and – at the same time – such a practice may be regarded as a breach of (pre-)contractual duties (leading to contractual remedies, e.g. nullity/avoidance of the contract or damages). Against this background, the general duties for pre-contractual dealings are mainly derived from directives and judgments both on contract law and trade practices law. Besides the directives quoted above, there is a multitude of individual provisions within 5 secondary EC law that can be understood as a closer definition of the imperative of good faith in pre-contractual dealings. Foremost among these, are the following duties: – Duty of a business to act with special skill and care that may reasonably be expected to be used with regard, in particular, to the legitimate expectations of consumers; cf. Art. 2:102 ACQP. – Duty of a party not to negotiate a contract with no real intention of reaching an agreement with the other party, cf. Art. 2:103 ACQP. – Duty of a business not to use aggressive commercial practices, especially to avoid harassment, coercion, including the use of physical force, or undue influence; cf. Art. 8 of the Unfair Commercial Practices D. – Duty of a business not to mislead consumers and traders; cf. especially Art. 6-7 of the Unfair Commercial Practices D. and (for B2B relations) Directive 2006/114 concerning misleading and comparative advertising. – Duty to inform the other party; cf. Art. 2:201 ACQP et seq. Duty to give advice; cf. Art. 19(4) of the Markets in Financial Instruments D. and Art. 12 of the Directive 2002/92. For more detail cf. Ebers, in: vol. 8.2 Electronic Journal of Comparative Law, (June 2004), http://www.ejcl.org/82/art82-2.html. – Duty to take reasonable steps to draw the other party’s attention to terms which have not been individually negotiated; cf. Art. 6:201 ACQP. In the acquis, the requirement of good faith is not limited to pre-contractual dealings:

6

– Interpretation of statements and contracts: According to Recital 8, Art. 2(2)(d), Art. 2(4) 1st indent of the Consumer Sales D. the question whether a consumer good is in conformity with the contract is to be determined by the quality and performance which the consumer can “reasonably expect”, taking into account any public statements on the specific characteristics of the goods made about them by the seller or

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Chapter 2: Pre-Contractual Duties General Provisions . Section 1: General duties

producer, particularly in advertising or on labelling. A structurally similar provision is given in Art. 3(2)(2) of the Package Travel D. and Art. 5(2) of the Timeshare D. 2008. These provisions cannot only be read as pre-contractual information duties or rules on formation of contract but also, as rules on interpretation of statements and contracts. – Assessing the fairness of contract terms: Good faith plays also a major role in assessing the fairness of terms which have not been individually negotiated (Art. 3 of the Unfair Terms D.). However, the content of the principle of good faith in the acquis is not yet clear. Whilst the ECJ in C-240/98 to C-244/98 (joint cases) – Océano reviewed a jurisdiction clause according to the standard of “good faith”, in C-237/02 – Freiburger Kommunalbauten it stressed that the court would not decide whether a contractual term is in breach of good faith in a concrete case (para. 22): “It follows (...) that in the context of its jurisdiction under Art. 234 EC to interpret Community law, the Court may interpret general criteria used by the Community legislature in order to define the concept of unfair terms. However, it should not rule on the application of these general criteria to a particular term, which must be considered in the light of the particular circumstances of the case in question.” – Performance of contracts: Many directives and regulations provide for a duty of the debtor to act in accordance with good faith in performing its obligation and some provisions in the acquis even provide for specific contracts as well for a duty to cooperate or a duty of loyalty: According to Art. 3(1) of the Commercial Agents D. the commercial agent must look after his principal’s interests and act dutifully and in good faith in performing his activities. The rule also works conversely, so that the principal must act dutifully and with good faith in his dealings with his agent (Art. 4(1)). Art. 5(5) to (7) of the Package Travel D. and Art. 75(1) subparagraph 4 of the Payment Services D. also contain individual rules which require mutual regard for the interests of the other party. Moreover, for denied boarding and cancellation of flights, Recital 17 of the Regulation 261/2004 states that passengers “should be adequately cared for and should be able to cancel their flights with reimbursement of their tickets or to continue them under satisfactory conditions” and Art. 9 of this regulation provides that passengers shall be offered free of charge, meals /refreshments, hotel accommodation as well as transport between the airport and place of accommodation. Extensive duties to cooperate during the performance phase are to be found also in Art. 19 of the Markets in Financial Instruments D. (conduct of business obligations when providing investment services to clients) and in Art. 21 of the Markets in Financial Instruments D. (obligation to execute orders on terms most favourable to the client). – Post-contractual stage: Some directives provide for specific duties of the parties after a contract has ended. The Unfair Commercial Practices D. applies to commercial practices “before, during and after a commercial transaction in relation to a product” (Art. 3(1)); therefore, the directive covers e.g. as well after-sale customer assistance. The Commercial Agents D., on the other hand, contains in Art. 20 detailed rules on agreements restricting the business activities of a commercial agent following termination of the agency contract. 7 Both the ECJ and the CFI have recognised the principle of good faith and concretised in many cases its content (cf. Riesenhuber, System und Prinzipien des Europäischen Vertrags102

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Article 2:101 Good faith

Art 2:101 8–10

rechts, Berlin (2003), p. 398-414; Laumann, Der privatrechtliche Vertragsschluss in der Rechtsprechung des Europäischen Gerichtshofs, Frankfurt am Main (2005), p. 80-86). The most relevant cases concern: – Prohibition of venire contra factum proprium: ECJ 22 March 1990, C-347/87 – Triveneta Zuccheri, para. 14 et. seq. (The Commission, having failed to obtain a declaration by the court that a Member State practice was incompatible with Community law, is “estopped” from preventing the Member State from carrying out this practice); ECJ 20 March 1997, C-24/95 – Land Rheinland-Pfalz v Alcan Deutschland GmbH, para. 40-42 (concerning the recovery of state subsidies). – Prohibition of abusive exercise of a right: ECJ 12 May 1998, C-367/96 – Kefalas, para. 20 (abusive exercise of a claim against the increase of capital); ECJ 23 March 2000, C-373/97 – Diamantis, para. 33 (abusive exercise of a claim against the increase of capital); ECJ 30 September 2003, C-167/01 – Inspire Art, para. 136 (improper recourse to freedom of establishment); cf. for more detail Fleischer, JZ 2003, 865-874; CFI 8 May 2007, T-271/04 – Citymo, para. 131 (abuse of the right not to contract). Given the fact, that the requirement of good faith in Community law is not limited to 8 pre-contractual dealings, an alternative option could have been to include a general rule on good faith. However, currently the acquis does not provide a solid basis for an overarching principle of good faith that could serve as a single standard for all aspects of contract law. The concept of good faith appears in the acquis rather in various different facets depending on whether it relates to pre-contractual, contractual or even post-contractual matters. Therefore, it was preferred to include individual provisions for the different aspects of the good faith principle (cf. Art. 2:103, 6:301, 7:101 et seq. ACQP).

3.

Political Issues

Extending the fragmented acquis provisions on pre-contractual good faith, may raise a 9 political issue. It should, however, be kept in mind that, in addition to the stated source in the acquis, many Member States recognise a general duty of pre-contractual good faith; cf. Hesselink, in: Beale et al. [eds.], Cases, Materials and Text on Contract Law, Oxford (2002), Chapter 2 Sec. 2, 237-293; Zimmermann/Whittaker [eds.], Good Faith in European Contract Law, Cambridge (2000); Schneider, Uberrima Fides, Berlin (2004).

B.

Commentary

1.

Meaning and Purpose

The Article contains a general duty for the parties to act in accordance with good faith in 10 pre-contractual dealings. Its purpose is to enforce the standards of fairness and reasonableness in pre-contractual dealings. The present Article is not a specific consumer provision; its scope, however, includes business to consumer transactions. Insofar, it seeks to promote procedural fairness allowing the consumer to make an unforced and informed choice. Article 2:101 must not be construed as an argument against a good faith requirement outside its scope of application.

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Art 2:101 11–14

2.

Chapter 2: Pre-Contractual Duties General Provisions . Section 1: General duties

Context

11 The Article applies as a general duty to all pre-contractual dealings. Article 2:102 ACQP and Art. 2:103 ACQP give further guidelines as to the interpretation of this general duty. Apart from this, the ACQP provide for specific requirements of good faith outside precontractual dealings, such as assessing the fairness of terms which have not been individually negotiated (Art. 6:301(1) ACQP), the duty of a debtor to perform its obligation in accordance with good faith (Art. 7:101(1) ACQP), good faith of a creditor in the exercise of rights (Art. 7:102 ACQP) and the duty of loyalty and co-operation (Art. 7:103, 7:104 ACQP).

3.

Explanation

12 Given that “good faith” refers to general standards of fairness, the term must be understood in an objective rather than a subjective sense (“Treu und Glauben” instead of “guter Glaube”). The latter may also be relevant for community law in some instances (e.g. ECJ 10 January 2006, C-402/03– Skov Æg, para 51: a reference to the general principle of legal certainty in order to limit the effects of an interpretation of EC law by the ECJ requires inter alia that the person concerned has acted in “good faith”, see also the German version of this judgment “guter Glaube”). Nevertheless, such an subjective concept is not meant by the present Article. However, an objective understanding of “good faith” in the Article at hand does not exclude that subjective elements of fact (such as the knowledge of a party at certain time) become relevant when the objective standard of the present rule is applied. The requirement of good faith is not, like most other acquis rules, confined to concrete, pre-established facts or to defined legal effects. Rather, the Article is an open provision, the content and the consequences of which depend on the circumstances of each specific case. Therefore, the abstract standard of good faith must be consolidated by case law in order to be suitable for the needs of application in legal practice. The Article can be interpreted as an empowerment to the courts to concretise and to supplement the rules laid down in the following articles. The requirement to act in accordance with good faith applies broadly, to all kinds of pre-contractual situations and, in particular, to all kind of parties; it is not limited to dealings between a business and a consumer. 13 The Article applies only to pre-contractual dealings carried out by one or more (potential) parties to the contract. Conduct of parties contrary to good faith after a contract has been concluded is not regulated by the present Article, but by specific provisions on good faith (cf. supra, No. 11). 14 The term “pre-contractual dealings” is not confined to offers (cf. Art. 4:102 ACQP et seq.) or an “invitation to purchase” (cf. Art. 2(i) Unfair Commercial Practices D. “invitation to purchase” means a commercial communication which indicates characteristics of the product and the price in a way appropriate to the means of the commercial com-

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Article 2:101 Good faith

Art 2:101 15–18

munication used and thereby enables the consumer to make a purchase”). On the other hand, “pre-contractual dealings” widely overlap with commercial practices in the sense of Art. 2(d) Unfair Commercial Practices D.: “‘business-to-consumer commercial practices’ (hereinafter also referred to as commercial practices) means any act, omission, course of conduct or representation, commercial communication including advertising and marketing, by a trader, directly connected with the promotion, sale or supply of a product to consumers.” The duty to act in good faith encompasses the duty of a business to act with the special 15 skill and care that may reasonably be expected to be used with regard, in particular, to the legitimate expectations of consumers (cf. Art. 2:102 ACQP). Moreover, a party may be liable if it conducts or discontinues negotiations in a manner contrary to good faith (cf. Art. 2:103 ACQP). More generally, a party has to do everything that can be expected from a decent person acting under the same circumstances and having the same information. This includes a duty to respect the rights and legal positions of the other side during the pre-contractual stage. A particular application of the principle of good faith is to protect a party from the in- 16 consistent behaviour of the other party (prohibition of venire contra factum proprium); cf. supra, No 7. An abusive exercise of a right may also fall under the present rule, e.g. if a party requires information where this information is already known to the party and, due to the circumstances, a further confirmation or document is not necessary either. The effects of infringement depend on the circumstances of the case. If no contract has 17 been concluded, a party who has acted in pre-contractual dealings contrary to good faith may be liable for any reliance damages of the other party (Art. 2:103(2) ACQP, Art. 2:208(3) ACQP). If a contract has been concluded, the contract normally has to be interpreted in a way detrimental to the unfaithful party; in this case, the contractual remedies for nonperformance apply (Art. 2:103 ACQP, No. 8; Art. 2:208(2) ACQP). Concerning other effects cf. Art. 1:201 ACQP, No. 21 (would-be consumer pretends to act in a business capacity) and Art. 1:304 ACQP, No. 7 et seq. (formal requirements and good faith). The parties may not exclude the duty to act in accordance with good faith. Nevertheless, 18 the mandatory character of this duty is to be considered together with the principle of party autonomy, especially the principle of freedom of contract. In most cases, the requirements of good faith will be influenced by what the parties have agreed to. Moreover, the parties are free to agree on a certain contractual clause addressing a problem that would otherwise be covered by the duty of good faith. However, mandatory rules, e.g. for consumer contracts cannot not be circumvented.

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Art 2:101, 19, 20 Art 2:102, 1, 2

4.

Chapter 2: Pre-Contractual Duties General Provisions . Section 1: General duties

Examples

Example 1 19 Visitor V asks taxi driver T for a ride “to the Museum where the famous painting from X can be seen”. As T knows, this Museum is closed this week. It is contrary to good faith if T drives V to the museum and charges V for this useless ride. Example 2 20 A and B have started negotiations for a contract. The negotiations take place within an industrial site of A’s. It would be contrary to good faith if B took photographs for espionage purposes.

Article 2:102: Legitimate expectations In pre-contractual dealings, a business must act with the special skill and care that may reasonably be expected to be used with regard, in particular, to the legitimate expectations of consumers.

A. Foundation in the Acquis 1.

Sources

1 This Article is based on Recital 6, Art. 6(1)(b) of the Product Liability D.; Art. 3(2)(2) of the Package Travel D.; Recital 16 of the Unfair Terms D.; Art. 5(2) of the Timeshare D. 2008; Recital 8, Art. 2(2)(d) and Art. 2(4) 1st indent of the Consumer Sales D.; Art. 3(3)(f) of the General Product Safety D.; Art. 2(h) of the Unfair Commercial Practices D.; ECJ and CFI case law.

2.

Development

2 The concept of legitimate or (in other words) reasonable expectations is expressly spelled out in the following directives: Recital 6 of the Product Liability D.

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“whereas, to protect the physical well-being and property of the consumer, the defectiveness of the product should be determined by reference not to its fitness for use but to the lack of the safety which the public at large is entitled to expect; whereas the safety is assessed by excluding any misuse of the product not reasonable under the circumstances;”

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Art 2:102 3

Article 2:102 Legitimate expectations

Art. 6(1)(b) Product Liability D.

“A product is defective when it does not provide the safety which a person is entitled to expect, taking all circumstances into account, including (...) (b) the use to which it could reasonably be expected that the product would be put.”

Recital 16 Unfair Terms D.

“(...) whereas, in making an assessment of good faith, particular regard shall be had to the strength of the bargaining positions of the parties, whether the consumer had an inducement to agree to the term and whether the goods or services were sold or supplied to the special order of the consumer; whereas the requirement of good faith may be satisfied by the seller or supplier where he deals fairly and equitably with the other party whose legitimate interests he has to take into account.”

Recital 8 Consumer Sales D.

“(...) whereas the quality and performance which consumers can reasonably expect will depend inter alia on whether the goods are new or second-hand (...)”

Art. 2(2)(d) Consumer Sales D.

“Consumer goods are presumed to be in conformity with the contract if they (...) (d) show the quality and performance which are normal in goods of the same type and which the consumer can reasonably expect, given the nature of the goods and taking into account any public statements on the specific characteristics of the goods made about them by the seller, the producer or his representative, particularly in advertising or on labelling. “

Art. 2(4) 1st indent Consumer Sales D.

“The seller shall not be bound by public statements, as referred to in paragraph 2(d) if he: – shows that he was not, and could not reasonably have been, aware of the statement in question.”

Art. 3(3)(f) General Product Safety D.

“In circumstances other than those referred to in paragraph (2), the conformity of a product to the general safety requirement shall be assessed by taking into account the following elements in particular, where they exist: (...) (f) reasonable consumer expectations concerning safety.”

Art. 2(h) Unfair Commercial Practices D.

“‘professional diligence’ means the standard of special skill and care which a trader may reasonably be expected to exercise towards consumers, commensurate with honest market practice and/or the general principle of good faith in the trader’s field of activity.”

Moreover, the concept of legitimate expectations at least indirectly underpins Art. 3(2) 3 (2) Package Travel D. and Art. 5(2) of the Timeshare D. 2008. Both provisions take into account the legitimate expectations of consumers which arise from pre-contractual statements, cf. Art. 4:107 ACQP et seq.

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4 Both the ECJ and the CFI have recognised the concept laid down in the present Article. Both courts concretised the concept of professional diligence and legitimate expectations in pre-contractual dealings in numerous decisions, particularly in the area of procurement law (cf. Art. 2:103 ACQP, No. 4 and 9 et seq.), intellectual property, especially trademarks (cf. e.g. C-404/02 – Nichols plc v. Registrar of Trade Marks, para. 23; C-299/99 – Philips, para. 59 and 63, and C-218/01 – Henkel, para. 50), labelling law and trade practices law including free movement case law (cf. Lettl, Der lauterkeitsrechtliche Schutz vor irreführender Werbung in Europa, München (2004); Radeideh, Fair Trading in EC Law: Information and Consumer Choice in the Internal Market, Groningen (2005)). In this context, the ECJ has particularly concretised the benchmark of the average consumer (cf. ECJ, C-210/96 – Gut Springenheide). 5 Besides pre-contractual dealings, the ECJ has used the concept of “legitimate expectations” especially in the areas of competition law, customs unions, agriculture and staff regulations; cf. C-30/00 – William Hinton & Sons Ltd v. Fazenda Publica: The customs authorities of a Member State must refrain from carrying out post-clearance recovery of duties where the liable person acting in good faith could not reasonably have detected that error, despite his professional experience and the diligence shown by him; C-370/96 – Covita AVE v. Elliniko Dimosio (Greek State): The error made by the competent authorities must be such that it could not reasonably be detected by the person liable acting in good faith, despite his professional experience and the diligence shown by him; T-307/01 – Jean Paul François v. Commission (concerning professional misconduct and grave negligence as regards compliance with rules of financial management). 6 The above mentioned directives and judgments make clear that the standard of professional diligence and the concept of legitimate expectations is not limited to business to consumer transactions but is an overarching principle of Community law. Moreover, it should be taken into account that this concept is also reflected to some extent by the Vienna Sales Convention (Art. 9(1)-(2), Art. 35), the UNIDROIT Principles (Art. 1.9)) and PECL (Art. 1:105, 1:302). An alternative solution would have been to extend the scope of Art. 2:102 beyond the field of pre-contractual dealings (cf. supra, Art. 2:101 ACQP, No. 8).

B.

Commentary

1.

Meaning and Purpose

7 The Article concretises the requirement of good faith in pre-contractual dealings laid down in Art. 2:101 ACQP.

2.

Context

8 The Acquis Principles contain a specific rule on legitimate expectations concerning performance in Art. 7:101(2) ACQP.

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Article 2:102 Legitimate expectations

3.

Art 2:102 9–13

Explanation

The scope of the present rule is limited to pre-contractual dealings between a business 9 and a consumer. While in B2C relations a certain degree of standardisation of “legitimate expectations” is possible with reference to the average consumer, it is hardly possible to make a similar standardisation in B2B relations. The acquis does not provide a sufficient basis for that anyway. Nevertheless, the present Article must not be construed as providing – by argumentum e contrario – that in a B2B context reasonable expectations of the parties are not protected at all. However, in B2B relations the relevance of such reasonable expectations has to be assessed on a case by case basis. The notions of “consumer” and “business” are defined in Art. 1:201 ACQP and Art. 1:202 ACQP. On the notion of “pre-contractual dealings” compare Art. 2:101 ACQP, No. 14. A business has to act “with the special skill and care that may reasonably be expected to be 10 used”. The reference to “special” skill and care makes clear that the standard depends on the field of activity of the business. Thus if businesses in a particular sector would be expected to behave in a certain way, this special standard will be expected. However, as the adjective “reasonable” makes clear, the standard of professional diligence is a normative one. Therefore, it would not be acceptable to argue that a business is acting with professional diligence if it complies with widespread, but poor standards common in a sector. Reasonableness is to be judged by what the persons acting in good faith and in the same 11 situation as the parties would consider being reasonable. In particular, in assessing what is “reasonable” the following circumstances should be taken into account: The field of activity of the business, the usages and practices of the businesses involved, widely established codes of conduct, the nature and purpose of the contract and the relevant group of clients addressed by the business. A business has to pay particular regard to the legitimate expectations of consumers. The 12 benchmark for this standard is the “average” consumer, “(...) who is reasonably well informed and reasonably observant and circumspect, taking into account social, cultural and linguistic factors, as interpreted by the Court of Justice (...)” (Recital 18 of the Unfair Commercial Practices D.). However, in ECJ case law the average consumer is neither defined as a person with individual characteristics nor defined as a particular group of people (cf. Twigg-Flesner/Parry/Howells/Nordhausen, An Analysis of the Application and Scope of the Unfair Commercial Practices Directive, A report for the Department of Trade and Industry, 18 May 2005, p. 15 et seq.). Rather, requirements and expectations depend highly on the individual circumstances of the goods and services in question and the targeted group of persons. If a product is aimed at a particular group of consumers, then the average consumer is 13 drawn from this group (Art. 5(2)(b) of the Unfair Commercial Practices D.). Community law and ECJ case law provide specific protection for “vulnerable consumers” when they are targeted alongside less vulnerable consumers (cf. Art. 5(3) of the Unfair Commercial Practices D.; ECJ C-382/87 – Buet). Where a business seeks to promote, sell or supply a product by a commercial practice that is likely to reach a group of consumers

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Art 2:102, 14 Art 2:103, 1, 2

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who are particularly vulnerable because of the mental or physical infirmity, age or credulity, in a way that the business could reasonably be expected to foresee, the conduct of the business should be assessed from the perspective of the average member of that group.

4.

Example

14 A has a shop for exotic animals and sells, for example, poisonous snakes. B, who enters the shop, can legitimately expect that A has taken professional precautions so that it is not dangerous to enter the shop and to take a close look at the animals.

Article 2:103: Negotiations contrary to good faith (1) A party is free to negotiate and is not liable for failing to reach an agreement. (2) However, a party who has conducted or discontinued negotiations contrary to good faith is liable for loss caused to the other party. (3) In particular, a party acts contrary to good faith if it enters into or continues negotiations with no real intention of reaching an agreement.

A. Foundation in the Acquis 1.

Sources

1 Paragraph (1) follows from the principle of freedom of contract and self-responsibility. Paragraph (2) and (3) are based on Art. 5(5) in conjunction with Annex I (5) to (6) of the Unfair Commercial Practices D.; Art. 2(1)(c) of the Directive 89/665 as amended by Directive 2007/66; Recital 10 and 11, Art. 1(2), Art. 2(1)(d), Art. 2(7) of the Directive 92/13 as amended by Directive 2007/66; CFI case law. The wording of the present Article follows Art. 2:301 PECL.

2.

Development

2 According to the Unfair Commercial Practices D. negotiations contrary to good faith are regarded as unfair. Annex I lists those commercial practices, which are in any event, considered as unfair. Especially misleading commercial practices are: “(5) Making an invitation to purchase products at a specified price without disclosing the existence of any reasonable grounds the trader may have for believing that he will not be able to offer for supply or to procure another trader to supply, those products or equivalent products at that price for a period that is, and in quantities that are, reasonable having

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Article 2:103 Negotiations contrary to good faith

Art 2:103 3, 4

regard to the product, the scale of advertising of the product and the price offered (bait advertising).” “(6) Making an invitation to purchase products at a specified price and then: refusing to show the advertised item to consumers, or refusing to take orders for it or deliver it within a reasonable time, or demonstrating a defective sample of it, with the intention of promoting a different product (bait and switch)”. Several directives in the area of public procurement law provide that an unsuccessful ten- 3 derer harmed by an infringement of Community provisions in the field of procurement law can claim compensation: Art. 2(1)(c) Directive 89/665, as amended by Directive 2007/66

“The Member States shall ensure that the measures taken concerning the review procedures specified in Article 1 include provision for the powers to: (...) (c) award damages to persons harmed by an infringement.”

Recital 10 and 11 Directive 92/13, as amended by Directive 2007/66

“(10) Whereas claims for damages must always be possible; (11) Whereas, where a claim is made for damages representing the costs of preparing a bid or of participating in an award procedure, the person making the claim is not be required, in order to obtain the reimbursement of his costs, to prove that the contract would have been awarded to him in the absence of such infringement (...).”

Art. 1(2) Directive 92/13, as amended by Directive 2007/66

“Member States shall ensure that there is no discrimination between undertakings likely to make a claim for injury in the context of a procedure for the award of a contract as a result of the distinction made by this directive between national rules implementing Community law and other national rules.”

Art. 2(1)(d) Directive 92/13, as amended by Directive 2007/66

“The Member States shall ensure that the measures taken concerning the review procedures specified in Article 1 include provision for the powers: (...) (d) and, in both the above cases, to award damages to persons injured by the infringement.”

Art. 2(7) Directive 92/13, as amended by Directive 2007/66

“Where a claim is made for damages representing the costs of preparing a bid or of participating in an award procedure, the person making the claim shall be required only to prove an infringement of Community law in the field of procurement or national rules implementing that law and that he would have had a real chance of winning the contract and that, as a consequence of that infringement, that chance was adversely affected.”

Moreover, the CFI in Embassy Limousines (CFI, 17 December 1998, T-203/96) and in Ci- 4 tymo (CFI, 8 May 2007, T-271/04) stressed that there may be a breach of the principle of the protection of legitimate expectations capable of giving rise to liability on the part of the Community according to Art. 288(2) of the EC-Treaty (ex Art. 215(2) of the ECThomas Pfeiffer/Martin Ebers

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Treaty). Thus, in a case where, before the contract in question was awarded, an unsuccessful tenderer had been encouraged by the contracting institution (here: Community administration) to make irreversible investments in advance and thereby to go beyond the risks inherent in the business under consideration, consisting in making a bid, the contracting institution was held liable (Embassy Limousines, summary para. 8 and holdings para. 74 et seq.). Although the contract in question stipulated the applicability of Luxembourg law, the CFI stated the liability principle in a general manner without particular reference to the law of the Grand Duchy. Likewise, in Citymo (para. 131 et seq.) the CFI ruled that, under the principle of good faith, the Community must not withhold its decision not to conclude a procurement contract for two months if its own conduct caused the legitimate expectation that the conclusion of a particular contract is certain. 5 Moreover it can be assumed that the above rules are not limited to contracts concluded as a result of a public procurement procedure. Just as in the field of water, energy, transport and telecommunications, a multitude of privately organised businesses are active and subject to the provisions of the directive when they exercise “special or exclusive rights” (Art. 86 EC). Procurement law thus covers aspects of private contract formation as well. Consequently, the present Article provides for a general rule on pre-contractual duties. Therefore, unlike Art. II. – 3:301 DCFR, it is not limited to the single issue of liability for a termination of negotiations.

3.

Political Issues

6 The Article states a case of liability that is not yet expressly acknowledged as part of the acquis. However, the underlying policies seem to be affirmed by the acquis, in particular with regard to the significance of the legitimate consumer expectations in EC law, so that this provision should be included in the present text.

B.

Commentary

1.

Meaning and Purpose

7 The present Article deals with a party’s liability for the loss it has caused to the other party by conducting or discontinuing negotiations in a manner contrary to good faith.

2.

Context

8 The Article is to be interpreted according to the requirements of good faith (Art. 2:101 ACQP) and legitimate expectations (Art. 2:102 ACQP). The legal consequences depend on the specific case. It is possible, according to the rules of interpretation, that the contract has to be construed in a way detrimental to the unfaithful party. In this case, the contractual remedies for non-performance of chapter 8

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Article 2:103 Negotiations contrary to good faith

Art 2:103 9–11

apply accordingly. In other cases, liability for loss caused to the other party is determined by paragraph (2). The kind of damage may differ depending on the kind of pre-contractual misconduct. If goods of the other side have been damaged, normal rules on the calculation of damages apply. If the unfaithfulness lies in the conduct of negotiations without real intention to contract, the other side may be limited to reliance damages.

3.

Explanation

The Article at hand applies to all kind of parties; it is not limited to negotiations between 9 a business and a consumer. As a rule, parties are free to decide whether they will conclude a contract or not. Parties may enter into negotiations and break them off without risking any liability. Generally, parties, especially businesses, “must bear the economic costs inherent in their activities, taking account of the circumstances of each case” (CFI, Embassy Limousines, para. 75). In negotiations, those economic risks include, inter alia, the costs connected with the preparation of an offer (Embassy Limousines, para. 75). However, a party, and especially a business, who has conducted or discontinued negotiations contrary to good faith is liable for loss caused to the other party. This applies especially if one party encourages the other to make irreversible investments in advance and thereby to go beyond the regular risks (acquisition costs) inherent in the business under consideration (Embassy Limousines, para. 76). Liability for conducting or discontinuing negotiations in a manner contrary to good faith 10 does not require fault (Embassy Limousines, para. 87), but the missing intention of reaching an agreement is an indicator that one party acts contrary to good faith (Art. 2:103(3) ACQP). The aggrieved party can claim compensation for all expenses incurred or work done in reliance of a contract (Embassy Limousines, para. 104). In some cases non-pecuniary damage may also be compensated (Embassy Limousines, para. 108). The aggrieved party cannot claim to be put into the position in which it would have been if the contract had been concluded. Therefore, the aggrieved party cannot claim compensation for its loss of profit, since that would result in giving effect to a contract that never existed (Embassy Limousines, para. 96).

4.

Examples

Example 1 (modelled on CFI, 17 December 1998, T-203/96): Business B intends to introduce a limousine service for its employees. After an offer has 11 been submitted by company C, the general manager of B informs C that, in a recent meeting, the directors of B have decided that B will accept C’s offer. At the same time he mentions that because of the urgency of the matter, B has commissioned another company to provide a temporary limousine service. In response to this information, C pre-

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Art 2:103 12

Chapter 2: Pre-Contractual Duties General Provisions . Section 1: General duties

pares for the request by acquiring new cars, hiring further drivers and preparing the necessary logistics. Yet, B extends the contract with the other company and finally informs C that it does not accept its offer. C demands damages. B is liable for damages under Art. 2:103(2) because B has conducted or discontinued negotiations contrary to good faith by encouraging C to make irreversible investments. Therefore C is entitled to claim compensation for all expenses incurred and work done in reliance of the contract. Example 2 (modelled on Austrian Supreme Court, 26 April 2005, 4Ob 65/05w): 12 Supermarket S advertises a discount of 16 EUR for each purchase of a “original box” containing 40 packages of tea-butter (i.e. prime quality butter). Customer C drives 100 kilometres to the supermarket immediately. There he realises that the supermarket only had a very limited amount of tea-butter in stock and which has already been sold out. C demands compensation for his fuel expenses. S is liable for those reliance damages under Art. 2:103(2) because S made an invitation to purchase the tea butter at a specified price without disclosing that there are just small amounts of tea butter available (bait advertising, cf. supra, No 2.).

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Section 2: Pre-contractual information duties Article 2:201: Duty to inform about goods or services Before the conclusion of a contract, a party has a duty to give to the other party such information concerning the goods or services to be provided as the other party can reasonably expect, taking into account the standards of quality and performance which would be normal under the circumstances.

A. Foundation in the Acquis 1.

Sources

The present Article reflects the provisions on conformity in Art. 2 of the Consumer 1 Sales D., which applies to business-to-consumer contracts, and Art. 35 CISG, dealing with international business-to-business contracts. Both contain concrete requirements relating to the individual contracting situation and rules for a more abstract assessment of quality. As far as business-to-consumer transactions are concerned, the goods are presumed to be 2 in conformity with the contract, if they are fit for the purposes for which goods of the same type are normally used, and if they show the quality and performance which are normal in goods of the same type and which the consumer can reasonably expect. These provisions, as the Directive in general, are mandatory in favour of the consumer and contractual terms cannot, according to Art. 7 waive or restrict the rights resulting from the Directive. However, the mandatory character of the rules only prevents the contractual waiver or restriction of the application of the rules, but it does not rule out the possibility to affect the application with the help of specific information given in the contract or otherwise before the conclusion of the contract. It is fairly self-evident that the seller to some extent can avoid responsibility for defects by pointing them out to the consumer. This follows from both the reference to the contract of sale in Art. 2(1) and the wording of Recital 8, as well as from more specific provisions of the aforementioned article. These include a reference to the description given by the seller in Art. 2(2)(a), and use the term “legitimate expectations” in Art. 2(2)(d). Moreover, Art. 2(3) provides that there shall be deemed not to be a lack of conformity if, at the time the contract was concluded, the consumer was aware, or could not reasonably have been unaware of, the lack of conformity. In other words, the quality standards of the Directive can be adjusted by exchange of specific information.

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Art 2:201 3–5

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3 A corresponding indirect disclosure requirement is contained in the Product Liability D. In Art. 6 of this directive, the legitimate expectations test – the safety which a person is entitled to expect – is expressly connected to the presentation of the product.

2.

Development

4 In considering whether there are any specific pre-contractual duties imposed on the parties to a prospective contract, it should be noted that there is no overarching general principle that requires the full disclosure of all the relevant information which the opposite party may need in order to make a fully-informed decision about whether to conclude a contract on particular terms with the opposite party. Each party to a contract can generally be expected to assume the responsibility of obtaining the relevant factual and legal information it may need before entering into a contract. To the extent that there are particular pre-contractual information duties, it must be borne in mind that such duties are imposed in specific circumstances. 5 With regard to developing the present rule from the sources outlined above, it can be observed that neither Art. 2 of the Consumer Sales D., nor Art. 35 CISG, are expressed in terms of a disclosure requirement. However, Art. 2 of the Consumer Sales D. on ‘conformity with the contract’ could be read as containing an implied information obligation. According to Art. 2(4), a seller who makes a consumer aware of a particular lack of conformity will not be liable for the non-conformity of the goods. In the literature, this has been interpreted in different ways, ranging from an obligation to disclose information to an “indirect information requirement” or a simple “encouragement to disclose information” (Cf. e.g., Riesenhuber, “Party Autonomy and Information in the Sales Directive”, in Grundmann/Kerber/Weatherill [eds.], Party Autonomy and the Role of Information in the Internal Market, Berlin (2001); Wilhelmsson, “Private Law Remedies against Breach of Information Requirements of EC Law”, in Schulze/Ebers/Grigoleit [eds.], Informationspflichten und Vertragsschluss im Acquis Communautaire, Tübingen (2003); Twigg-Flesner, “Information Disclosure about the Quality of Goods – Duty or Encouragement?”, in Howells/Janssen/Schulze [eds.], Information Rights and Obligations, Aldershot (2005)). It is therefore possible to make explicit that both Art. 2 of the Consumer Sales D. and Art. 35 CISG appear to be based on a disclosure rule, and the present Article seeks to express this as such a rule: if the goods do not fulfil the requirements of the “fit for normal purposes test” and the “normal quality and consumer expectations test”, the seller is obliged to inform the consumer thereof. In view of the mandatory character of these tests, a general statement that the goods do not conform to the tests and other similar statements containing general information only are not sufficient in this respect. The lack of conformity can be avoided only with the help of specific information concerning the actual problem of quality or performance. Therefore it seems quite natural to speak about an indirect information requirement following from the provisions on conformity in the Consumer Sales D.

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Article 2:201 Duty to inform about goods or services

Art 2:201 6–8

As the conformity test of Art. 2 of the Directive expressly concerns “the quality and performance” of the goods, only performance-related information is relevant in this context. The parallel rule of the Product Liability D. is somewhat more explicit, as it expressly ties 6 the legitimate expectations test to the presentation of the product. Warnings and other information certainly affect the assessment as to whether the consumer’s expectations can be considered to be fulfilled. In this context, however, even specific warnings and other information are not always sufficient to avert liability. Due to the fact that the Consumer Sales D. and the CISG contain very similar provisions 7 in this respect, it seems possible to provide the same rule for all kinds of sales contracts with professional sellers. The fact that the reasonable expectations test is not expressly included in the CISG does not pose a serious problem. “Reasonable expectations” just have to be understood differently, and with a much narrower content, in business-to-business relationships than in consumer contracts. As the Consumer Sales Directive regulates the activities of business sellers and the CISG also focuses on business activities, the acquis offers direct support only for contracts with business suppliers. However, even non-business suppliers may be under some obligation to provide information. The considerations that apply in the context of non-business transactions are not identical to those that are relevant in business supply, but the present Article is sufficiently flexible to accommodate such differences. The indirect disclosure requirement of the Directive may on good grounds be applicable to contracts other than sales contracts, when the circumstances are similar. The Acquis Group therefore believes that the disclosure requirements in sales contracts can be generalised to cover both sales and services. For this reason, the neutral term “party” is used instead of “seller” or “supplier”.

B.

Commentary

1.

Meaning and Purpose

This article is applicable to all contracts for the supply of goods or services, irrespective of 8 whether the parties are businesses or consumers. Where the supplier is a business and the recipient a consumer, the provision will have a mandatory character. The Article focuses on circumstances where the supplier of goods or services is in possession of information about the quality and performance of those goods or services, disclosure of which can reasonably be expected by the other party. It does not require the positive disclosure of all the information the supplier may have about the goods or services, but information which is relevant in assessing the quality and performance that can be expected should be given. It is a disclosure provision in the meaning that the supplier can usually not be reasonably expected to provide such information that it neither has nor ought to have. Christian Twigg-Flesner/Thomas Wilhelmsson

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Art 2:201 9, 10

Chapter 2: Pre-Contractual Duties General Provisions . Section 2: Pre-contractual information duties

However, where the supplier has such information, it must be disclosed in order to avoid any subsequent liability for supplying goods or services not in conformity with the contract.

2.

Context

9 The provisions in this chapter only deal with obligations to provide information. False and misleading information is not dealt with in this context. This Article ties in with the provisions on non-conformity of goods as expressed e.g. in the Consumer Sales D. As explained above, it is generally the case that a seller of goods who is aware of matters rendering goods not in conformity with the contract can make the buyer aware of these and thereby avoid liability for breach of contract. Article 2:201 restates this position as a disclosure obligation which applies to suppliers of goods and of services.

3.

Explanation

10 The duty established in this article applies before a contract has been concluded. The subject-matter of the contract is the provision of goods or services. The starting point for establishing the information to be disclosed is the standard of quality and performance that would be normal in the circumstances of the case. If there is no information that would indicate that the goods or services would deviate from this standard, then there will be no further obligation to disclose information. However, if one party has information that the quality or performance of the goods or services to be provided will fall below the normal standard, then there is a duty to disclose this information to the other party. In most circumstances, this duty will fall on the supplier of the goods or services. There may be circumstances where the recipient of the goods or services also has information that might affect the quality or performance of the goods or services, and there would then be a corresponding obligation to disclose that information to the other party. Information relevant in this context often relates to sub-normal standards of quality of performance. However, other information concerning goods and services may be relevant as well. If, for example the supplier knows that the goods cannot be used for a particular purpose made known to him (cf. Art. 2(2)(b) of the Consumer Sales D.) the buyer can reasonably expect to be informed about the uselessness of the goods for his purpose. Legal requirements related to the goods or services may be as relevant as physical ones. If the seller knows that the buyer is not allowed by law to use the goods in the way he plans, and the seller is aware of these plans, he should inform the buyer of the legal obstacles.

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Article 2:202 Information duties in marketing towards consumers

4.

Art 2:101, 11–14 Art 2:202

Examples

Example 1 A is the seller of a car, and B is the buyer. There are no problems with the car and it is of 11 the quality normal for the type and make of car, and performs as normal. There is no obligation under this article on the seller to disclose any information. Example 2 A is the seller of a car, and B is the buyer. A is aware that there is a problem with this car’s 12 engine when the car is driven for short distances only. This information would affect the level of quality and performance B could reasonably expect of a car of this type and make. A is required to disclose this information. Example 3 A is the seller of a car, and B is the buyer. There are no problems with the car and it is of 13 the quality normal for the type and make of car, and performs as normal. However, it is the previous season’s model, and a new model is about to replace the model of the car to be sold within the next few days. The seller should disclose this fact to the buyer. Example 4 If the seller of premises of a size suitable for a small shop knows that according to muni- 14 cipal legislation the premises cannot be used for shop keeping, he should inform the buyer thereof.

Article 2:202: Information duties in marketing towards consumers (1) Where a business is marketing goods or services to a consumer, the business must, with due regard to the limitations of the communication medium employed, provide such material information as the average consumer can reasonably expect in the given context for a decision on any steps to take towards concluding a contract for those goods or services. (2) Where a business uses a commercial communication which gives the impression to consumers that it contains all the relevant information necessary to make a decision about concluding a contract, it must in fact contain all the relevant information. All the relevant information must be provided in the same language. Where it is not already apparent from the context of the commercial communication, the information to be provided comprises: (a) the main characteristics of the goods or services, the identity and address, if relevant, of the business, the price, and any available right of withdrawal; (b) peculiarities related to payment, delivery, performance and complaint handling, if they depart from the requirements of professional diligence; (c) the language used for communications between parties after the conclusion of the contract, if this differs from the language of the commercial communication.

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Art 2:202 1– 4

Chapter 2: Pre-Contractual Duties General Provisions . Section 2: Pre-contractual information duties

A. Foundation in the Acquis 1.

Sources

1 The pre-contractual information requirements of the type noted in this article derive from the Unfair Commercial Practices D. Paragraph (1) is based on Art. 7(1) of the Unfair Commercial Practices D. Although Art. 7(1) is expressed in terms of omitting to provide material information, it seems that a prohibition of an omission to provide information is equivalent to saying that there is an obligation to provide such information (cf. Radeideh, Fair Trading in EC Law, Groningen (2005), p. 271: the Directive “is used as a tool to incorporate some basic positive information duties.”). Paragraph (2)(a) and (b) are based on the Unfair Commercial Practices D., Art. 7(4), and lit. c is based on item 8 in Annex 1 of the Unfair Commercial Practices D. 2 The notion of the “average consumer” was developed in the case law of the European Court of Justice, primarily in the context of Art. 28 of the EC-Treaty (free movement of goods) and misleading advertising (cf. e.g., C-210/96 – Gut Springenheide GmbH and Rudolf Tusky v Oberkreisdirektor des Kreises Steinfurt – Amt für Lebensmittelüberwachung, C220/98 – Estee Lauder Cosmetics GmbH & Co. OHG v Lancaster Group GmbH and C-44/ 01 – Pippig Augenoptik GmbH & Co. KG v Hartlauer Handelsgesellschaft GmbH) and is defined too in the Preamble to the Unfair Commercial Practices D., Recital 18. 3 “Professional diligence” is a concept defined in Art. 2(h) of the Unfair Commercial Practices D. as “the standard of special skill and care which a trader may reasonably be expected to exercise towards consumers, commensurate with honest market practice and/or the general principle of good faith in the trader’s field of activity”.

2.

Development

4 Although the Unfair Commercial Practices D. is expressed to be “without prejudice” to contract law (Art. 3(2)), it nevertheless compliments the existing contract law Directives by indicating the type of information that is essential for a consumer to make an informed decision about whether to enter into a contract. It does not mandate the positive disclosure of information before a consumer concludes a contract, but it does prohibit the omission of key information, which affects the average consumer’s ability to make an informed transactional decision. In fact, the exclusion of contract law from the scope of the Unfair Commercial Practices D. should be understood to indicate that the Member States are not obliged to reform their contract laws because of the Directive. A more general reading of the exclusion would be misleading, as the Directive may very well have an indirect impact on contract law (cf. e.g., Howells/Micklitz/Wilhelmsson, European Fair Trading Law, The Unfair Commercial Practices Directive, Aldershot (2006), p. 71-73). The Directive seeks to require those businesses whose activities fall below the basic level of professional diligence to disclose this. This may appear to be a disclosure rule that

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Article 2:202 Information duties in marketing towards consumers

Art 2:202 4

might have no realistic application beyond forcing businesses to improve their practices to reach the basic level, but this would be too narrow a view. There are consumers who would be willing to conclude a contract with a business which may offer less in terms of delivery, performance or complaint handling, if the cost of doing so is less and they are fully aware of this. This rule therefore does have a specific disclosure element to it. In paragraph (2), it is provided that all the relevant information must be provided in the same language. Further, lit. (c) requires that if the language for post-contract communications varies from that of the commercial communication itself, then this must be disclosed to the consumer. The basis for these provisions is Item 8 in Annex I of the Unfair Commercial Practices D., which deems it an unfair commercial practice to undertake to “provide an after-sales service to consumers with whom the trader has communicated prior to a transaction in a language which is not an official language of the Member State where the trader is located and then making such service available only in another language without clearly disclosing this to the consumer before the consumer is committed to the transaction”. Although dealing with a very specific commercial practice, this provision reflects a more general concern of the acquis regarding the use of language. Clearly, it is important that information in a commercial communication is given in the same language, to ensure that a consumer can understand all (or none) of this information. Similarly, as Item 8 from Annex I indicates, consumers might expect the language used in commercial communications also to be used in post-contractual communication. Whilst it would not be appropriate to make this a positive rule that the same language must be used, it is entirely in accordance with the general principle of ensuring that all the relevant information is disclosed for a consumer to be made aware that the post-contractual language is different from that of the commercial communication. A further development in paragraph (2) is that the wording used in Art. 2(i) (definition of “invitation to purchase”) and 7(4) of the Unfair Commercial Practices D. has not been adopted, but modified to convey more clearly what the objective of this provision is. In essence, this is a completeness rule, requiring a commercial communication which appears to contain all the information a consumer needs to make a purchase to contain this information in fact. The wording chosen in paragraph (2) seeks to encapsulate this more clearly.

3.

Political Issues

The adoption of principles derived from the Unfair Commercial Practices D. into the field of contract law may raise a political issue. The Directive is expressed to be without prejudice to the validity of contracts, and it does also not envisage there to be a remedy for an individual consumer who has suffered losses in consequence of an unfair commercial practice. In the ACQP, the effect is that consumers will be provided with an individual remedies for certain infringements of rules derived from the Unfair Commercial Practices D. A second political issue arises with regard to the provisions on language. In paragraph (2) of the present Article, there is a requirement that the information must be given in the Christian Twigg-Flesner/Thomas Wilhelmsson

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Chapter 2: Pre-Contractual Duties General Provisions . Section 2: Pre-contractual information duties

same language. To date, the acquis has not been consistent with regard to rules on language. This therefore raises the wider political issue to what extent there should be language-specific rules in the acquis.

B.

Commentary

1.

Meaning and Purpose

5 Paragraph (1) requires the provision of “material” information when goods or services are marketed. Where there are specific rules on the information required when marketing goods or services to consumers, then this information will be material. In other circumstances, information will be “material” where its absence or presence would affect the consumer’s final decision. However, this obligation is subject to two limitations. Firstly, regard must be had to all the circumstances of the context in which the information might be provided. The circumstances and context may therefore determine which information is material, and how detailed the information that is to be provided must be. Secondly, the limitations of the communication medium employed are relevant. Thus, where the business is communicating with the consumer by telephone, it may be possible to provide fewer items of information than when using a website, or e-mail communication. 6 Paragraph (2) deals with a situation where a business uses a commercial communication to draw the availability of particular goods or services to the consumer’s attention, and the communication itself creates the impression that it provides the consumer with all the relevant information necessary to conclude a contract. A “commercial communication” includes advertising and marketing information. The key requirement is that the information given in such a situation is indeed all the relevant information. Some of this information may already be apparent from the communication itself, but for the avoidance of doubt, it is made clear which information must be included in the communication to ensure that a consumer has all the relevant information he needs to make a purchase. However, this obligation does not apply to general marketing activities by a business, where it is clear that a consumer may have to take additional steps before it will be possible to acquire the goods or services, such as acquiring other goods which are necessary, or agreeing to a service contract to use particular goods (e.g., a cheap mobile telephone, the price of which requires the consumer to sign-up to a 12-month contract on a specific tariff).

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Article 2:202 Information duties in marketing towards consumers

2.

Art 2:202 7–9

Context

The provision is derived from unfair commercial practices law, but it seems to have a 7 useful role to play within the contract law framework as well. As it will be at least partially ‘consumed’ by Art. 2:201 ACQP in a situation when a contract is concluded, it will have its main role as a basis for damages under Art. 2:208(3) ACQP. However, as the information requirements according to this Article in some aspects go further than those of Art. 2:201 ACQP, it may be used as a basis for contractual claims according to Art. 2:208(2) ACQP as well.

3.

Explanation

Paragraph (1) requires a business to give consumers “material” information. As this pro- 8 vision is a consumer protection provision related to marketing, the definition of “material” has to take place on a more general basis than related to the more individual “reasonable expectations” mentioned in the previous article. In many cases the requirements of the both articles are similar. However, the present Article indicates that in consumer relationships the required information should to the extent prescribed by the article be given already in marketing. In addition, the scope of this Article is broader in the sense that it covers other information than just information concerning the goods or services to be provided. Paragraph (2) only covers the situation where the business uses a commercial communi- 9 cation which purports to contain all the information the consumer needs to make a decision as to whether to purchase. In such a situation, there is a requirement that the communication does in fact contain this information. For the avoidance of doubt, the paragraph lists all the information which is relevant in this regard. The information that has to be made available covers the main characteristics of the goods or services, the address and identity of the business, and the price. The consumer’s right of withdrawal, where available according to the law (and not solely as a consequence of the business’ contract practices), must also be included in this. In most commercial communications, this information will already be provided, and this paragraph would not impose any additional duties on a business. In addition, if the practices of the business with regard to payment, delivery, performance and complaint handling depart from the requirements of professional diligence, then this must also be stated. “Professional diligence” relates to the standard of special skill and care which a business may reasonably be expected to exercise, measured with reference to honest market practice in the particular business sector, and/or good faith. In some situations, a business may offer a level of complaint handling which goes beyond this basic standard. Where this is the case, it is likely that a business would advertise this fact as part of its overall marketing strategy, and such information would therefore already be provided.

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Furthermore, in order to ensure that the consumer has all this information, it must be provided in the same language in the communication. Thus, important information should not be presented in another language, as that would mean that a consumer who does not speak/understand this other language will be deprived of important information. This is also the case where the commercial communication is in one language, but any post-contractual dealings will be in another language. In this case, the consumer has to be made aware of this fact; otherwise, the consumer may believe that any complaints or follow-ups will be conducted in the same language as the commercial communication, only to discover that this is not the case and that he will be unable to engage in postcontract communications as a result. Paragraph (2) does not exclude the simultaneous application of paragraph (1), if its requirements are not fulfilled.

4.

Example

Example 1 10 A business markets ‘antique’ decoration telephones. It should in its marketing inform consumers of the material fact that it is not allowed to connect these telephones to the telephone network (cf. Finnish Market Court Decision 1981:12). Consumers who run up travel expenses for visiting the shop because of the marketing can claim damages for costs, even though they do not conclude any contract, having learnt about this feature. Example 2 11 B Ltd is an electronics-store. It distributes flyers offering an 80% discount on a new wifirouter. However, the flyer fails to mention that this discount is only applicable where a consumer also signs up to a broadband deal with C Telecom, and customers are only told this when they arrive at the store to purchase the router. Example 3 12 Romania Insurance offers low-cost travel insurance to consumers which includes cover for circumstances when a schedule airline becomes insolvent and a consumer has to be repatriated. It has advertised its services to consumers in Portugal, using material in Portuguese, and the commercial communication emphasises its excellent customer service. Whilst Romania Insurance’s customer service is indeed excellent, it only provides this is Romanian and German. This fact must be disclosed in the commercial communication.

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Article 2:203 Information duties towards disadvantaged consumers

Art 2:203 1, 2

Article 2:203: Information duties towards disadvantaged consumers (1) In the case of transactions that place the consumer at a significant informational disadvantage because of the technical medium used for contracting, the physical distance between business and consumer, or the nature of the transaction, the business must, as appropriate in the circumstances, provide clear information about the main characteristics of the goods or services, the price including delivery charges, taxes and other costs, the address and identity of the business with whom the consumer is transacting, the terms of the contract, the rights and obligations of both contracting parties, and any available redress procedures. This information must be provided at the latest at the time of conclusion of the contract. (2) Where more specific information duties are provided for specific situations, these take precedence over general information duties under paragraph (1).

A. Foundation in the Acquis 1.

Sources

In the acquis on consumer contract law, there are many examples of provisions dealing 1 with pre-contractual information duties. Doorstep Selling Directive 85/577/ EC This Directive imposes only a very basic information requirement: under Art. 4(1), a consumer must be given information about his right to withdraw from a contract concluded in the circumstances to which the directive applies within a period of no less than 7 days from concluding the contract, as well as the name and address of the person against whom this right may be exercised. This information must be given in writing. Package Travel Directive 90/314 / EEC This Directive requires that information is provided to a consumer at four different 2 stages, and the type of information required varies accordingly. The first stage is where a brochure about a package holiday is given to a consumer. The directive states that such a brochure must contain information about the following aspects of the holiday (Art. 3 (2)): (i) the price (ii) adequate information concerning: (i) destination and means, characteristics and categories of transport used; (ii) type of accommodation, its location, category or degree of comfort and its main features; its approval and tourist classification under the rules of the host Member State concerned; (iii) the meal plan; (iv) the itinerary; (v) general information on passport and visa requirements for nationals of the Member State or states concerned and health formalities required for the journey and the stay;

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Art 2:203 2

Chapter 2: Pre-Contractual Duties General Provisions . Section 2: Pre-contractual information duties

(vi) either the monetary amount or the percentage of the price which is to be paid on account, and the timetable for payment of the balance; (vii) whether a minimum number of persons is required for the package to take place and if so, the deadline for informing the consumer in the event of cancellation. This information has to be included in the brochure. In addition, Art. 3(1) requires that this information must not be misleading. The second stage at which information has to be provided is at a point before the contract is concluded. Art. 4(1)(a) states that the consumer has to be provided with information about (i) passport and visa requirements applicable to nationals of the Member State(s) concerned, in particular on the periods for obtaining these; and (ii) information on the health formalities required both for the journey and the stay. This information must be provided ‘in writing or any other appropriate form’. The third stage is the period ‘in good time before the start of the journey’ (Art. 4(1)(b)), which, presumably, means that a contract has already been concluded. The fourth, and final, stage at which the directive mandates the provision of specific information to the consumer is in the contract document itself. Art. 4(2)(a) requires that the contract includes at least all the items listed in the Annex to the directive, which are: (a) the travel destination(s), and, where periods of stay are involved, the relevant periods with dates; (b) the means, characteristics and categories of transport to be used, the dates, times and points of departure and return; (c) where the package includes accommodation, its location, its tourist category or degree of comfort, its main features, its compliance with the rules of the host Member State concerned and the meal plan; (d) whether a minimum number of persons is required for the package to take place and, if so, the deadline for informing the consumer in the event of cancellation; (e) the itinerary; (f) visits, excursions or other services which are included in the total price agreed for the package; (g) the name and address of the organiser, the retailer, and, where appropriate, the insurer; (h) the price of the package, an indication of the possibility of price revision under Art. 4 (4) and an indication of any dues, taxes or fees chargeable for certain services (landing, embarkation or disembarkation fees at airports, tourist taxes) where such costs are not included in the package; (i) the payment schedule and method of payment; (j) special requirements which the consumer has communicated to the organiser or retailer when making the booking, and which have been accepted; (k) periods within which the consumer must make any complaint concerning failure to perform or improper performance of the contract. This information also has to be ‘communicated’ to the consumer before the conclusion of the contract, and according to Art. 4(2)(b), the consumer must be given a copy of these terms. 126

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Art 2:203 3–6

Timeshare Directive 94/47/ EC and Timeshare Directive 2008/122 / EC Both Timeshare Directives contain an extensive catalogue of items of information which 3 must be disclosed to a consumer at two stages in the process of acquiring a property on a timeshare basis: (i) when information about a property is requested; and (ii) when the contract is drawn up. The Annex to the Timeshare D. 1994 contains a minimum list of information that must be provided to a consumer. Annex I Part 1 of the Timeshare D. 2008 provides a similar list. Distance Selling Directive 97/7/ EC The Distance Selling D. also requires the provision of specific items of information, both 4 before and after a contract is concluded. Unlike the directives on Package Travel and Timeshare, the Distance Selling D. specifies broad categories of information, because the directive applies to the sale of a wide range of goods and services at a distance and can therefore only state generally applicable items of information. Article 4 specifies a list of items which must be given before a contract is concluded: (a) the identity of the supplier and, in the case of contracts requiring payment in advance, his address; (b) the main characteristics of the goods or services; (c) the price of the goods or services including all taxes; (d) delivery costs, where appropriate; (e) the arrangements for payment, delivery or performance; (f) the existence of a right of withdrawal, except in the cases referred to in Art. 6(3); (g) the cost of using the means of distance communication, where it is calculated other than at the basic rate; (h) the period for which the offer or the price remains valid; (i) where appropriate, the minimum duration of the contract in the case of contracts for the supply of products or services to be performed permanently or recurrently. Price Indication Directive 98/6 / EC This Directive requires the provision of pricing information in a particular format: the 5 provision of the selling price and the unit price. Thus, in situations within the scope of this directive, pricing information must comply with the requirements of this directive. Where the price is given, it must be ‘unambiguous, easily identifiable and clearly legible” (Art. 4(1)). Although not directly linked to the pre-contractual context, this directive may affect the manner in which pricing information, which has to be provided under other measures, is made available. Consumer Sales Directive 1999/44 / EC This Directive contains specific information requirements in respect of guarantees (cf. 6 Art. 6). This provision requires that a guarantee must contain information about: (i) the consumer’s legal rights under the national legislation on the sale of goods, and make clear that these rights are unaffected by the guarantee; (ii) the contents of the guarantee, including duration and territorial scope of the guarantee; (iii) the essential particulars for making a claim, including the name and address of the guarantor. Christian Twigg-Flesner/Thomas Wilhelmsson

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A guarantee must be made available on request in writing or in another durable medium available and accessible to the consumer. It also has to set out the contents and essential particulars in plain and intelligible language. Electronic Commerce Directive 2000/31/ EC 7 Although not limited to consumer contracts, the E-Commerce D. complements the precontractual information requirements in the Directives mentioned above. Thus, Art. 10 imposes an obligation on a service provider to make the following items of information available “prior to the order being placed by the recipient of the service”: (a) different technical steps to follow to conclude the contract; (b) whether the contract will be filed by the service provider, and if it will be accessible; (c) how to identify and correct inputting errors before an order is placed; (d) the languages in which a contract can be concluded. Distance Selling of Financial Services Directive 2002/65/ EC 8 A companion measure to the Distance Selling D., Financial Services Distance Selling D., contains a very lengthy list of pre-contractual information requirements in respect of distance contracts for financial services. There are 21 sub-categories of information, grouped into four broad categories, and these relate to (i) the supplier; (ii) the financial service; (iii) the distance contract; and (iv) redress (Art. 3). If other Community legislation also applicable to financial services imposes additional information obligations, then these will continue to apply. Payment Services Directive 2007/64 / EC 9 A complex set of pre-contractual information requirements is found in the Payment Services D., covering payment transactions which are either a single transaction or made within the context of a framework contract. There are information duties before a transaction is entered into, once a payment order has been received by a bank, and finally once a payment transaction has been executed. With regard to a single transaction, the information to be provided before an order is placed covers the information/unique identifier which the payer has to provide, the maximum execution time, the charges payable and (where applicable), the applicable exchange rate (Art. 37). In the context of a framework contract, there is information that has to be provided before such a contract is concluded, as well as when a transaction is ordered in the context of this contract. There is a detailed catalogue of items of information to be given in Article 42, grouped under seven broad headings: (i) payment service provider; (ii) use of payment service; (iii) charges, interest and exchange rates; (iv) communication; (v) safeguards and corrective measures; (vi) changes and termination; and (vii) redress. For each individual payment transaction, information has to be provided about the maximum execution time and the charges payable (Art. 46). If the payment service provider imposes a charge for using a particular payment instrument, this information has to be given before the payment transaction is initiated (Art. 50(2)).

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Article 2:203 Information duties towards disadvantaged consumers

Art 2:203 10–13

Consumer Credit Directive 2008/48 / EC The Consumer Credit D. 2008 contains information obligations in respect of both the 10 general marketing stage and the pre-contractual stage. When credit is advertised together with an interest rate, a representative example to illustrate the full costs of the agreement has to be given. This example must contain the applicable borrowing rate and applicable charges, the total amount borrowed, the annual percentage rate (APR), duration, any advance payments, number of instalments and total amount payable (Art. 4). As the Consumer Credit D. 2008 is a full harmonisation measure with regard to many of its provisions, it will introduce a standardised ‘European Consumer Credit Information’ (ECCI) form (a template for which is provided in Annex II to the Directive). Article 5 lists 19 items of information to be given on this form, including basic information about the credit provider and details of the proposed credit agreement, including the APR, total amount borrowed and repayable, details of repayments, penalties for failing to maintain regular payments and information about early repayment.

2.

Development

In identifying an underlying rationale for the various pre-contractual information re- 11 quirements in the consumer law directives, it is possible to identify two key situations when it seems necessary to introduce such a duty, both placing the consumer at a disadvantage: (i) the context in which the contract is concluded creates a significant disadvantage; and (ii) the particular nature of the transaction puts the consumer at a disadvantage. For example, in a doorstep situation where consumer has been surprised by the business at his home, this affects the consumer’s ability to make an informed decision. Similarly, with distance selling, the inability to inspect the goods before deciding to purchase can be disadvantageous for the consumer (cf. also Ebers, “Informations- und Beratungspflichten bei Finanzdienstleistungen” in Schulze/Ebers/Grigoleit [eds.], Informationspflichten und Vertragsschluss im Acquis Communautaire, Tübingen (2003), for a slightly different classification). In the case of timeshare or package holiday contracts, the nature of the transaction ne- 12 cessitates that a consumer is given specific information. Although the lists of items to be disclosed provided in some of the directives (particularly Package Travel D., Timeshare D. 1994 and 2008 and Financial Services Distance Selling D.) are very detailed, all of these items can be grouped under more general headings (cf. also Schulte-Nölke/TwiggFlesner/Ebers [eds.], ConsLC, Part 4, section D).

3.

Political Issues

Although some of the items of information to be provided before a contract is made are 13 regarded as essential in any legal system in order to be sufficiently certain about the subject-matter of a contract, many items required under the various directives mentioned above either require an amplification of these core matters, or are additional. This makes it difficult to develop a general principle that can be derived from the acquis. The acquis can be used to inform the circumstances in which pre-contractual information duties may

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be imposed and assist in establishing the degree of information required, but ultimately, setting pre-contractual information obligations is a political decision (cf. Wilhelmsson/ Twigg-Flesner, “Pre-contractual information duties in the acquis communautaire”, European Review of Contract Law (ERCL) 2006/2, 441-470 at 470). It has been suggested that the limitation of this provision to consumer transactions rather than extending it to small and medium-sized enterprises should be regarded as a political issue, too (cf. Jansen/Zimmermann, “Restating the Acquis Communautaire? A Critical Examination of the “Principles of Existing EC Contract Law”, 71 Modern Law Review (2008), 505-534). However, as the acquis does not include any provisions on pre-contractual information duties in business contracts comparable to those in consumer contracts, there is no political decision involved here. Rather, it would be a political decision to extend these provisions to cover e.g., contracts where the recipient of the information is an SME. This is not advocated here, but could be a matter for political consideration.

B.

Commentary

1.

Meaning and Purpose

14 Paragraph (1) of the present Article seeks to state, in general form, the circumstances under which the acquis imposes information duties on a business dealing with a consumer. There are measures dealing with specific situations where a positive obligation to provide information is felt necessary. In broad terms, such situations may be based on the means of communication used by the business, the physical distance between the consumer and the business, or the nature of the particular transaction. This means that such information obligations will arise, e.g. where a contract between a business and a consumer is concluded at a distance.

2.

Context

15 This Article deals specifically with consumer transactions. In some circumstances, the acquis envisages information duties for transactions which are not consumer-specific, such as the acquisition of shares in listed companies. Where such rules exist, they continue to apply. These are regarded as specific transactions, and rules on these are listed there.

3.

Explanation

16 This Article only applies in transactions between a business and a consumer. It does not impose a general obligation to disclose information before a contract is concluded. Instead, the circumstances are limited to those where the consumer is at a significant informational disadvantage. It is generally the case that consumers are subject to an informational disadvantage when dealing with a business, because the business will generally

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Art 2:203 17–19

know more about the goods or services it provides. It will also have the benefit of experience from repeat transactions, whereas a consumer will often engage in that transaction as a one-off only. The scope of this Article is therefore restricted by requiring that the informational disadvantage has to be significant. The Article is further limited by linking the significant informational disadvantage to (i) 17 the technical medium used for entering into a contract; (ii) the physical distance between business and consumer; and (iii) the nature of the transaction. Therefore, it is not merely the existence of the significant informational disadvantage that activates the obligation to provide information before a contract is made, but the fact that this disadvantage is caused by one (or more) of the three factors mentioned. Thus, buying goods over the internet creates a significant informational disadvantage because the consumer is unable to physically examine the goods (or a representative model). The same applies where a consumer orders goods by telephone. Distance selling and e-commerce are therefore paradigm situations. The nature of the transaction might also cause a significant informational imbalance; this will particularly be so in the case of high-value low-frequency transactions. An example is a contract for timeshare, which is complex and requires the provision of information before a consumer decides to enter into a transaction. The Article lists a number of categories of information. These are expressed in very gen- 18 eral terms, but they reflect the different items of information that have been required by the existing acquis rules on pre-contractual information disclosure. This generalisation is inspired by the provisions of the Unfair Commercial Practices D., where broad general categories similar to the ones listed in this article are used. Existing acquis measures which require the disclosure of information in particular situations frequently contain more detailed requirements. It is generally possible to group these requirements under the headings provided by the categories listed in Art. 2:202 ACQP. For example, Art. 2:202 ACQP refers to the “main characteristics of the goods or services”. Under the old as well as under the Timeshare D. 2008, a business is required to provide a long list of particulars about the property subject to the timeshare contract. Many of these could be classed as relating to the main characteristics of the service provided. Paragraph (1) is therefore not intended to replace these more detailed catalogues of information, but to provide a broad statement of the instances when information duties may be imposed, and what sort of information will be required. The phrase “rights and obligations of both contracting parties” may include obligations 19 about the means of delivery. Also, where there are no “redress procedures” available, it may be desirable to provide at least an address to which a consumer may send his complaint. The present Article contains the qualification that the business must provide the relevant information “as appropriate in the circumstances”. This emphasises that it may not always be appropriate to provide information under all of the headings listed in this article. Alternatively, some of the information may be obvious and need not be provided separately. Christian Twigg-Flesner/Thomas Wilhelmsson

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Art 2:203, 20–22 Art 2:204

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20 Paragraph (2) reflects the fact that paragraph (1) is a generalisation, and that it will be necessary to spell out in more detail the items of information that should be provided in the context of specific contracts, such as package travel or timeshare, or in particular contracting situations, such as distance or doorstep selling. Paragraph (2) confirms that where rules have been adopted for specific contracts, these rules apply instead and no recourse should be allowed to paragraph (1) to create additional information duties.

4.

Examples

Example 1 21 S runs an on-line electronics store. C wishes to buy a washing machine and places an order over the internet. As C cannot inspect the washing machine before deciding to purchase, he is placed at a significant informational disadvantage. S is therefore required to provide information about the main characteristics of the washing machine, its price including the cost of delivery and other relevant information (including the existence of a right of withdrawal). Example 2 22 C who knows very little about personal computers has gone to S’s store to purchase a new laptop. C is at a significant informational disadvantage because he has very little information about computers. However, the disadvantage is not caused by the technical medium used, nor is there a physical distance between C and S, nor is the nature of the transaction itself the cause of the disadvantage. Consequently, there is no obligation on S to provide information under this article.

Article 2:204: Clarity and form of information (1) A duty to provide information imposed on a business is not fulfilled unless the information is clear and precise, and expressed in plain and intelligible language. (2) In the case of contracts between a business and a consumer concluded at a distance, information about the main characteristics of the goods or services, the price, the address and identity of the business with whom the consumer is transacting, the terms of the contract, the rights and obligations of both contracting parties, and any available redress procedures, as may be appropriate in the particular case, needs to be confirmed in writing at the time of conclusion of the contract. (3) Where more specific formal requirements for the provision of information are provided for specific situations, these take precedence over general requirements under paragraphs (1) and (2). Unless stated otherwise, writing may be replaced by another textual form on a durable medium, provided this is reasonably accessible to the recipient. (4) Failure to observe a particular form will have the same consequences as breach of information duties.

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Article 2:204 Clarity and form of information

Art 2:204 1

A. Foundation in the Acquis 1.

Sources

The directives which impose information duties also specify the form – here understood 1 broadly, as covering language as well as intelligibility – in which this information has to be given. However, as the directives were adopted over a period of 20 years, there is a degree of incoherence and inconsistency in the form requirements. The table below lists the various form requirements found in the Directives: Doorstep Selling D.

Form requirement(s) written notice (Art. 4)

Package Travel D.

Legible, comprehensible and accurate (Art. 3(2)) [brochure] In writing or other appropriate form (Art. 4(1)) [pre-contract] In writing or such other form as is comprehensible and accessible to the consumer (Art. 4(2)(b)) [contract]

Unfair Terms D.

If contracts in writing, must be in plain and intelligible language (Art. 5)

Timeshare D. 1994

Contract in writing and language of Member State (Art. 4)

Distance Selling D.

Clear and comprehensible manner; appropriate to medium of distance communication used (Art. 4) In writing or in another durable medium available and accessible to the consumer

Price Indications D.

Unambiguous, easily identifiable and clearly legible (Art. 4(1))

Consumer Sales D.

In writing or in another durable medium available and accessible to the consumer (Art. 6)

E-Commerce D.

Clear, comprehensive and unambiguous (Art. 10(1))

Financial Services Distance Selling D.

Clear and comprehensible manner appropriate to the means of distance communication

Insurance Mediation D.

On paper or any other durable medium; clear and accurate, comprehensible to customer (Art. 13(1))

Payment Services D.

Easily understandable words and in clear and comprehensible form (Art. 36(1))

Timeshare D. 2008

Contract in writing, on paper or another durable medium and drawn up in the language of the Member State (Art. 5(1)).

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Art 2:204 2– 4

2.

Chapter 2: Pre-Contractual Duties General Provisions . Section 2: Pre-contractual information duties

Development

2 This overview demonstrates that there is a degree of variation in the form requirements for the provision of information. It would be desirable to consider a uniform approach to the question of form of information, to improve overall coherence and to reduce the risk of compliance difficulty for business. Paragraph (1) reflects the requirements regarding the clarity of the information which can be found in many of the directives. Paragraph (2) is a confirmation rule based on the Distance Selling D. Art. 5 of the Distance Selling D. requires written confirmation of the information listed in Art. 4 of that Directive, with the addition of other items of information. Paragraph (3) is based on the various provisions that specify the form in which information has to be provided.

B.

Commentary

1.

Meaning and Purpose

3 It is generally the case in the acquis that where information requirements exist, such information needs to be provided in a clear and precise form, and expressed in plain and intelligible language, and this is reflected in paragraph (1). Paragraph (2) confirms that there may be instances where such information has to be provided in writing. It is not a general requirement that information always has to be provided in writing, but this may be needed for specific contracts. Paragraph (3) confirms that such rules can be adopted, where this is necessary. 4 As far as the consequences for breach of this article are concerned, the starting point is that these are the same as for breach of the information duties themselves. However, the consequences may nevertheless be different for damages because of the causation requirement – the loss for which damages are claimed must have been caused by the incorrect or missing information, or the fact that information was not provided in the correct form. But the losses caused by having information in an incorrect form may not be the same as not having received the information in question at all. It must also be noted that there may be additional consequences, because a failure to observe the correct form may trigger additional rights, such as withdrawal from the contract, or termination.

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Article 2:205 Information about address and identity

2.

Art 2:204, 5–7 Art 2:205

Context

This Article complements the other provisions in this chapter by explaining how infor- 5 mation required elsewhere has to be provided.

3.

Explanation

All pre-contractual information supplied by a business must be clear and precise. This 6 means that the information should not be ambiguous, and must reasonably avoid leaving room for different interpretations. In addition, the language used must be plain and intelligible. This means that technical language should be avoided as much as possible. Where such language has to be used, it should be explained adequately. There are circumstances where information must be provided in writing. This may be replaced with a textual form on a durable medium accessible to the recipient, unless there is an overriding requirement for the information to be in writing. Cf. Art. 1:306 ACQP for a definition of “durable medium”.

4.

Example

S operates a website for selling laptops on-line. He is required (under Art. 2:203 ACQP) 7 to provide a consumer with certain items of information. In giving this information, S needs to ensure that the information is clear and precise. For example, a statement about the cost of supplying a laptop along the lines of “J 499.99, with additional tax and delivery charges as notified in our standard terms and conditions” is insufficiently clear and precise, whereas a statement that supplying the laptop “costs J 549.99 (including all taxes and delivery costs)” would be acceptable.

Article 2:205: Information about address and identity (1) For the purposes of this chapter, the address and identity of the business include: (a) the name of the business; (b) any trading names relevant to the contract in question; (c) the registration number in any official register, and name of that register; (d) its geographical address; (e) contact details; (f) where the business has a representative in the consumer’s country of residence and this is a Member state, the address and identity of that representative; (g) where the activity of the business is subject to an authorisation scheme, the particulars of the relevant supervisory authority; and

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Art 2:205 1

Chapter 2: Pre-Contractual Duties General Provisions . Section 2: Pre-contractual information duties

(h) where the business exercises an activity which is subject to VAT, the relevant identification number. (2) For the purpose of Article 2:202 (Information duties in marketing towards consumers) paragraph (2), the address and identity of the business include only the information indicated in paragraph (1) subparagraphs (a), (c), (d) and (e).

A. Foundation in the Acquis 1.

Sources

1 The various pre-contractual (and contractual) information duties in the acquis frequently refer to ‘address and identity’ of the business and require certain particulars to be provided. The following table provides a non-exhaustive overview of the relevant legislation: Package Travel D.

Art. 4(1)(b)(ii): the name, address and telephone number of the organizer’s and/or retailer’s local representative or, failing that, of local agencies on whose assistance a consumer in difficulty could call

Distance Selling D.

Art. 4(1)(a): the identity of the supplier and, in the case of contracts requiring payment in advance, his address

Financial Services Distance Selling D.

Art. 3(1): – the supplier (a) the identity and the main business of the supplier, the geographical address at which the supplier is established and any other geographical address relevant for the customer’s relations with the supplier; (b) the identity of the representative of the supplier established in the consumer’s Member State of residence and the geographical address relevant for the customer’s relations with the representative, if such a representative exists; (c) when the consumer’s dealings are with any professional other than the supplier, the identity of this professional, the capacity in which he is acting vis-à-vis the consumer, and the geographical address relevant for the customer’s relations with this professional; (d) where the supplier is registered in a trade or similar public register, the trade register in which the supplier is entered and his registration number or an equivalent means of identification in that register; (e) where the supplier’s activity is subject to an authorisation scheme, the particulars of the relevant supervisory authority.

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Article 2:205 Information about address and identity

Art 2:205 1

Unfair Commercial Practices D.

Art. 7(4)(b): the geographical address and the identity of the trader, such as his trading name and, where applicable, the geographical address and the identity of the trader on whose behalf he is acting

Services D.

Art. 22(1): (a) the name of the provider, his legal status and form, the geographic address at which he is established and details enabling him to be contacted rapidly and communicated with directly and, as the case may be, by electronic means; (b) where the provider is registered in a trade or other similar public register, the name of that register and the provider’s registration number, or equivalent means of identification in that register; (c) where the activity is subject to an authorisation scheme, the particulars of the relevant competent authority or the single point of contact; (d) where the provider exercises an activity which is subject to VAT, the identification number referred to in Article 22(1) of Sixth Council Directive 77/388 / EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment; (e) in the case of the regulated professions, any professional body or similar institution with which the provider is registered, the professional title and the Member State in which that title has been granted;

Payment Services D.

Art. 42(1)(a): the name of the payment service provider, the geographical address of its head office and, where applicable, the geographical address of its agent or branch established in the Member State where the payment service is offered, and any other address, including electronic mail address, relevant for communication with the payment service provider; and (b) the particulars of the relevant supervisory authorities and of the register provided for in Article 13 or of any other relevant public register of authorisation of the payment service provider and the registration number, or equivalent means of identification in that register;

Timeshare D. 2008

Annex I, II, III and IV, Part 1 respectively: Identity, place of residence and legal status of the trader(s) which will be party to the contract

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Art 2:205 2–5

2.

Chapter 2: Pre-Contractual Duties General Provisions . Section 2: Pre-contractual information duties

Development

2 The references to ‘address and identity of the business’ in the acquis are inconsistent, especially when more than one directive is applicable to a particular situation. This makes it more difficult to establish in each specific instance which particular item of information must be provided. Nevertheless, it is possible to identify a core of specific items of information that must be given whenever the acquis refers to ‘address and identity of the business’. In the present Article, these recurring items have therefore been standardised. In the present version of paragraph (2), the Acquis Group suggested a limitation in respect of the information about ‘address and identity’ that a business must provide when marketing goods or services to consumers. Consequently, for the purposes of Art. 2:202 ACQP, only certain details must be given to satisfy the requirement to provide information about the ‘address and identity’ of the business. Further discussions have taken place within the Acquis Group about introducing a similar limitation in the context of Art. 2:203 ACQP if the technical medium used for contracting would make it too cumbersome to provide all the details, e.g., where the contract is concluded by telephone or SMS. This limitation has not yet been introduced in this version of the ACQP, but it is proposed for adoption in a revised version.

B.

Commentary

1.

Meaning and Purpose

3 This provision seeks to define the scope of a term which recurs in various provisions in this chapter and elsewhere in the ACQP. It gives a standardised meaning to the term ‘address and identity of the business’. Consequently, every reference to ‘address and identity’ in other Articles of Chapter 2 of the ACQP must be read in accordance with the definition set out in this Article.

2.

Context

4 The purpose of this definitional section, is to simplify other provisions of the ACQP by providing a central reference point for this key term. This ensures that there are no variations whenever there is a reference to ‘address and identity’ in the ACQP. Furthermore, where other articles refer to the notion of ‘address and identity of the business’, there is no need to spell out in detail which particular elements of information need to be provided.

3.

Explanation

5 The term ‘address and identity of the business’ is used in the ACQP primarily in the context of pre-contractual information duties imposed when a business is dealing with a con-

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Article 2:205 Information about address and identity

Art 2:205 5

sumer, although not exclusively so. As the overview at A.1 shows, the acquis contains frequent references to both concepts, but is inconsistent as to the precise details that all these references involve. Paragraph (1) explains that references to ‘address and identity of the business’ include its name, as well as its trading name, if this is relevant to the contract in question. A business which does not have a separate trading name will not have to provide a separate trading name. However, there are businesses which may use a trading name for certain sectors of their activity, or indeed for all their consumer-focused activities. In order to let the other party know with whom it is contracting, this information must therefore be given. Many directives also require that the registration number of the business in the relevant official register is given. This information may be important, e.g., to inform the other contracting party that the business is properly registered and has therefore complied with the relevant registration requirements. Although not essential in every context, it was decided to include this requirement whenever there is a reference to the ‘name and identity of the business’ in order to facilitate standardisation – i.e., to allow businesses to create one dataset which can always be used whenever they must provide information on its ‘address and identity’. For the same reason, the geographical address and the contact details of the business have to be given whenever information on the ‘address and identity of the business’ is to be provided. ‘Contact details’ may include telephone numbers, e-mail addresses and website forms. It was necessary to specify in full detail which of these must be given, as the means of conducting business will vary and not all contact details are always appropriate. In short, the contact details which must be provided may depend on the specific contract or situation. In particular, in the context of Art. 4:104 ACQP (information duties in real time communication), the context requires only information about the name of the business, together with an indication of the commercial nature of the communication. Three further items of information need to be included only where this is applicable to the particular business. At the same time, this facilitates standardisation of information where the conditions set out in lit. (f) to (h) are applicable to a business, but it also avoids overburdening the recipient of this information with too many details where this is not needed. Thus, where the business does have a representative in the consumer’s state of residence (and that country is a Member State of the EU), it is important that the address and identity of that representative is also provided. The reference to the ‘address and identity of that representative’ is to the information contained in lit. (a) to (e) of this Article as applied to the representative. This information can be especially important where a consumer buys goods from abroad via the internet, in which case it will be helpful to know that there is a representative in the consumer’s home state where any problems could be dealt with. The requirement in lit. (g) is primarily applicable to certain types of transactions, notably payment services, distance sales of financial services and consumer credit. Not every Christian Twigg-Flesner

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Art 2:205, 6 Art 2:206, 1

Chapter 2: Pre-Contractual Duties General Provisions . Section 2: Pre-contractual information duties

business requires authorisation, but any business that is subject to autorisation must give this information. The particular information that must be given here is the name of the relevant supervisory authority and basic contact information such as a geographical address, web address, telephone number or e-mail address. Finally, lit. (h) requires the inclusion of the VAT identification number if VAT applies to the activities of the business under the relevant legislation. This item is also included to make it easier for a business to standardise its information. 6 Paragraph (2) limits the information that has to be provided in the context of Art. 2:202 (2) ACQP because in the particular context as much information is not needed.

Article 2:206: Information about price (1) For the purposes of this chapter, the ‘price’ includes: (a) the remuneration for the goods or services; (b) any deposits payable; (c) any additional taxes and duties where these may be indicated separately; and (d) any additional charges, including those made for (i) delivery; or (ii) the use of distance communication where this exceeds the basic rate. (2) When an exact price cannot be indicated, the consumer must be given such information on the basis for the calculation which enables the consumer to verify the price. (3) Where the price is not payable in one sum, the consumer must be informed of the payment schedule.

A. Foundation in the Acquis 1.

Sources

1 The various pre-contractual (and contractual) information duties in the acquis frequently refer to ‘business’ and ‘price’, and require certain particulars to be provided. The following table provides a non-exhaustive overview of the relevant legislation: Package Travel D.

Art. 3(1)(f): either the monetary amount or the percentage of the price which is to be paid on account, and the timetable for payment of the balance

Distance Selling D.

Art. 4(1): (c) the price of the goods or services including all taxes; (d) delivery costs, where appropriate

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Article 2:206 Information about price

Art 2:206 1

Financial Services Distance Selling D.

Art. 3(2) the total price to be paid by the consumer to the supplier for the financial service, including all related fees, charges and expenses, and all taxes paid via the supplier or, when an exact price cannot be indicated, the basis for the calculation of the price enabling the consumer to verify it

Unfair Commercial Practices D.

Art. 6(d): the price or the manner in which the price is calculated, or the existence of a specific price advantage Art. 7(4)(c): the price inclusive of taxes, or where the nature of the product means that the price cannot reasonably be calculated in advance, the manner in which the price is calculated, as well as, where appropriate, all additional freight, delivery or postal charges or, where these charges cannot reasonably be calculated in advance, the fact that such additional charges may be payable

Services D.

Art. 22(1)(i): the price of the service, where a price is pre-determined by the provider for a given type of service

Payment Services D.

Art. 37(c) all charges payable by the payment service user to his payment service provider and, where applicable, the breakdown of the amounts of any charges Art. 42(3): (a) all charges payable by the payment service user to the payment service provider and, where applicable, the breakdown of the amounts of any charges; (b) where applicable, the interest and exchange rates to be applied or, if reference interest and exchange rates are to be used, the method of calculating the actual interest, and the relevant date and index or base for determining such reference interest or exchange rate; and (c) if agreed, the immediate application of changes in reference interest or exchange rate and information requirements related to the changes in accordance with Article 44(2);

Timeshare D. 2008

Annex I, Part 1: Price to be paid by the consumer for acquiring the right(s): outline of additional obligatory costs imposed under the contract; type of costs and indication of amounts (e.g., annual fees, other recurrent fees, special levies, local taxes). Annex II, Part 1: Price to be paid by the consumer for acquiring the right(s), including any recurring costs the consumer can expect to incur resulting

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Art 2:206 2–5

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from the right to obtain access to the accommodation, travel and any related products or services as specified; The staggered payment schedule setting out equal amounts of instalments of this price for each year of the length of the contract and the dates on which they are due to be paid.

2.

Development

2 The references to ‘price’ in the acquis are inconsistent, especially when more than one directive is applicable to a particular situation. This makes it more difficult to establish in each particular instance which specific item of price-related information should be provided. Nevertheless, it is possible to identify a core of information that must be given whenever the acquis refers to ‘price’. In the present Article, these recurring items have therefore been standardised.

B.

Commentary

1.

Meaning and Purpose

3 This provision seeks to define the scope of a key term which recurs in various provisions in this chapter and elsewhere in the ACQP. It gives a standardised meaning to the term ‘price’. Consequently, whenever there is a reference to this term in other Articles of the ACQP, their scope will be the same.

2.

Context

4 The purpose of this definitional section is to simplify other provisions of the ACQP by providing a central reference point for this key terms. This ensures that there are no variations whenever there is a reference to ‘price’ in the ACQP. Furthermore, where other articles refer to the notion of ‘price’, there is no need to spell out in detail which particular elements of information need to be provided.

3.

Explanation

5 Paragraph (1) standardises the information regarding ‘price’. This is to ensure that, as far as possible, pricing information is complete and includes all the relevant information which a consumer needs. In particular, any charges beyond the immediate cost of the goods or services to be provided, but payable by the recipient as an integral part of the contract, must be clearly given. Paragraph (2) reflects circumstances where an exact price cannot necessarily be indicated at the point in time when pricing information must be provided. In that case, the basis or method for calculating the price has to be provided instead. This will enable a

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Article 2:207 Burden of proof

Art 2:207 1, 2

consumer to check, once he or she is informed of the relevant amount, whether this corresponds with the basis for calculation. Paragraph (3) deals with the situation where the price is to be paid by instalments. In that case, it has to be made clear when each instalment is due, as well as the amount payable in each instalment.

Article 2:207: Burden of proof The business bears the burden of proof that it has provided information as required by Article 2:203 (Information duties towards disadvantaged consumers) and by the Specific Provisions of this Chapter.

A. Foundation in the Acquis 1.

Sources

There are few burden of proof rules in the acquis, and the general assumption is that the 1 person seeking to rely on a particular fact has the burden to prove it. However, in some instances, this rule is reversed. In Art. 3(2) of Unfair Terms D., it is indicated that the burden of proof in respect of the non-negotiated nature of a contract term falls on the seller or supplier. In Art. 5(3) of the Consumer Sales D., the burden of proving that goods are not in conformity with the contract is reversed during the first six months after delivery, effectively requiring the business to show that the goods were in conformity when delivered. In respect of pre-contractual information duties, the acquis only contains two express burden of proof provisions. The first is Art. 15 of the Financial Services Distance Selling D. This norm gives Member States the option of providing that the burden of proof in respect of the obligation to provide information is placed on the business. The second is in Art. 33 of the Payment Services D. This rule also grants Member States the regulatory option of providing that a payment service provider can be required to prove that it has complied with all the relevant information requirements of that Directive.

2.

Development

As is evident from the foregoing, many of the directives which form the basis of the pro- 2 visions on pre-contractual information duties in the ACQP do not contain any express burden of proof rules. However, in the area of pre-contractual information duties it is possible to identify a gradual development both in terms of detail and regulation. The two directives which do contain burden of proof rules have been adopted more recently, namely in 2002 and 2007 respectively. It seems therefore plausible to suggest that the Christian Twigg-Flesner

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Art 2:207, 3–5 Art 2:208

Chapter 2: Pre-Contractual Duties General Provisions . Section 2: Pre-contractual information duties

acquis has evolved in such a way as to place the burden of proving compliance with precontractual information duties on the business as the party which is required to provide this information. This has resulted in the generalised rule in this Article so that whenever there is an obligation to provide information to a consumer prior to a contract, the burden of proving compliance with that duty lies on the business.

B.

Commentary

1.

Meaning and Purpose

3 The purpose of this provision is to establish that whenever a business must provide precontractual information to a consumer, the onus is on that business to prove that this duty has, in fact, been observed.

2.

Context

4 This burden of proof rule applies only to the general provision on pre-contractual information duties when dealing with consumers at an informational disadvantage (Art. 2:203 ACQP), and in respect of the pre-contractual information duties applicable to particular types of contract required by Chapter 3 of this title.

3.

Explanation

5 The obligation to provide certain items of pre-contractual information is imposed on a business by Art. 2:203 ACQP and the provisions in Chapter 3. They seek to ensure that a consumer can make a sufficiently well-informed decision as to whether to conclude a particular contract. However, after a contract has been made – or, indeed, in a situation where no contract has been concluded – the consumer might argue that certain items of information were not fully provided, or were simply not provided at all. Under normal rules, it would be for the consumer to show that this information was not given. The effect of the Article at hand is to require the business to prove that it gave such information. It will usually be easier for a business to provide evidence of the information given, and this explains why the burden is thus imposed on that business.

Article 2:208: Remedies for breach of information duties (1) If a business is required under Articles 2:203 (Information duties towards disadvantaged consumers) and 2:204 (Clarity and form of information) above to provide information to a consumer before the conclusion of a contract from which the consumer has the right to withdraw, the withdrawal period commences when all this information has been provided. How-

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Article 2:208 Remedies for breach of information duties

Art 2:208 1

ever, this rule does not postpone the end of the withdrawal period beyond one year counted from the time of the conclusion of the contract. (2) If a party has failed to comply with its duties under Articles 2:201 (Duty to inform about goods or services) to 2:204 (Clarity and form of information), and a contract has been concluded, this contract contains the obligations which the other party could reasonably expect as a consequence of the absence or incorrectness of the information. (3) Whether or not a contract is concluded, a business which has failed to comply with any duty imposed by the preceding Articles of this section is liable to the other party for reliance damages. The rules on damages for non-performance of a contractual obligation apply accordingly.

A. Foundation in the Acquis 1.

Sources

One of the glaring gaps in all the directives imposing information obligations is a con- 1 sistent scheme of sanctions for a failure to comply with such an obligation. In the directives imposing a right of withdrawal, not providing some of the information, may result in an extension to the period during which the right of withdrawal may be exercised (cf. Chapter 5 for details). However, even in those directives, this sanction does not extend to all failures to comply with an information duty. In some directives that give the consumer a right of withdrawal, the withdrawal period does not start to run before the information duty prescribed in those directives is fulfilled. According to Art. 5 of the Doorstep Selling D., (which uses the term “cancellation” for withdrawal), the withdrawal period does not commence before the time when the consumer received the required legal information and party-related information on the right of withdrawal and its exercise. Case law before the ECJ has established that one consequence is that the period for extending the right of withdrawal is extended indefinitely, i.e., the seven-day ‘withdrawal period’ will not commence until the consumer has been informed adequately. It has been established by the European Court of Justice that this prolongation of the withdrawal period seems to be unrestricted (C-481/99 – Heininger v Bayerische Hypotheken- und Wechselbank). Article 5(1) of the Timeshare D. 1994 represents the next step in this development. It states that the purchaser may withdraw from the contract within a longer period (three months and ten days), if certain required information has not been provided. This notion is reproduced in Art. 6 of the Distance Selling D., which states that the beginning of the period of withdrawal is tied to the provision of most of the information required to be given by the articles of the directive, however, again with a maximum period of withdrawal (three months) in case the information is not given. As the Timeshare D. 1994 and the Distance Selling D. put much more emphasis on information than the Doorstep Selling D. the prolongation of the period of withdrawal in these directives applies to both party-related, performance-related, price-related, term-related and legal information duties. Art. 6(1) of the Financial Services Distance Selling D. carries the use of this sanction still further, as the list of items of information that have to be given before the period

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Art 2:208 2

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of withdrawal starts to run, is much longer, again containing items belonging to all the five above-mentioned categories. As this directive does not mention any maximum period of prolongation it seems to leave the contract open to withdrawal “indefinitely” as long as the information requirements are not fulfilled. In other words, the acquis contains at least the following principle: in cases where the law prescribes both a withdrawal period and an information requirement, a (serious) breach of the information requirement should prolong the withdrawal period. The legal foundations for the provision in paragraph (2) are to be found in the provisions of non-conformity of the Consumer Sales D. and the CISG, as explained above in connection with Art. 2:201 ACQP. Beyond these situations, the consumer acquis in its present format does not envisage any particular sanctions, leaving the matter for the Member States to resolve.

2.

Development

2 Paragraph (1) has its roots in several directives, but a degree of generalisation is required. The main issue addressed in this paragraph is the determination of a clear long-stop for extending the withdrawal period in circumstances where the required information has not been provided on time. Paragraph (2) reflects the general position that information available in the pre-contractual context can have a bearing on the substance of a contract. As mentioned above, this follows from the provisions of non-conformity of the Consumer Sales D. and the CISG, and is here extended to cover all the information provisions of the present chapter. The remedy can also be supported with reference to the need of a logical application of effet utile, especially in light of cases C-453/99 – Courage Ltd v Crehan and C-253/00 – Antonio Munoz Cia SA v Frumar Limited. Paragraph (3) deals with the issue of damages. It seems appropriate that this remedy should be available where no contract results at all; e.g., because the information provided by a business, which is misleading or incomplete, has caused the consumer to decide not to enter into a contract at all. Damages could not be awarded for breach of contract in these circumstances. The acquis itself is silent on this question. However, the jurisprudence of the ECJ has begun to develop a principle by which an entitlement to damages for losses suffered as a result of a failure to correspond with directly applicable Treaty articles or Regulations can give rise to a claim in damages. This approach is based on the general principle of effet utile (cf., in particular, cases C-453/99 – Courage Ltd v Crehan and C-253/00 – Antonio Munoz Cia SA v Frumar Limited). Although the case law is currently restricted to circumstances where there is a directly applicable provision of EC law, it is conceivable that this may evolve into a general principle in situations where there is national legislation which implements an EC directive. This would suggest that the availability of dam146

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Article 2:208 Remedies for breach of information duties

Art 2:208 3–5

ages for a consumer not only where he has entered into a contract in response to incomplete or misleading information, but also where he has not done so, is a nascent principle of the acquis. What is difficult to determine are the kinds of damages that might be recoverable, and if a claim would arise in contract or tort. In essence, an analogy either with provisions concerning damages for breach of contract or damages for culpa in contrahendo (damages for negligent negotiations) may need to be drawn. In case C-334/00 – Fonderie Officine Meccaniche Tacconia Spa v Heinrich Wagner Sinto Maschinenfabrik GmbH, a case from Italy involving a claim for wrongfully breaking-off negotiations regarding a contract, the ECJ took the view that this kind of action was a “matter relating to tort” for the purposes of the Brussels Convention.

3.

Political Issues

A question not currently reflected in the above draft is whether the acquis can be said to 3 offer arguments for a right of withdrawal of contracts even when there is no prescribed withdrawal period which could be prolonged. One could claim that the considerable prolongation of the withdrawal period – some times for around three months and sometimes even indefinitely – in fact means that in these cases a broad right of withdrawal is attached to breaches of information duties. As the reason for prolonging the withdrawal period under the above-mentioned directives is the need to let the consumers have adequate knowledge of certain facts before they make their decisions whether to withdraw or not, one might argue that there is a similarly strong reason to give the consumers who did not have the sufficient, prescribed information when making other contracts than those covered by the above-mentioned directives, a right to withdraw within a reasonable period of time after having received the information. As the withdrawal rules are designed for typical one-off market transactions made by con- 4 sumers, it is not self-evident that they can be given a general scope. It could be possible to apply them by analogy to at least some such other weaker party-relations in which the provision of information is important, but this requires further analysis. More significantly, determining whether there should be a long-stop for extending the cancellation period is a political issue, and a matter in respect of which the acquis is uncertain.

B.

Commentary

1.

Meaning and Purpose

The purpose of this Article is to make available a remedy where there has been a failure 5 to provide pre-contractual information. As firmly established in the acquis, where a right of withdrawal is made available (cf. Chapter 5), failure to provide the required pre-contractual information leads to a delay in the commencement of the withdrawal period.

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Art 2:208 6–10

Chapter 2: Pre-Contractual Duties General Provisions . Section 2: Pre-contractual information duties

6 Even where a contract has been concluded, a failure to provide the required pre-contractual information, or to use the correct form, can affect the substance of the obligations assumed under the contract, and may result in the incorrect performance or non-performance of contractual obligations. A remedy will therefore be available in those circumstances. 7 Finally, there may be circumstances where the failure to provide information, or failure to use appropriate form, may cause loss, even though no contract has been concluded. A right to damages must be made available in those circumstances. Paragraph (3) ensures that this is possible. Importantly, this sub-paragraph provides a remedy both where no contract has been concluded at all and where a contract has been concluded but no remedy is available by virtue of paragraph (2). The claimant would have to demonstrate that they had incurred a loss in reliance on the information which had been made available to him, if any.

2.

Context

8 The remedies available for breach of pre-contractual information duties are partially found in other parts of contract law, related both to business-to-consumer relations as well as to other contractual relationships. In some situations an omission to give information can be misleading in a way that makes the general provisions on validity of contracts or validity of unfair contract terms applicable. Failure to comply with the duties in Art. 2:201 to 2:207 ACQP may have consequences within existing validity rules, e.g. when establishing whether there has been legal intention, fraud, etc, although those consequences may not amount to remedies in the strict sense. 9 In other situations the omission can lead to such a difference between the other party’s expectations and the actual performance that remedies for breach of contract may be available. In particular, if the omission to provide information leads to a situation in which the other party concludes a contract misinformed about some relevant fact, this party in a contract of sale has the ordinary remedies for lack of conformity to his disposal. As discussed above in the comments to Art. 2:201 ACQP, this rule can well be extended to contracts for the provision of services as well. As also mentioned it must be applied both in consumer relations and in business-to-business relationships.

3.

Explanation

10 If a particular situation would require the provision of pre-contractual information and the transaction also entails the grant of a right of withdrawal, then failing to provide the relevant information has the effect of postponing the start of the period during which the right of withdrawal may be exercised. However, it is not appropriate to delay this indefinitely, and a long-stop of one year from conclusion of the contract is imposed.

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Specific Provisions Part A: Contracts Negotiated Away from Business Premises Article 2:A-01: Specific pre-contractual information duties for Placeholder distance selling of financial services

Part B: Contracts for the Delivery of Goods Article 2:B-01: Pre-contractual information on consumer guarantees

Placeholder

Part C: Timeshare Contracts Article 2:C-01: Specific pre-contractual information duties for timeshare contracts

Placeholder

Part D: Service Contracts Article 2:D-01: Specific pre-contractual information duties for service contracts

Placeholder

Part E: Package Travel Contracts Article 2:E-01: Specific pre-contractual duties for package travel contracts (1) In the case of a package travel contract, as defined in Article 7:E-02 (Definition of package travel contract) paragraph (1), a business is presumed to have complied with the information duties imposed by Articles 2:202 (Information duties in marketing towards consumers) and

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Art 2:E-01

Chapter 2: Pre-Contractual Duties Specific Provisions . Part E: Package Travel Contracts

2:203 (Information duties towards disadvantaged consumers) if it makes a brochure available to the customer with the information specified in paragraph (2). (2) Where the business makes available a brochure to a customer, this brochure must specify: (a) the main characteristics of the goods or services: (i) the destination(s) and the means, characteristics and categories of transport used; (ii) the type of accommodation, its location, category or degree of comfort and its main features; its approval and tourist classification; (iii) the meal plan; (iv) the itinerary; and (v) whether the package is offered only if a minimum number of bookings is reached, and the deadline for informing the consumer in the event of termination; (b) the address and identity of the organiser; (c) the price and (d) other relevant information about: (i) passport and visa requirements; and (ii) health formalities required for the journey and stay. (3) At a reasonable time before conclusion of the package travel contract, the customer must be given information about: (a) passport and visa requirements; and (b) health formalities required for the journey and stay. (4) The contract must specify at least: (a) the main characteristics of the goods or services, including: (i) the destination(s), including the dates of the periods of stay where multiple stays are involved; (ii) the means, characteristics and categories of transport used; (iii) dates, times and points of departure and return; (iv) the itinerary (times and places of any intermediate stops and transport connections); (v) visits, excursions or other services which are included in the total price agreed for the package; and (vi) the type of accommodation, its location, category or degree of comfort and its main features; its approval and tourist classification; (b) the price, including any possibility of price revision as provided in Article 7:E-03 (Revision of price); (c) the address and identity of the organiser and, where applicable, the retailer; (d) the terms of the contract, including any agreed special requirements of the customer; (e) the rights and obligations of both contracting parties, including (i) whether a minimum number of persons is required for the package to take place and, if so, the deadline for informing the customer in the event of termination; and (ii) the duty to communicate any failure in the performance which the traveller perceives on the spot to the supplier of the services concerned and to the business in writing or any other appropriate form at the earliest opportunity; and (f) any available redress procedures, including periods during which the customer must make any complaint concerning the performance of the contract.

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Article 2:E-01 Specific pre-contractual duties for package travel contracts

Art 2:E-01 1, 2

A. Foundation in the Acquis 1.

Sources

The Package Travel D. requires that information is provided to a consumer at four differ- 1 ent stages, and the type of information varies accordingly (for details see comment No. 2 to Art. 2:203 ACQP): Art. 3(2) Package Travel D.

Information to be included if a brochure is made available to the consumer (price, destination, means of transportation, types of accommodation, meal plan, itinerary etc.).

Art. (4)(1)(a) Package Travel D.

Information to be provided before the contract is concluded (passport and visa requirements, health formalities)

Art. (4)(1)(b) Package Travel D

Information to be provided in good time before the start of the journey (times and places of intermediate stops and transport connections, name, address and telephone number of the organiser’s and/or retailer’s local representative etc.)

Art. 4(2)(a) Package Travel D.

Information to be included in the contract (elements listed in the Package Travel D.’s Annex, e.g. travel destination(s), periods of stay, means of transportation etc.)

In addition, Art. 4(2)(b) requires that all the terms of the package travel contract are set out in writing or in such other form as is comprehensible and accessible to the consumer and are communicated to him or her before the conclusion of the contract. Furthermore, the consumer must be given a copy of these terms.

2.

Development

The information duties of the Package Travel D. have been used – together with simi- 2 lar lists of information duties from other directives – for formulating Art. 2:203 ACQP, a provision which seeks to state, in general form, pre-contractual information duties towards consumers that are informationally disadvantaged, either because of the technical medium used for contracting or (as in the case of package travel contracts) because of the nature of the transaction. This approach has the advantage of identifying and exposing the common rationale of various information duties in the acquis. However, using such a generalisation technique necessarily means that some of the finer points of the information duties formulated in the acquis for specific contracts or contracting situations have to be omitted. In order to properly reflect such detailed information duties, the Ggeneral Provisions in Chapter 2 of the ACQP have been supplemented with a number of Specific Provisions for contracts negotiated away from business premises (Art. 2:A-01 ACQP), contracts for the delivery of goods (Art. 2:B-01 ACQP), timeshare contracts (Art. 2:C-01 ACQP) etc.

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Art 2:E-01 3, 4

Chapter 2: Pre-Contractual Duties Specific Provisions . Part E: Package Travel Contracts

3 Instead of simply reproducing the list of information duties from the Package Travel D., the present Article seeks to improve the regulatory technique of the acquis in two regards: Firstly, according to paragraph (1) a business is presumed to have complied with the information duties imposed by Art. 2:202 and 2:203 ACQP if it makes available to the customer a brochure with the information specified in paragraph (2). The purpose of this “presumption technique”, which will also be used for the other Specific Provisions of Chapter 2 (which are currently mere placeholders and still have to be adopted by the Acquis Group), is to offer businesses both guidance and a certain security about compliance with the general information duties. Secondly, the information items enumerated in paragraphs (2) and (4) have been organised – as far as possible – along the following scheme: (a) main characteristics of the product, (b) address and identity of the business, (c) price, (d) other relevant information. This structure corresponds with the structure of Art. 2:202 and 2:203 ACQP. While rearranging the information items in order to increase clarity, some inconsistencies in the Package Travel D. have been identified. For example, Art. 3(2) of the Package Travel D. does not expressly require the business to properly indicate its address and identity. This defect has been remedied by paragraph (2)(b). 4 Based on this approach, the Article reflects the information duties expressed in Art. 3 and 4 of the Package Travel D. as follows: Paragraphs (1) and (2) on the information to be included in a brochure are modelled on Art. 3(2) of the Package Travel D. However, the present Article replaces the term “consumer” with the term “customer”, as the notion of “consumer” in the Package Travel D. covers also those who conclude contracts for business related purposes and therefore is much broader in scope than the term “consumer” defined in Art. 1:201 ACQP. Paragraph (3) concerning information to be provided before the conclusion of the contract (whether a brochure is made available or not) is modelled on Art. (4)(1)(a) of the Package Travel D. While the directive only requires the business to provide the information “before the conclusion of the contract”, paragraph (3) uses the expression “at a reasonable time before the conclusion of the contract”. This wording makes clear that the information must be provided in such a way that, the customer has an opportunity to make use of it before concluding the contract. Paragraph (4), which enumerates the items to be specified in the contract, is modelled on Art. 4(2)(a) of the Package Travel D. in connection with the directive’s Annex. On the one hand, it could be argued that this provision, which relates to the content of the contract document, belongs rather to Chapter 4 of the ACQP. On the other hand, it might be useful for businesses and consumers to if they can identify and compare the information to be included in a brochure and the information to be specified in the contract in one and the same place. As a compromise, the ACQP now include a (slightly redundant but user-friendly) reference to paragraph (4) in Art. 4:E-01(1) ACQP (cf. comment No. 3 to Art. 4:E-01 (1) ACQP), which also reflects the formal requirements expressed in Art. 4(2)(b) of the Package Travel D. and the duty to give a copy of the contract to the customer.

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Article 2:E-01 Specific pre-contractual duties for package travel contracts

Art 2:E-01 5–8

The duty to provide additional information “in good time before the departure” expressed in Art. (4)(1)(b) of the Package Travel D. has been transposed in Art. 7:E-06 ACQP, as this is a performance related information duty rather than a pre-contractual duty.

3.

Political Issues

Similarly to other consumer law directives, the Package Travel D. has been criticised for 5 requiring too much detailed information which is likely to cause an “information overload” and thus reduce the quality of the consumer’s decision making. Some of the more recent directives, such as the new Consumer Credit D. and the new Timeshare D. have addressed this problem by introducing standard information forms which make it easier for consumers to compare offers. This approach could serve as a model for a future reform of the information duties in the Timeshare D. as well. One could additionally consider amending the Article at hand by adding a rule on information duties for contracts concluded away from business premises.

B.

Commentary

1.

Meaning and Purpose

The Article sets out specific pre-contractual information duties for package travel con- 6 tracts which complement the general provisions in Art. 2:202 and 2:203 ACQP. According to paragraph (1) a business is presumed to comply with these general rules if it makes available to the customer a brochure containing the information items listed in paragraph (2). Paragraph (3) formulates additional information duties which apply regardless of whether a brochure is made available or not. Paragraph (4) defines minimum requirements for the content of the package travel contract. Paragraph (5) contains a specific provision for package travel contracts concluded away from business premises.

2.

Context

The general rules on pre-contractual information duties are applicable to the present Ar- 7 ticle, in particular Art. 2:204 ACQP which sets out requirements regarding form and clarity of information. Furthermore, the terms “address and identity” and “price” are to be interpreted in line with Art. 2:205 and Art. 2:206 ACQP. In case of a violation of the Article, the remedies under Art. 2:208 ACQP apply. The notion of package travel contract is defined in Art. 7:E-02 ACQP. The pre-contrac- 8 tual information duties in the Article at hand are complemented by additional information duties under Art. 7:E-06 ACQP to be fulfilled in good time before departure. Paragraph (2)(a)(v) and paragraph (4)(e) refer to the business’s right of termination in case that less than the minimum number of persons have enrolled. This right of termination is governed by Art. 7:E-05 ACQP. The customer’s duty to communicate any failure in the performance referred to in paragraph (4)(e) is regulated in Art. 8:E-04 ACQP.

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Art 2:E-01 9–13

3.

Chapter 2: Pre-Contractual Duties Specific Provisions . Part E: Package Travel Contracts

Explanation

9 Under the Article a business marketing package travel services is not obliged to provide potential customers with a brochure. But if it chooses to do so, and if the brochure contains the information specified in paragraph (2), pursuant to paragraph (1) the business is presumed to have complied with the general information duties under Art. 2:202 and 2:203 ACQP. For such cases paragraph (1) makes an exception to the general principle expressed in 2:207 ACQP, according to which the business is burdened with the proof that it has provided information as required by Art. 2:203 ACQP. However, the present Article only formulates a presumption, therefore the provision still allows a customer to prove that, in an exceptional case, the information listed in paragraph (2) is not sufficient to discharge the duty under Art. 2:202 and 2:203 ACQP. 10 Regardless of whether a brochure is made available, under paragraph (3) the customer has to be provided with information about passport and visa requirements as well as health formalities required for the journey and stay. Such information has to be provided at a reasonable time before conclusion of the package travel contract. This requires that the information is provided in such a manner that the consumer has an opportunity to reflect on the information before concluding the contract. 11 Paragraph (4) formulates requirements regarding the content of a package travel contract. This provision is complemented by Art. 4:E-01(1) ACQP which requires that the contract must be made “in writing” or in another textual form on a durable medium (e.g. a CD). This rule, which has mainly an information purpose, would not be effective if the customer did not receive a copy of the contract. Therefore, Art. 4:E-01(1) ACQP also requires that the customer is given such a copy (cf. comment No. 10 to Art. 4:E-01 ACQP). 12 In case of a violation of the Article, the sanctions under Art. 2:208 ACQP apply. Therefore, if the customer has a right to withdraw (e.g. under Art. 5:A-01 ACQP if the package travel contract was negotiated away from business premises), the commencement of the withdrawal period is postponed (Art. 2:208(1) ACQP). In addition, the package travel contract imposes on the business the obligations which the customer could reasonably expect as a consequence of the absence or incorrectness of the information (Art. 2:208 (2) ACQP). The business is also liable to the customer for reliance damages (Art. 2:208 (3) ACQP).

4.

Example

13 A business marketing package travel contracts makes available a brochure and marks a particular hotel in this brochure as a “five star hotel” (cf. Art. 2:E-01(2)(a)(ii)). If the business does not specify whether it refers to local or international tourist classifications, this information is not “clear and precise” as required under Art. 2:204 ACQP (unless the circumstances leave not doubt as to which classification is referred to). Therefore, the presumption set up by Art. 2:E-01(1) does not apply. The business has to prove, according to Art. 2:207 ACQP, that it has nevertheless fulfilled its information duties under Art. 2:203 ACQP.

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Art 2:E-01 13

Article 2:E-01 Specific pre-contractual duties for package travel contracts

Part F: Consumer Credit Contracts Article 2:F-01: Specific pre-contractual information duties for Placeholder consumer credit contracts

Part G: Payment Services1 1

The rules on Payment Services are not repeated here. They are presented on pp. 11-14.

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Chapter 3: Non-discrimination Section 1: General Rules/Definitions

Article 3:101: Principle of non-discrimination in contract law Any discrimination based on sex, racial or ethnic origin is prohibited.

A. Foundation in the Acquis 1.

Sources

Rules on non-discrimination can be found in many sources of Community law, and the 1 present provisions must be read keeping in mind this general context. For instance, the general rule on non-discrimination in Art. 12 of the Treaty establishing the European Communities (EC-Treaty) prohibits discrimination on the basis of nationality, while Art. 141 of the EC-Treaty ensures the principle of equal pay for male and female workers. Article 13 of the EC-Treaty mentions discrimination on the basis of sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation. But this provision is not directly applicable; it merely authorises the Council to prevent and stop such discrimination. However, it has to be borne in mind that according to Art. 6(2) of the Treaty on the European Union, the Union shall respect fundamental rights, as guaranteed by the European Convention for the Protection of Human Rights and Fundamental Freedoms. Article 14 of the Convention sets out that the enjoyment of the rights and freedoms under the Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status. Building on the aforementioned provisions, Art. 21 of the EU Charter of Fundamental Rights prohibits discrimination based on any ground “such as sex, race, colour, ethnic or social origin, genetic features, language, religion or belief, political or any other opinion, membership of a national minority, property, birth, disability, age or sexual orientation”. Article 23 of the EU Charter of Fundamental Rights guarantees the equal treatment of men and women in all spheres, including employment, occupation, and education. There are numerous directives dealing with the question of non-discrimination. These 2 are, in particular:

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Art 3:101 3

Chapter 3: Non-discrimination Section 1: General Rules/Definitions

Council Directive 2000/43 of 29 June 2000 implementing the principle of equal treatment between persons irrespective of racial or ethnic origin – further referred to herein as the Antiracism D.; Council Directive 2000/78 of 27 November 2000 establishing a general framework for equal treatment in employment and occupation – further referred to herein as the Directive on General Framework for Equal Treatment in Employment and Occupation; Directive 2002/73 of the European Parliament and of the Council of 23 September 2002 on the implementation of the principle of equal treatment for men and women as regards access to employment, vocational training and promotion, and working conditions – further referred to herein as the Directive on Equal Treatment for Men and Women as Regards Access to Employment (with effect from 15 August 2009 the Directive 2002/73 will be repealed and replaced by the Directive 2006/54); Council Directive 2004/113 of 13 December 2004 implementing the principle of equal treatment between men and women in the access to and supply of goods and services – further referred to herein as the General Sex Discrimination D.; Directive 2006/54 of the European Parliament and of the Council of 5 July 2006 on the implementation of the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation (recast) – further referred to herein as Directive on Principle of Equal Opportunities and Equal Treatment of Men and Women. For this draft two directives are of most importance – the Antiracism D. and the General Sex Discrimination D. Both directives – the former only inter alia, the latter exclusively – apply to the field of contract law, other than labour contract law (Art. 3(1)(h) of the Antiracism D. and Art. 3(1) of the General Sex Discrimination D.). There is also a provision of Art. 20 of the Services D. Paragraph (1) of this Article obliges the Member States to ensure that the recipient is not made subject to discriminatory requirements based on his nationality or place of residence. According to Art. 20(2) the Member States shall ensure that the general conditions of access to a service, which are made available to the public at large by the provider, do not contain discriminatory provisions relating to the nationality or place of residence of the recipient, but without precluding the possibility of providing for differences in the conditions of access where those differences are directly justified by objective criteria.

2.

Development

3 As the heading of the present Article suggests, the rule provided here forms part of contract law, although it also fulfils functions traditionally associated with tort law. Situating these provisions among contractual principles and rules is justified by the fact that the prohibition of non-discrimination must be respected at the stage of the formation of the contract or its performance. Such incorporation of the non-discrimination laws into contract law facilitates the operation of the contract law. 158

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Article 3:101 Principle of non-discrimination in contract law

Art 3:101 4–6

The EU directives identify different reasons on the basis of which one may not discrimi- 4 nate. These proscribed reasons need to be enumerated. Another ground is defined by primary Community law: nationality (Art. 12 of the EC-Treaty). But the directives on nondiscrimination exclude nationality from their scope of application (Art. 3(2) of the Antiracism D.; Art. 3(2) of the D. on General Framework for Equal Treatment in Employment and Occupation). Thus, this element was not included in the principle. It also does not seem necessary to do so, because the prohibition of discrimination on the ground of nationality in Art. 12 of the EC-Treaty is directly applicable. That is the view held by the majority of the commentators, although there are some diverging opinions. The majority of opinion can be supported by the ECJ’s decision of 6 June 2000 in C-281/98 – Angonese. Hence Art. 12 of the EC-Treaty is a general principle of Community law and can therefore be invoked against any private person. It should however be noticed that there is no sufficient acquis governing the consequences of the violation of the requirement of nondiscrimination under Art. 12 of the EC-Treaty. The EC-Treaty does not provide any sanctions for a violation of its Art. 12; however it could be considered to expand the scope of application of the non-discrimination rules of this instrument to include discrimination based on nationality. After the rules on non-discrimination have been adopted by the Acquis Group the Services D. has been passed. Art. 20(2) of this Directive contains a rule, which may be interpreted as a private law provision, banning the offering of services on discriminatory basis, related to the nationality or place of residence of the recipient. It is question still open how far this provision should be reflected by the Acquis Group in its prospective work. For reasons mentioned above there is no need to address the nationality, since such discrimination is already prohibited under Art. 12 of the Treaty. A prohibition of discrimination based on place of residence is more complicated, since such ground for discrimination is not mentioned in Art. 13 of the Treaty and it is an open question whether the Community is authorised to intervene into freedom of contract in this field. All this needs further decisions of the Acquis Group. The Antiracism D. (Art. 1) and the General Sex Discrimination D. (Art. 2) refer only to 5 sex, ethnical or racial origin as prohibited grounds of discrimination. In contrast, the Directive on General Framework for Equal Treatment in Employment and Occupation (Art. 1) prohibits discrimination on the grounds of religion or belief, disability, age or sexual orientation. However, this directive applies only with regard to employment and occupation. Although Art. 13 of the EC-Treaty gives the Community the competence to extend this prohibition to other contracts as well, the legislator has not made use of this power. Therefore, there is no sufficient ground for formulating a broader non-discrimination principle as part of the non- labour law acquis. In its judgment of 22 November 2005, the ECJ points out in the that “The principle of 6 non-discrimination on grounds of age must thus be regarded as a general principle of Community law” (C-144/04 – Mangold). However, this statement should be read in connection with the preceding passage which primarily refers to the Directive on General Framework for Equal Treatment in Employment and Occupation. Even if the ECJ favours the broader understanding, expanding the prohibition of age related discrimination to all areas of private law, this would not solve the question of what the consequences of a vioStefan Leible/Susana Navas Navarro/Jerzy Pisulin´ski/Fryderyk Zoll

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Art 3:101 7–10

Chapter 3: Non-discrimination Section 1: General Rules/Definitions

lation of the prohibition should be. Hence, as in the case of Art. 12 of the EC-Treaty, no further rules of the acquis can be identified. 7 Although the list of prohibited grounds for discrimination (sex, racial or ethnical origin) is exhaustive, this does not rule out the possibility of censuring in the process of evaluation, other possible grounds of discrimination from a different perspective, for instance from the point of view of good faith. However, this would not lead to the application of the special remedies governed by Art. 3:201 and 3:202 ACQP. 8 The terminology used in the present Article is partially modelled on Art. 2 General Sex Discrimination D. which uses the term “sex” to describe one of the prohibited discrimination criteria. It might have also been possible to use the term “gender”, which refers to a social, cultural, or psychological condition, as opposed to that of biological sex. The terminology used by EC documents is not always consistent as to this distinction. In fact, the recitals of the General Sex Discrimination D. on the one hand refer to the promotion of “gender equality” (Recital 16) and on the other hand to the prohibition of “sex discrimination” (Recital 7 et seq.). Yet, as Art. 2 of the General Sex Discrimination D. as well as Art. 2(1)(a) Directive on Principle of Equal Opportunities and Equal Treatment of Men and Women use the term “sex” in the definition of “direct discrimination”, this Article follows this terminology.

3.

Political Issues

9 The Article has not been drafted as a hard and fast rule, but as a general principle (which could possibly form part of a preamble of several such general principles in a later stage of the work). For the time being, the principle of non-discrimination has been incorporated as a rule into this chapter. This may however lead to some inconsistencies in the structure of the draft which will be eliminated during the further steps of the work. Hence, the Article at hand does not constitute a complete rule. However, it does correctly reflect the idea, which is expressed in the acquis: that discrimination for the reasons of sex, ethnical origin and race should be eliminated from the legal relationships among people. 10 Community law treats any kind of discrimination – for the reasons mentioned in Art. 12 and 13 of the EC-Treaty – as wrongful behaviour. It does not mean however that every instance of such behaviour will automatically amount to a violation of the law. The sanctioning of all possible kinds of discrimination in many different contexts would lead to conflict with other, often highly protected values such as personal freedom, freedom of thought and freedom of contract etc. All mentioned sources of the acquis show an attempt by the law-maker to find a balance among all of these important values. In the area of non-labour contract law the scope of the application of the directives on non-discrimination is limited to the contracts that provide access to, or supply goods and services which are available to the public, including housing. However, this is a justified decision to formulate more broadly the commented rule. It represents the main idea of the legal order of the Community with respect to other values in the area of the contract law. This rule is broader than the scope of application of the remedies under Art. 3:201 and 3:202 ACQP. It may appear to be an inconsistency, but this rule also serves to concretise other 160

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Article 3:101 Principle of non-discrimination in contract law

Art 3:101 11–13

general clauses used by this law, such as good faith, and may be used to cover cases of discrimination in the other fields of the contract law, not mentioned under Art. 3:201(1) ACQP, launching the application of remedies for non-performance. The rules on non-discrimination are drafted with the idea of allowing easy modification and extension of the scope of its application in other areas of discrimination. The decision of whether such extension should happen is purely political.

B.

Commentary

1.

Meaning and Purpose

This Article expresses a general idea of the draft which prohibits any discrimination on 11 the basis of sex, ethnicity or racial origin.

2.

Context

The Article is not a complete rule. It is only a part of the rule and needs to be read within 12 the context of the further provisions of the draft. Article 3:102 ACQP contains a definition of discrimination while Art. 3:103 ACQP provides a possible justification where unequal treatment is the result of a legitimate aim. Possible remedies for discrimination are set out in Art. 3:201 and 3:202 ACQP, which also include a restriction on the scope of the application. Article 3:101 ACQP should be understood as a concretisation of the principle of good faith and it is also of relevance for those parts of the Acquis Principles, where such general clauses are used (pre-contractual duties, performance/non-performance). The violation of the present Article may cause the application of other remedies than those covered by Art. 3:201 and 3:202 ACQP, particularly where a violation of the Article constitutes a case of non-performance.

3.

Explanation

The principle refers to key factors such as sex, racial or ethnical origin. Discrimination 13 based on sex means that a person is treated by the other party differently from another person for the reason of being a man or a woman. Discrimination based on ethnical origin means that a person is treated in a different way because this person, in fact or supposedly, belongs to a group with a common tradition, culture and/or language. Discrimination based on race means that person is treated differently because this person, in fact or supposedly, belongs to a specific race. The term “race” has to be understood in a subjective way, leaving it open to the discriminating person to determine what they understand as being a different “race”. Specifically, the use of the term “race” does not mean that the acquis accepts any of the theories classifying people by race (Recital 6 of Antiracism D.). However, we should acknowledge that the notion “race” cannot be purely understood in its subjective sense, i.e. from the perspective of the wrongdoer. A purely subjective criterion could lead to forbidden discrimination in any case where unequal treatment occurs

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Art 3:101 14–17

Chapter 3: Non-discrimination Section 1: General Rules/Definitions

due to the appearance of the person. Rather, discrimination based on race should be understood as relating to certain traits that, within a concrete cultural and social environment, are understood as distinguishing criterion from the group of people to which a discriminator is believed to belong. It is necessary to evaluate each case with consideration to the local cultural and historical context and background.

4.

Examples

Example 1 14 Landlord A refuses to rent an apartment to B for the reason that B has naturally red hair. A declares openly that he does not trust red-haired people. This example shows the difficulties in applying a purely subjective criterion of “race”. Generally it cannot be treated as discrimination based on racial reasons, unless there are some local contexts, which evidence that the local community treats “red-haired people” as strangers or some type of ‘other’. Example 2 15 A shop owner refuses to sell bread to a customer, arguing that the buyer is Jewish. It is a clear case of racial discrimination, and it also follows a shameful tradition of discriminatory treatment of Jewish people as a different race. In this situation, it does not matter whether the client in fact belongs to the Jewish community or not. Legally, it is solely a question of evaluating the reason for the shop owner’s decision. Example 3 16 A group of citizens from one of the Member States books rooms in a hotel in a different Member State. The hotel refuses to perform the contract, arguing, that the citizens of this State are not welcome in the hotel. This type of discrimination is covered by Art. 12 of the EC-Treaty. From the perspective of this draft it also fulfils the conditions of discrimination based on ethnic origin. The notion of ethnic origin is sufficiently broad to cover also a common citizenship. Article 3:201(1) ACQP states that a victim of discrimination may resort to the remedies under this article if the discrimination has occurred in relation to contracts that provide access to, or supply goods and services which are available to the public, including housing. Article 3:101 ACQP does not include such a restriction. In the case of other contracts than those mentioned under Art. 3:201(1) ACQP, a victim of discrimination may resort to other remedies. These apply if the discrimination amounts to a violation of other duties such as pre-contractual duties or rules on non-performance. Example 4 17 A one year contract to teach a foreign language has been concluded by the parties. A male student verbally violates the dignity of his female teacher because of her sex. This is a case of harassment as defined under Art. 3:102(2) ACQP, although this kind of contract is not covered by Art. 3:201(1) ACQP because it is the supplier of the service and not the recipient who is discriminated against. Although this has the consequence that the remedies of Art. 3:201 are not applicable, there may be other legal consequences. For example, the teacher may terminate a contract according to the rules on non-performance. 162

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Article 3:102 Discrimination

Art 3:102 1, 2

Article 3:102: Discrimination (1) ”Discrimination” means: (a) a situation where one person is treated less favourably than another person is, has been or would be treated in a comparable situation; (b) a situation where an apparently neutral provision, criterion or practice would place persons with a particular feature at a particular disadvantage when compared with other persons; (2) Discrimination also includes (a) unwanted conduct which violates the dignity of a person and which creates an intimidating, hostile, degrading, humiliating or offensive environment, or which aims to do so (harassment); or (b) any form of unwanted physical, verbal, non-verbal, or psychical conduct of a sexual nature that violates the dignity of a person, or which aims to do so, in particular when such conduct creates an intimidating, hostile, degrading, humiliating or offensive environment (sexual harassment). (3) Any instruction to discriminate also amounts to discrimination.

A. Foundation in the Acquis 1.

Sources

Every directive in the field of non-discrimination contains a definition of the term “dis- 1 crimination” (Art. 2 of the Antiracism D. and Art. 2 of the General Sex Discrimination D.) and the content of these definitions is similar. All of them include a distinction between direct and indirect discrimination. Article 2 of the General Sex Discrimination D. defines discrimination as follows: “(a) direct discrimination: where one person is treated less favorably, on grounds of sex, than another is, has been or would be treated in a comparable situation; (b) indirect discrimination: where an apparently neutral provision, criterion or practice would put persons of one sex at a particular disadvantage as compared with persons of the other sex, unless that provision, criterion or practice is objectively justified by a legitimate aim and the means of achieving that aim are appropriate and necessary”; Additionally, Art. 4(4) of the General Sex Discrimination D. extends the definition of discrimination to instructions to directly or indirectly discriminate. The respective definitions of the Antiracism D. do not differ from the quoted definitions, despite the different grounds for unequal treatment. All non-discrimination directives include the notion of harassment (Art. 2(3) of the Di- 2 rective on General Framework for Equal Treatment in Employment and Occupation; Art. 2(3) of the Antiracism D.; Art. (2)(c) of the General Sex Discrimination D.). Ar-

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Art 3:102 3–5

Chapter 3: Non-discrimination Section 1: General Rules/Definitions

ticle 2(c) and (d) of the General Sex Discrimination D. defines harassment as a situation where unwanted conduct relates to the sex of a person and occurs with the purpose or effect of violating the dignity of a person and of creating an intimidating, hostile, degrading, humiliating or offensive environment; and sexual harassment as a situation where any form of unwanted physical, verbal, non-verbal or physical conduct of a sexual nature occurs, with the purpose or effect of violating the dignity of a person, in particular when creating an intimidating, hostile, degrading, humiliating or offensive environment. The Antiracism D. also contains a definition of harassment similar to the Art. 2(c) of the directive mentioned above. The other directives governing issues of non-discrimination on the area of labour law contain similar definitions (cf. Art. 2(2) to (4) of the Directive on General Framework for Equal Treatment in Employment and Occupation and Art. 2(1)(a) to (d) of the Directive on Equal Opportunities and Equal Treatment for Men and Women).

2.

Development

3 The definition is a synthesis of the definitions expressed by all non-discrimination directives. Paragraph (1) of the present Article contains a definition of the term “discrimination” that covers both direct and indirect discrimination. Although all relevant directives cover direct and indirect discrimination by different rules, this type of differentiation should not be followed. From the perspective of private law, indirect discrimination is simply a circumvention of the prohibition of direct discrimination. Therefore, both situations should be covered by the same rules. In both cases the same remedies are available, and in both cases there is the possibility of justifying the unequal treatment (Art. 3:103 ACQP). Thus, this instrument does not treat direct and indirect discrimination separately. It should be noted that the distinction made here between these regulations does not mean that any changes have been made as to their content. Generally, discrimination can be understood as meaning that a person is treated “less favourably than another person would be treated in a comparable situation”. 4 Since the prohibited grounds for discrimination – ethnic or racial origin and sex – are already included in the general principle, there is no need to repeat them in the definition of the notion of discrimination. These criteria are also repeated in the provision on remedies (Art. 3:201(1) ACQP). The method of defining discrimination without reference to the grounds for discrimination was chosen in order to avoid having to change the definition if the list of prohibited grounds for discrimination was modified. The definition also underlines the idea that all unequal treatment in a comparable situation is discrimination, although there is not a remedy for each type of discrimination.

3.

Political Issues

5 The inclusion of harassment cases into the draft on contract law can be justified by a need for coherency of the whole non-discrimination draft. In this case the proximity to tort law is evident.

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Article 3:102 Discrimination

B.

Commentary

1.

Meaning and Purpose

Art 3:102 6–11

Since the provisions on discrimination prohibit and sanction certain types of behaviour 6 between people, there is a need for a strict definition of the unwanted conduct which is to be eliminated. The present Article provides definitions of discrimination, including harassment and sexual harassment.

2.

Context

The definitions of the Article apply not only in the context of the remedies under 7 Art. 3:201 to 3:202 ACQP and the burden of proof under Art. 3:203 ACQP but also to the discrimination under Art. 3:101 ACQP. Through Art. 3:101 ACQP these definitions become relevant to all parts of the draft, where discrimination may occur as a violation of pre-contractual duties or constitute a non-performance. Since these definitions do not contain a list of grounds for discrimination they may also apply in other cases of unequal treatment, which could be relevant for other parts of the law.

3.

Explanation

The first part of the definition of discrimination refers to a person being treated less fa- 8 vourably than another person would be treated in a comparable situation. The less favourable treatment means all treatment that disadvantages, such as rejecting the conclusion of a contract, not providing sufficient information, terminating the contract, requiring additional security of guarantees or additional services solely based on special features of the other party. A comparable situation is taken to mean a real or a potential situation of the normal treatment of a person in similar circumstances subject to market conditions, without regard to any features of this person.

4.

Examples

Example 1 A bank does not provide loans to coloured people. This is unequal treatment because the 9 bank differentiates on the ground of race; white people who fulfil the other loan requirements would get the loan. Example 2 A woman needs the additional signature of her husband in order to finance a lease, while 10 a man could conclude that type of contract without his wife’s signature. Example 3 A seller delivers goods to Roma people only against payment in advance, while other 11 customers are able to get goods with a 14 day payment period after delivery.

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Art 3:102 12–18

Chapter 3: Non-discrimination Section 1: General Rules/Definitions

12 The second part of the definition of discrimination tries to prevent the use of such criteria that are not immanently linked to a specific group of people, but that could (proportionately) affect such a group more than another group of people who does not share the same feature which is the basis for discrimination. Example 4 13 A bank grants loans only to full time employees. Since most people who are employed in part-time jobs are women, such a policy of the bank is discriminatory. 14 Article 3:102(2) extends the notion of discrimination to two kinds of harassment: harassment in a broader sense and sexual harassment. The harassment cases are not covered by the definition of discrimination under paragraph (1) because a harassed person is formally treated like others; yet because of his or her special features such a person cannot enter into the transaction without being put into an intimidating or hostile or otherwise difficult or negative situation. Example 5 15 Racist music is played in a bar or a restaurant. Such conduct violates human dignity and creates a humiliating and an offensive environment. This constitutes harassment and is therefore covered by the definition of discrimination under Art. 3:102(2). Example 6 16 During a bus journey, a pornographic movie is being shown without the prior consent of the passengers. This constitutes sexual harassment because it may cause a degrading or humiliating situation for the female passengers. 17 The term “discrimination” also includes an instruction to discriminate. The relation between the person acting in a discriminating way and the person discriminated against is of no relevance. Therefore, the prohibition of an instruction to discriminate is a pure tort provision. However, due to the close relationship to the whole system of non-discrimination, it has been included in this instrument. An “instruction to discriminate” means all orders to discriminate in the sense of Art. 3:102(1) relating to a legal or factual situation of dependence. An instruction to harass is also discrimination according to these rules. Example 7 18 The manager of a barbershop orders his employees to stop providing services to coloured people. This is an instruction to discriminate under Art. 3:102(3).

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Article 3:103 Exception

Art 3:103 1– 4

Article 3:103: Exception Unequal treatment which is justified by a legitimate aim does not amount to discrimination if the means used to achieve that aim are appropriate and necessary.

A. Foundation in the Acquis 1.

Sources

As previously mentioned, the directives distinguish between direct and indirect discrimi- 1 nation. The prohibitions against direct discrimination are phrased differently from those of indirect discrimination. While indirect discrimination by definition presupposes that there is no justified reason for the different treatment, the proscription of discrimination on the grounds of race and ethnic origin in the Antiracism D. is formulated as an absolute principle without any exception. On the other hand, Art. 4(5) of the General Sex Discrimination D. provides that differences in treatment shall not be precluded if they can be justified by a legitimate aim and if the means of achieving that aim are appropriate and necessary. In addition, Art. 5(2) of the same directive allows justification of different premiums and benefits in insurance between men and women. The directives (Art. 5 of the Antiracism D. and Art. 6 of the General Sex Discrimina- 2 tion D.) do not forbid specific measures to prevent or compensate disadvantages (positive action), although these also constitute discrimination themselves.

2.

Development

Article 3:102 ACQP does not distinguish between different forms of discrimination. This 3 provision generalises the ideas expressed in Art. 4(5) of the General Sex Discrimination D. In addition, Recital 16 of this directive provides for the possibility of justifying direct unequal treatment. It would be too restrictive not to provide for the possibility of justification of unequal treatment in the area of private law with its principle of freedom of contract (cf. Recital 14 of the General Sex Discrimination D.). It is not possible to predict all of the numerous multi-faceted situations in life. The stronger arguments therefore, are in favour of adopting a relative rather than an absolute prohibition of unequal treatment. There is no danger that such an approach would erode the prohibition, since exceptions have to be interpreted strictly and are submitted to the control of the ECJ. This instrument does not follow the strict division between direct and indirect discrimi- 4 nation of the regulations because it does not seem practical to maintain this distinction with regard to the requirements and the effects of discrimination. Both the questions whether there is discrimination, and the question of whether it could be justified, are a matter of evaluation, and their answers depend on the intensity as well as on a number of different facts. In some cases the existence of one criterion is evidence enough to establish a case of unjustified discrimination; in other cases it is necessary to find a collection

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Art 3:103 5–8

Chapter 3: Non-discrimination Section 1: General Rules/Definitions

of facts with sufficient intensity. This approach also allows the law to justify and to accept any positive actions which are aimed at compensating or improving the position of disadvantaged people, often referred to as “reverse discrimination” or “affirmative action”.

3.

Political Issues

5 The main problem is the question of expanding the possibilities of justification of unequal treatment, mostly in relation to the Antiracism D. It should not however, be treated as a political matter. Rather, it is a question of legislative method. The concept of the whole Acquis Principles aims at reaching a higher level of abstraction. The consequence of such synthesis is a reduction of the casuistic approach. Such an approach becomes more an agenda of the courts, which have the responsibility for making the necessary distinctions and having more flexibility. Generally, this approach does not change the practical results – in the case of ethnically and racially based unequal treatment, only exceptional circumstances may lead to the justification of such practices.

B.

Commentary

1.

Meaning and Purpose

6 This Article brings some necessary flexibility into the process of evaluating unequal treatment. It allows the party behaving unequally to justify such treatment by legitimate aims. In this way, rational use of the freedom of contract is still granted and it also allows for different factors to be taken into account. It prevents the mechanical qualification of all unequal treatment as discrimination.

2.

Context

7 The relation to other parts of the Acquis Principles is the same as in the case of Art. 3:102 ACQP, as the Article at hand completes the definition of discrimination.

3.

Explanation

8 According to this provision, discrimination cannot occur where unequal treatment is justified by legitimate aims, and the means applied to reach these aims are appropriate and necessary. The aims are legitimate, if they constitute a protected value in a society, which should not be given up. It could reflect the need to protect privacy, decency, religion and/ or cultural identity. In exceptional cases (like insurance contracts) certain economical factors can also provide a justification within the meaning of the present Article. It is not sufficient, however, that such societal values are in conflict with the requirement of equal treatment. Rather it must be decided whether the protection is of such value that it does not violate the main goal of non-discrimination laws: a protection of human dignity.

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Article 3:103 Exception

Art 3:103 9–11

The existence of a legitimate aim is not sufficient in and of itself. There needs to be proof that the unequal treatment is the only way to achieve this goal. The application of such a justification is tempered by the requirement of proportionality. From the perspective of the broader interests of society the benefits have to outweigh the disadvantages of the unequal treatment. The fact that Art. 3:102 ACQP may apply to all cases of discrimination does not mean 9 that the grounds on which discrimination occurs would not be relevant in deciding whether such discrimination can be justified. Depending on the kind of discrimination at hand, the exception test should be applied differently, i.e. more or less strictly. For instance, in case of racial discrimination the possibility of justification is extremely limited and absolutely exceptional, because of the overriding principle that the criterion of race should be abandoned as a means of the classification of people. Since the criterion of race and to some extent that of ethnic origin are predominantly subjective categories, unequal treatment usually cannot bring a real benefit worthy of justification. Therefore, only an exceptional justification test may be used when deciding whether to permit this kind of discrimination. In case of any harassment (sexual or otherwise) there is no possible justification because of the reprehensibility of the very nature of such behaviour.

4.

Examples

Example 1 A woman makes an offer to rent two rooms in her apartment, but only to female students. 10 This discrimination is justified for reasons of privacy and decency (Recital 16 of the General Sex Discrimination D.). Example 2 A woman makes an offer to rent rooms in her apartment only to white students. This 11 discrimination cannot be justified. Although there might be a legitimate privacy argument, this must not be based on or linked to the race of the roommates. One of the goals of non-discrimination law is to fight against unreasonable stereotypes. Race is such stereotype that leads to degrading conditions for certain groups of people. Therefore, privacy motivations alone cannot be sufficient. Europe has an extremely painful history of racial discrimination. The memory of this history is reflected in constitutionally protected values which must obviously influence which justifications for discrimination are permitted and which are not.

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Section 2: Remedies Article 3:201: Remedies (1) A person who is discriminated against on the grounds of sex, ethnic or racial origin in relation to contracts that provide access to, or supply goods or services which are available to the public, including housing, is entitled to compensation. (2) Where appropriate, the discriminated person is entitled to other remedies which are suitable to undo the consequences of the discriminating act or to prevent further discrimination.

A. Foundation in the Acquis 1.

Sources

1 Community law does not provide for any specific remedies against prohibited discrimination. All directives leave it to the Member States to determine the sanctions which are to be adopted in case of infringement of the non-discrimination rules. They only require Member States to provide for sanctions that are effective, proportionate and dissuasive. All five Directives set out that the sanctions may entail the payment of compensation to the victim. Detailed provisions on damages can be found in Art. 8(2) of the General Sex Discrimination D., Art. 18 of the Directive on Principle of Equal Opportunities and Equal Treatment of Men and Women, and Art. 6(2) of the Directive on Equal Treatment for Men and Women as Regards Access to Employment. According to these provisions, Member States shall introduce into their national legal system such measures that are necessary to ensure real and effective compensation for the loss and damage sustained by a person injured as a result of discrimination within the meaning of the directive. The directives set out that such compensation should be done in a way that is dissuasive and proportionate to the damage suffered. 2 The General Sex Discrimination D. and the Antiracism D. confine their scope of application in the field of contract law to contracts that provide access to, or supply goods and services that are available to the public, including housing (Art. 3(1) of the General Sex Discrimination D. and Art. 3(1)(h) of the Antiracism D.).

2.

Development

3 The remedies under this instrument may be applied only if discrimination occurs because of sex, ethnic or racial origin. The reason for such restriction has already been explained in the comments to Art. 3:101 ACQP.

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Article 3:201 Remedies

Art 3:201 4–7

Since Community law only provides guidelines for the Member States to shape a system 4 of remedies, it was an open question of whether the Acquis Principles should be confined to the reformulation of these guidelines or whether it should determine the content of remedies. The draft contains an open catalogue of sanctions. The directives themselves mention compensation and the draft sets this as a primary remedy. The danger of a closed list of remedies would be that in particular cases of infringement of the requirement of equal treatment, there would be not an appropriate remedy to undo the effects of the discrimination and/or to prevent further violations, securing additionally a dissuasive impact. The remedies under the present Article apply only in relation to contracts that provide 5 access to, or supply goods and services which are available to the public, including housing. Yet such a limitation is problematic in and of itself because the two directives mentioned differ in this respect. While the Antiracism D. is applicable to education, this area is expressly excluded from the scope of application of the General Sex Discrimination D. This means that in the context of education contracts, Community law prohibits discrimination on the basis of ethnic or racial origin, but not discrimination on the basis of sex. One could try to reflect this position through a special limitation of the general rule on remedies. But it seems to be preferable to abstain from such a limitation in the interest of clarity, and instead follow the general notion of “goods and services which are available to the public”. If one were to follow this proposition, a supplemental provision would become indispensable in the specific part of the Acquis Principles, to relate to education contracts. A similar, though not identical problem arises with regard to insurance contracts. There 6 can be no doubt that insurance contracts are services which are available to the public. Thus, they fall within the scope of application of the Antiracism D. and the General Sex Discrimination D. It follows that the general remedies also apply to insurance contracts. However, Art. 5 of the General Sex Discrimination D. contains a special provision on insurance contracts. Hence there is a need to deal with this issue in the part governing specific contracts.

3.

Political Issues

The open catalogue of remedies has also raised the question whether it endangers the 7 requirement legal certainty by giving too much power to judges. The idea of an open catalogue of remedies does not mean that they should or could be applied arbitrarily. Monetary compensation is a primary remedy. Other remedies could be used, according to the requirement of proportionality, if monetary compensation cannot fulfil the goals of the anti-discrimination law. This requirement provides sufficient security to the system.

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Art 3:201 8–11

B.

Commentary

1.

Meaning and Purpose

Chapter 3: Non-discrimination Section 2: Remedies

8 This Article provides sanctions for violations of the non-discrimination requirement. It serves to undo the results of discrimination and to also prevent further discrimination. One effect should also be to further the cause of general prevention as well.

2.

Context

9 The Article provides an open catalogue of remedies. The content of these remedies is specified in Art. 3:202 ACQP. The Article is not the only possible basis for remedial action for discrimination. The rules on non-performance and violation of pre-contractual duties may also apply. In the scope of application of the present Article however there is no such need, since the Article is flexible enough to accommodate different remedies that would be feasible and effective in undoing the effects of non-performance based on discrimination against race, ethnicity and sex. 10 Insofar as paragraph (1) of the present Article and 3:202 ACQP provide an entitlement to compensation these rules refer to provisions on damages which will be part of a specific chapter of the Acquis Principles on remedies that is currently being developed.

3.

Explanation

11 Discrimination, as it relates to this instrument, is confined to contracts which provide access to, or supply goods and services which are available to the public, including housing. Such discrimination entitles the victim to compensation. The notion of “goods and services”, which is taken from the Art. 3(1)(h) Antiracism D. and Art. 1 General Sex Discrimination D., should have a similar meaning as in these directives. In addition it should also be interpreted in the light of Art. 23(1) EC-Treaty and Art. 50 EC-Treaty regarding the free movement of goods and services, respectively. The contracts must either be designed to transfer certain goods from the seller to the buyer, or to allow the customer to receive or make use of a service of the provider. The goods and services are available to the public if they are typically offered in a general manner, irrespective of the person to whom the product is offered to. This is precisely the case where goods or services are marketed to the public at large, for example via an advertisement in the media or where goods and services are publicly offered by the owner of a shop or restaurant, regardless of whether this qualifies as an “offer” in the technical sense. Another example is the transport business, where the person of the contractual partner typically has no or little relevance.

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Article 3:201 Remedies

4.

Art 3:201 12–17

Examples

Example 1 A, a coloured person, owns a small business. In the past, he has entered into long-term 12 service contracts that require six months notice before termination. A new manager of the other party to this service contract, continually makes jokes about A’s appearance. A is not able to establish discrimination under Art. 3:101 ACQP, because the contract involved is not covered by this provision – it is not about the access of A to goods or services as A himself is providing services to the other party. He can, however, resort to the usual non-performance remedies. The primary remedy for forbidden discrimination is the right to compensation. A parti- 13 cularly controversial question is who has the right to compensation. On the one hand, it would go too far to grant this right to anyone who has the feature that could be the basis for a discrimination. On the other hand, it would excessively restrict the right to compensation if one would require a person to actively try to enter into a contract with the discriminating person, even though the latter has made it clear that he or she will reject that attempt. It seems that a certain amount of proximity between the person who claims to be discriminated against and the discriminating situation or behaviour itself is an indispensable pre-condition to a right to compensation. Otherwise the person will not be considered to have suffered “damage”, not even an immaterial one. Community law does not provide any indications as to how this proximity should be defined. This is a question connected to remedies, which is up to the Member States to decide. Consequently, there is no acquis on this point. Nevertheless, the question of who has a right to compensation must be determined by bearing in mind that the remedies have to be “effective, proportionate and dissuasive”. The content of compensation is governed by Art. 3:202(1) ACQP. Generally, a party to a 14 contract, or at least a potential contractual partner may be entitled to the remedies under this instrument. It could, however, also be a person who is simply a customer and not a party to a contract or a potential contractual partner. Example 2 A invites her boyfriend B, a person of colour, to a restaurant. The waiter does not want to 15 serve B on racial grounds. In this situation, B could be entitled to compensation even though he is not a party to the contract. Further conditions for compensation are governed by the general rules on damages. A victim of discrimination may also use other remedies which are suitable to undo the 16 consequences of discrimination, or to prevent further discrimination. Another such remedy could be, a right to modify a contract containing a discriminating clause, thus invalidating such clause. Example 3 A is a landlord that rents apartments to tenants T1 to T4. Only the contract with T3, 17 who is a person of colour, contains a provision according to which an additional guaranStefan Leible/Susana Navas Navarro/Jerzy Pisulin´ski/Fryderyk Zoll

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Art 3:201 18–23

Chapter 3: Non-discrimination Section 2: Remedies

tee payment is required to secure potential claims for damages. As this is a discriminatory provision, T3 could require the cancellation of this clause. 18 Another remedy could be the termination of a contract, even if there is no possibility of such termination before the regular duration of this contract. Example 4 19 B, a person of colour, has entered a contract for the subscription of a newspaper. The newspaper unexpectedly publishes a series of articles presenting clearly racist positions. In this situation, B can terminate the contract because the criterion of harassment has been fulfilled. 20 If a discriminating act occurred, it must also be possible to prohibit discrimination in the future. Therefore, the remedies would include the right to prevent further discrimination. 21 The catalogue of remedies is not exhaustive. There are various types of discrimination that could possibly occur in various different situations, such that an adequate remedy has to be left to the judge’s power to determine in the circumstances. An exhaustive list of remedies could endanger the real possibility of undoing the consequences of discrimination. 22 The provisions of paragraph (2) are broad enough to also encompass a right to demand the conclusion of a contract. Although such a remedy should not be generally excluded, it needs to be applied with the highest level of caution. Fundamentally it infringes the far reaching principle of freedom of contract and is usually considered inefficient in the field of civil law contracts. Normally, compensation should be a sufficient means to satisfy the aggrieved party. In very specific situations, however, it is necessary to ensure that the victim of discrimination has access to the goods or services, where there has been a general denial to provide them on the basis of discrimination. In case C-14/83 – Colson the ECJ has made a statement in the area of labour law (Directive 76/207 on the implementation of the principle of equal treatment for men and women as regards access to employment, vocational training and promotion and working conditions), in the sense that the victim of discrimination does not have a general right to demand the conclusion of a contract and that the requirement of efficiency of Community law alone does not justify such a remedy (although it also does not prevent the national law from providing such a remedy). An indirect argument for the strict limitation of the possibility to require the conclusion of a contract can be taken from Art. 18 of the Directive on Principle of Equal Opportunities and Equal Treatment of Men and Women. This provision allows the national legislature to provide for a maximum compensation limit if discrimination is confined to a denial of the conclusion of a contract with the victim of discrimination. Example 5 23 A is a landlord who refuses to rent an apartment to a young pregnant woman B, because special protective measures exist which limit the ability to terminate the contract with women in these circumstances. B may demand the conclusion of the contract with her. Since it is very likely that she will also face similar refusals from other people for the same 174

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Article 3:202 Content of the remedies

Art 3:201, 24–26 Art 3:202, 1

reason, it is likely that other remedies, such as compensation may not be sufficient to undo the effects of the discrimination. Example 6 A seller refuses to sell food to a person of colour for racist reasons. Compensation (also 24 non-pecuniary) should be a sufficient remedy, unless there are no other places to purchase food in the immediate or nearby area. Save for cases of abuse of rights, a person who has been subjected to discrimination can 25 choose among different remedies. However, those remedies must be “appropriate”. This means that the remedy must be in conformity with the requirement of proportionality. In choosing the remedy, the court must also take into consideration the particular situation of a person who has discriminated against others, since the remedy must have a dissuasive effect (cf. Art. 3:202(2) ACQP). All remedies under this article can be combined, if appropriate.

26

Example 7 If the victim is terminating a contract, the victim cannot at the same time require that the contract be modified, invalidating the discriminating clause(s). The victim may, however, simultaneously claim pecuniary and non-pecuniary damages.

Article 3:202: Content of the remedies (1) Compensation under Article 3:201 (Remedies) paragraph (1) may include damages for pecuniary and non-pecuniary losses. (2) The amount of any damages for non-pecuniary losses, and remedies granted under Article 3:201 (Remedies) paragraph (2), must be proportionate to the injury; the deterrent effect of remedies may be taken into account.

A. Foundation in the Acquis 1.

Sources

The Antiracism D. and the General Sex Discrimination D. contain a sort of general de- 1 scription of the aim and content of remedies. Article 15 of the Antiracism D. requires that sanctions may include the payment of compensation to the victim of discrimination and that all sanctions must be effective, proportionate, and dissuasive. Article 8 of the General Sex Discrimination D. requires effective compensation or reparation for any loss and damage sustained by a person injured as a result of discrimination in a way which is dissuasive and proportionate to the damage suffered. Other directives on non-discrimination related to labour law formulate similar concepts (cf. Art. 17 of the Directive on General Framework for Equal Treatment in Employment and Occupation and Art. 18 of Stefan Leible/Susana Navas Navarro/Jerzy Pisulin´ski/Fryderyk Zoll

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Art 3:202 2, 3

Chapter 3: Non-discrimination Section 2: Remedies

the Directive on Principle of Equal Opportunities and Equal Treatment of Men and Women). In the Colson case, the ECJ expressed the view that “compensation must in any event be adequate in relation to the damage sustained” (para. 23). According to the Court, the limitation of the right to compensation to a purely nominal amount would not satisfy the requirements of an effective transposition of the directive (cf. Art. 8(2) of the General Sex Discrimination D., which prohibits a fixing of the maximum limit for compensation). Only the last directive in the field of labour law provides for the possibility to fix a maximum limit for compensation, but only in the case of a refusal to take a job application into consideration (Art. 18 of the Directive on Principle of Equal Opportunities and Equal Treatment of Men and Women).

2.

Development

2 The acquis does not limit the right to compensation to pecuniary damages. Because of the nature of discrimination, it may be extremely difficult in a large number of cases to prove that a pecuniary damage has been suffered. Above all, discrimination violates human dignity. Therefore, it usually causes a non-pecuniary loss. To make the entire system operable, there is a need to recognise the right to claim not only pecuniary damages but also non-pecuniary damages. Although all the above-mentioned directives require that remedies must be dissuasive, the draft limits this requirement with non-pecuniary damages. The reason is that only this remedy may fulfil the function of being “generally preventive”. The amount of pecuniary damages cannot depend on the dissuasive effect of the remedy. The pecuniary damages are strictly related to the tangible loss of the aggrieved party. The general policy function of the remedy, i.e. its deterrent effect, may therefore be considered only in case of other remedies and above all in the case of non-pecuniary damages. As part of non-pecuniary damages, punitive damages may also play a role.

3.

Political Issues

3 As mentioned above the directives require that the remedies have to play a dissuasive function. The draft follows this indication (paragraph (2) of the present Article) with the exception of the damages for pecuniary losses. The whole draft is based on the concept of the compensatory nature of the damages. The dissuasive effect cannot be accommodated under such a concept. According to this draft the dissuasive effect should be taken into account by the application of other remedies. This would mainly relate to cases of non-pecuniary damages. In this case the damages become punitive. It will be a matter of case law to determine the true severity of this remedy.

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Article 3:202 Content of the remedies

B.

Commentary

1.

Meaning and Purpose

Art 3:202 5–9

Paragraph (1) defines the notion of compensation. This definition includes damages for 5 pecuniary and non-pecuniary losses. Paragraph (2) determines the guidelines for the application of remedies specifying the conditions which are to be fulfilled by the granted remedy.

2.

Context

The present Article does not govern the issue of damages completely. Other conditions 6 such as the amount of pecuniary losses (pecuniary damages), or causal relationships should be set according to the rules on damages in case of non-performance.

3.

Explanation

According to paragraph (1) compensation, as introduced by Art. 3:201(1) ACQP may 7 include damages for pecuniary and non-pecuniary losses. To determine the scope of damages it is necessary to refer to the rules on non-performance (which are still in the process of being elaborated). The measure of damages is therefore determined as a monetary payment of the amount necessary to cover both the loss suffered by the aggrieved party, as well as the gain which they were deprived of as a result of non-performance. This rule has to apply accordingly in order to determine the measure of pecuniary damages under paragraph (1).

4.

Examples

Example 1 X, a credit institution, refuses to provide a loan to client B on the basis of B’s ethnicity. B 8 is forced to enter into a contract with another institution, Y, under less beneficial financial conditions. B has a claim against X for compensation of the difference between the cost of the loan by institution Y and the costs of the loan by institution X. Non-pecuniary damages are related to the specific kind of injury that has been suffered, 9 but in their application, they also need to have a dissuasive effect, meaning that nonpecuniary damages cannot be solely nominal compensation. A court deciding on the amount of compensation should bear in mind that this remedy should make any future acts of discrimination economically unattractive for the discriminating party. A dissuasive effect can only be achieved if the kind and size of the business belonging to the discriminating party is taken into consideration in formulating the court’s decision. The kind of discrimination and its degree of “intimidating power” should also be relevant to the court’s decision. However, the need to find a balance must also be considered – if the

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Art 3:202, 10–12 Art 3:203, 1

Chapter 3: Non-discrimination Section 2: Remedies

discriminatory act does not influence life conditions or real market opportunities of the aggrieved party, the court should moderate the severity of the remedy. Example 2 10 A large enterprise that provides hotel services only offers rooms with lower standards to certain ethnic groups. Each potential client from such ethnic groups, who was trying to rent a higher quality room and was refused to do so, may claim non-pecuniary damages in a “significant” amount, which would reflect the enterprise’s position in the market. 11 Other remedies (apart from pecuniary damages) should also be “proportionate” and “dissuasive”. In cases where the remedies directly relate to the modification or termination of a contract, the requirement of dissuasiveness has a limited scope of application. This simply means, that the aggrieved party may also use “stronger” remedies as those needed to undo the consequences of discrimination, although the dissuasive purpose cannot lead to the abandoning the requirement of proportionality. It follows that in particular cases, the termination of a contract may be granted although another remedy would be sufficient to undo the effects of discrimination, for example the modification of the contract. Example 3 12 In the case presented as Example 3 under Art. 3:201 ACQP, the tenant, instead of demanding the cancellation of the discriminating contract clause, declares that the entire contract is terminated. The remedy may apply, although the cancellation of the clause would be sufficient to undo the effects of the discrimination.

Article 3:203: Burden of proof (1) If a person who considers himself or herself discriminated against on one of the grounds mentioned in Article 3:201 (Remedies) paragraph (1) establishes, before a court or another competent authority, facts from which it may be presumed that there has been such discrimination, it falls on the other party to prove that there has been no breach of the principle of nondiscrimination. (2) Paragraph (1) does not apply to proceedings in which it is for the court or another competent authority to investigate the facts of the case.

A. Foundations in the Acquis 1.

Sources

1 Article 8(1) of the Antiracism D., Art. 10(1) of the Directive on General Framework for Equal Treatment in Employment and Occupation, and Art. 9(1) of the General Sex Discrimination D. set out identical rules on the burden of proof. In addition, the preambles to all non-discrimination directives provide that “the rules on the burden of proof must be adapted when there is a prima facie case of discrimination and for the principle of equal 178

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Article 3:203 Burden of proof

Art 3:203 2–5

treatment to be applied effectively, the burden of proof must shift back to the respondent when evidence of such discrimination is brought (Recital 21 of the Antiracism D.; Recital 31 of the Directive on General Framework for Equal Treatment in Employment and Occupation; Recital 22 of the General Sex Discrimination D.; and Recital 30 of the Directive on Principle of Equal Opportunities and Equal Treatment of Men and Women). All the non-discrimination directives provide an exception with regard to procedures in 2 which a competent authority has to investigate the facts of the case (Art. 8(5) of the Antiracism D., Art. 10(5) of the Directive on General Framework for Equal Treatment in Employment and Occupation, Art. 9(5) of the General Sex Discrimination D., and Art. 19(3) of the Directive on Principle of Equal Opportunities and Equal Treatment of Men and Women – in this last case the provision also encompasses other named procedures).

2.

Development

Paragraph (1) of the present Article strictly adheres to the language of the directives quo- 3 ted above. Yet under the rules of the directives cited, Member States have discretion to provide for exceptions. The shift of the burden of proof is not absolute. A party who claims to be discriminated against needs to present facts to the court that justify the assumption of discrimination. They are required to present the facts, which directly prove all elements of the discrimination and which make this occurrence of a discriminating act likely according to the local practices, customs, or existing bias and traditional representations. Paragraph (2) restates the exception for the shifting of a burden of proof under paragraph 4 (1). Paragraph (2) must be understood to mean that in such procedures the respondent does not need to prove its innocence. In such cases, the investigating authority has to collect the evidence proving all relevant circumstances, as well as evidence that is in favour of the respondent. It does not exclude the possibility, however, that conclusions or inferences can be made from the established facts. In this sense, presumptions based on paragraph (1) may also apply to proceedings in the sense of paragraph (2).

3.

Political Issues

Paragraph (1) plays a crucial role in order to ensure the efficacy of anti-discrimination 5 law. However, it is a highly controversial instrument, which in the context of civil law, is considered close to being an instrument allowing control over the intentions and other thoughts of the alleged discriminator. Because of the already discussed ambivalence of the criterion for discrimination (mostly in a cases of race) it is extremely difficult to determine the circumstances justifying a shift in a burden of proof. It is an open question, whether the drafters should try to specify these circumstances in order to restrict the vague conditions for shifting the burden of proof. Currently the draft reflects the content of the acquis and this question should be further discussed. Stefan Leible/Susana Navas Navarro/Jerzy Pisulin´ski/Fryderyk Zoll

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Art 3:203 6–9

B.

Commentary

1.

Meaning and Purpose

Chapter 3: Non-discrimination Section 2: Remedies

6 The aim of paragraph (1) of the commented article is to facilitate the requirement of proving the occurrence of the discriminatory act. Paragraph (2) does not change these rules. It only states that an investigating authority, acting ex officio, should also collect evidence which is in favour of the person allegedly acting in a discriminatory fashion.

2.

Context

7 Paragraph (1) applies only in the context of discrimination, based on race, ethnicity and sex, in relation to contracts which provide access to, or supply goods and services which are available to the public, including housing. For other cases of discrimination in the sense of Art. 3:101 ACQP, or even further in any other case of discrimination, not mentioned in Art. 3:201(1) ACQP, the ordinary (national) rules on the burden of proof should apply.

3.

Explanation

8 This provision does not entail a formal shift of the burden of proof, but it allows for the drawing of a conclusion from facts based on life experiences which indicate discrimination. It relaxes the rigidity of the law of evidence in favour of the person who claims to be discriminated against.

4.

Example

9 A landlord does not want to rent an apartment advertised in the press to an affluent Roma family. Because of the well known general problems faced by the members of Roma minorities, it is sufficient, at least in some Member States, to infer from the established fact alone that discrimination has occurred. In a situation where a landlord refuses to rent an apartment to a woman, this would by itself not be enough to presume discrimination, unless in a specific country/region/local community such a sex-based refusal would be common.

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Chapter 4: Formation General Provisions

Article 4:101: Agreement between the parties A contract is concluded if the parties intend to be legally bound, and they reach a sufficient agreement.

A. Foundation in the Acquis 1.

Sources

Within the acquis, the principle that the agreement of the parties constitutes the basis for 1 the binding nature of the contract follows from various individual rules contained in directives. Some of the main ones are: Article 2(1) of the Distance Selling D. which makes clear that a (distance) contract has to be “concluded” between the parties; Article 9, 2nd indent of the Distance Selling D., which recognises the importance of the parties’ agreement by providing that, in the case of unsolicited supply, the consumer’s failure to respond does not constitute its “consent” to enter into a contract; Article 9, 2nd indent of the Financial Services Distance Selling D. makes the corresponding provision in respect of the distance selling of financial services; Article 7(1) sent. 2 of the Consumer Sales D. gives Member States the discretion to allow parties to contracts of sale for second-hand goods to “agree” to deviate from the prescribed time period for the liability of the seller; Recital 10 of the Unfair Contract Terms D. requires consideration of whether a consumer has had an inducement to “agree” to a contract term. The case law of the ECJ also bases the binding effect of the contract on the agreement of 2 the parties, e.g.: C-96/00 – Rudolf Gabriel recognised the parties’ agreement to conclude a contract as giving rise to “reciprocal and interdependent obligations” (para. 48, 49 et seq.).

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Art 4:101 3–5

Chapter 4: Formation General Provisions

C-269/95 – Benincasa v. Dentalkit Srl. refers to the “consensus formed between the parties” as securing a “legal certainty” in terms of the consequences of that consensus for the contract (para. 29). 3 More generally, the principle that the agreement of the parties constitutes the basis for the binding nature of the contract is in turn based upon the principle of freedom of contract which is characterised in the acquis by the concepts of the internal market and the free movement provisions (Art. 3(1)(c) of the EC-Treaty for the internal market; Art. 13 et seq. of the EC-Treaty for the free movement of goods; Art. 39 et seq. of the EC-Treaty for the free movement of workers; Art. 43 et seq. of the EC-Treaty for the freedom of establishment; Art. 49 et seq. of the EC-Treaty for the free movement of services; Art. 56 et seq. of the EC-Treaty for the free movement of capital). Through this principle people can exercise their private autonomy by entering into legally binding relationships of reciprocal rights and obligations on the basis of their mutual agreement. Freedom of contract is a fundamental right of European citizens and enterprises. Restrictions to this freedom, whether by virtue of mandatory rules or in any other form, may be justified in relation to certain situations or types of contract, particularly where there is or may be inequality of bargaining power, knowledge or understanding.

2.

Development

4 The quoted sources in existing Community law do not explicitly contain the rule that the conclusion of the contract requires a sufficient agreement of the parties and their intention to be legally bound. All quoted provisions from the directives (as well as numerous others) do, however, necessarily imply that an agreement of the parties must exist, if they are to be contractually bound. In particular, Art. 9, 2nd indent of the Distance Selling D. and Art. 9, 2nd indent of the Distance Selling of Financial Services D. further support the view that such an agreement can only exist if the parties intend to be legally bound. Some of the directives and in particular, the quoted judgments of the ECJ further link the obligations that arise from the contract to the agreement or the consensus of the parties at the conclusion of the contract. They thereby, at least indirectly, express that the agreement between the parties is decisive for the content of contractual obligations and must be sufficient in this respect. 5 In addition to these concrete starting points in a series of legislative acts and in the case law, one can state that the rule that the contract is based upon the agreement of the parties directly relates to the principle of freedom of contract in Community law. This principle requires that the parties have the freedom to decide whether, with whom and with what content they choose to conclude a contract. From the principle of freedom of contract it therefore follows that the conclusion of a contract depends on the intention of the parties to be legally bound and on a sufficient agreement with respect to the content of the contract. Accordingly, there is no doubt in the literature on European contract law that “the agreement [is] material for binding the parties” (Riesenhuber, System und Prinzipien des Europäischen Vertragsrechts, Berlin (2003), p. 312 et seq. [translation from German by drafter]).

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Article 4:101 Agreement between the parties

Art 4:101 6–8

The present Article expresses these rules, which are based on Community law, in the 6 wording that is based on Art. 2:101(1) PECL. The Acquis Principles and the PECL (albeit primarily conceived on a different basis) correspond in their core, such that there is no need to choose a different formulation.

B.

Commentary

1.

Meaning and Purpose

This Article contains the basic principle for the formation of contract. It reflects the 7 principle that the parties’ agreement constitutes the basis for the binding nature of the contract. It enables one to determine whether a contract has been formed between two parties or whether they merely find themselves in an extra-contractual relationship. If the conditions of this article are present, the provisions on rights and obligations arising from a contract apply, especially the chapters of the Acquis Principles on performance, non-performance and remedies.

2.

Context

The basic principle of the Article is substantiated and modified by numerous further pro- 8 visions. These include above all the following provisions of this chapter on conclusion of contract (Art. 4:102 ACQP), on the requirements of an offer in general and in particular in relation to public statements (Art. 4:103 ACQP), on the delivery of unsolicited goods or services to consumers (Art. 4:106 ACQP) and on pre-contractual statements by a contract party (Art. 4:107 ACQP) or by third parties (Art. 4:108 ACQP). Whereas the Article at hand requires an agreement of at least two parties, Art. 4:109 ACQP stipulates that unilateral promises can also have effects. The principle on freedom of form is particularly relevant, in addition to these provisions, for formation of a contract (Art. 4:105 ACQP). This includes the exceptions thereto for special cases as well as special rules for conclusion by electronic means (Art. 4:110 ACQP). For the inclusion of individual terms, Chapter 6 ACQP on terms not individually negotiated must also be observed. However, the acquis does not contain a complete set of rules for the conditions and precise mechanisms for conclusion of contract. Some of the aforementioned provisions, which are to be drawn upon to extend or modify the present Article, are therefore “grey rules” (cf. further the comments to Art. 2:201(b) PECL), which at least fills some of the gaps left in the acquis. If the requirements of the present Article are not fulfilled, the rules of Chapter 2 ACQP on pre-contractual duties may apply. These provisions may also apply even if the conditions of the present Article are met, if the relationship of the parties in the pre-contractual phase is relevant.

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Art 4:101, 9 Art 4:102

3.

Chapter 4: Formation General Provisions

Explanation

9 The rule stipulates two requirements for formation of contract, (a) intention to be legally bound and (b) that a sufficient agreement on the content of the contract has been reached. The acquis does not contain an express requirement of consideration for the formation of a contract. There is also not a sufficient basis which allows one to assume an implicit requirement of consideration. Therefore the rule formulated in this article does not contain such a requirement. For contracts to which this rule applies, it is therefore not necessary, with respect to the conclusion of the contract, in addition to examining whether one party has promised the other a performance, to examine whether this other party has promised some kind of counter performance and what kind of performance this is. On the issue of what constitutes an intention to be legally bound, the acquis does not contain any general statements. Therefore, for the application of the present Article it will be necessary to draw upon the experiences of the Member States’ legal orders and, on this basis, in particular on Art. 2:102 PECL and its explanations. According to this rule, the intention to be legally bound by a contract is to be determined from the party’s statements or conduct as they were reasonably understood by the other party. On the issue of what constitutes sufficient agreement, the acquis itself has to date not provided any sources for general guidance. However, Art. 2:103 PECL offers a fairly precise rule which is consistent with the principles of Community law and which can be combined with the rule of the present Article. According to Art. 2:103(1) PECL there is sufficient agreement if the terms have been sufficiently defined by the parties so that the contract can be enforced, or can be determined under the PECL. According to Art. 2:103(2) PECL, however, if one of the parties refuses to conclude a contract unless the parties have agreed on some specific matter, there is no contract unless agreement on that matter has been reached.

Article 4:102: Conclusion of contract (1) A contract can be concluded by the acceptance of an offer in accordance with the following provisions. (2) The rules in this chapter apply accordingly when the process of conclusion of a contract cannot be analysed into offer and acceptance.

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Article 4:102 Conclusion of contract

Art 4:102 1–3

As to paragraph (1) A. Foundation in the Acquis 1.

Sources

Within the acquis, the process of formation of contract through offer and acceptance is 1 described by the terms offer and acceptance in numerous legislative provisions, most notably the following: Article 1(3) and (4) of the Doorstep Selling D. use “offer” and “acceptance”. Article 7(1) of the Distance Selling D. uses “order”, although arguably not in the technical legal meaning which this expression commonly has for formation of contracts. Article 3(3) of the of the Commission’s European Model EDI (Electronic Data Interchange) Agreement expressly refers to formation of contract through an “EDI message constituting acceptance of an offer”. The offer-and-acceptance model has also found entry into the case law of the ECJ. Thus C-96/00 – Rudolf Gabriel expressly mentioned the process of “acceptance of [an] offer” (para. 48) giving rise to a “contract” (para. 49). Therefore, it can be inferred that Community law is familiar with the principle that a contractual agreement can come into existence through one party accepting an offer made by the other.

2.

Development

It follows from the aforementioned sources that the existing Community law recognises 2 the mechanism of formation of contract through offer and acceptance. Accordingly, the present Article contains the statement that a contract can be concluded by the acceptance of an offer. Nevertheless, the provisions of the acquis communautaire only substantiate the requirements and the process of formation of contract through offer and acceptance in relatively few individual aspects. Thus the Article provides no further elaboration in this regard, but only refers to the following provisions that address the individual aspects of formation of contract as “black” or “grey letter rules”.

B.

Commentary

1.

Meaning and Purpose

This Article makes clear, on the basis of a series of provisions of the acquis (cf. supra 3 No. 1), that a contract can be concluded with the aid of the traditional mechanism of offer and acceptance (as also recognised in the laws of Member States). In addition, this

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provision has a purely technical significance by stating that contracts concluded in this way are subject to the following provisions of this chapter. In the absence of a sufficient basis within the acquis, neither paragraph (1) nor the following rules to which it refers can comprehensively regulate the more detailed specific requirements of offer and acceptance. Paragraph (1) does not assert any exclusivity of formation of contract by the process of offer and acceptance. Moreover, a contract can be concluded by other means. This follows from the wording of this rule (“can be concluded”) as well as from paragraph (2).

2.

Context

4 Paragraph (1) extends the basic rule for conclusion of contract as stipulated in Art. 4:101 ACQP in that the agreement of the parties can be expressed by the acceptance of an offer. It refers to the further provisions of this chapter for the individual aspects of this kind of contractual formation. These include, in particular, the rules on offers and public statements in Art. 4:103 ACQP and on unsolicited goods and services (in which a contract does not come into being in the absence of an offer or acceptance by the consumer) in Art. 4:106 ACQP. No general rules can be discerned from the existing Community law on further aspects of formation of contract through offer and acceptance, whereas the laws of the Member States and the PECL do have more detailed provisions (cf. Art. 2:201 et seq. PECL).

3.

Explanation

5 Existing Community law does of course recognise the principle that a contract can be concluded by the acceptance of an offer. It does not, however, provide any more detailed definition of the requirements and processes of this kind of contractual formation which would be precise enough for providing guidelines for the application of this principle in practice (apart from individual aspects addressed in the following rules). In this respect, therefore, the principles of the acquis need considerable supplementation by other provisions, especially from the PECL.

As to paragraph (2): 6 Community law recognises that contractual obligations can arise even though their crystallisation cannot be neatly analysed into the offer and acceptance formula. An example would be the binding effect of pre-contractual public statements, already well established in the acquis (cf. Art. 4:107 ACQP below). Indeed, through the idea of effet utile, various protective provisions of the acquis in favour of the weaker contractual party generally aim to achieve their goals of protection independently of how the Member State laws recognise contractual obligations arising. Accordingly, such provisions should not be less effective than where the process of formation of contract neatly fits into the pattern of offer and acceptance. However, the acquis has not developed any more detailed rules of

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Art 4:103 1

Article 4:103 Offer; public statements

its own with respect to the process of formation of contract other than through the offer and acceptance formula. Therefore, the wording of paragraph (2) has been taken from Art. 2:211 PECL in order to show the context in which the Acquis Principles can operate. As a result, the wording of paragraph (2) may be partially inconsistent with the general terminology of the Acquis Principles.

Article 4:103: Offer; public statements

1

(1) A proposal amounts to an offer if: (a) it is intended to result in a contract if the other party accepts it, and (b) it contains sufficiently definite terms to form a contract. (2) An offer may be made to one or more specific persons or to the public. (3) A proposal to supply goods or services at stated prices made by a business in a public advertisement or a catalogue, or by a display of goods, is treated, unless the circumstances indicate otherwise, as an offer to sell or supply at that price until the stock of goods, or the business’s capacity to supply the service, is exhausted.

Provisional Comment There is no sufficient basis in the acquis for formulating such a rule. In particular, the 1 acquis does not directly address the question of what constitutes an offer. It does, however, contain rules on the binding effect of advertisements, brochures and other statements not addressed to specific persons. Whilst they do not mean that the public statement is per se an offer, they do provide that such a public statement is incorporated into the contract (cf. Art. 2(2)(d) of the Consumer Sales D.; Art. 2(4) of the Consumer Sales D.; Art. 6 of the Consumer Sales D.; Art. 3 of the Travel Package D.). The rules in these directives appear to be founded upon a general assumption that public statements have a major role to play in the process of contract formation and that public statements can actually influence the decision to enter into a contract. Therefore the wording of the present Article has been taken from Art. 2:201 PECL in order to show the context in which the Acquis Principles can operate. As a result the wording of the Article may be partially inconsistent with the general terminology of the Acquis Principles.

1

Grey rule from Art. II. – 4:201 DCFR.

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Article 4:104: Information duties in real time communication (1) When initiating real time distance communication with a consumer, a business must provide at the outset explicit information on its name and the commercial purpose of the contact. (2) Real time distance communication includes telephone and electronic means such as voice over internet protocol and internet related chat. (3) The business bears the burden of proof that the consumer has received the information required under paragraph (1). (4) If a business has failed to comply with the duty under paragraph (1), the other party has the right to withdraw from the contract. The right of withdrawal must be exercised no later than one year after the conclusion of the contract, and not after the contract has been fully performed by both parties. The other party may also claim damages caused by the failure to comply.

A. Foundation in the Acquis 1.

Sources

1 The sources of the provision are the Distance Selling D., the E-Commerce D. and the Financial Services Distance Selling D. They require businesses to disclose their identity and their commercial purposes when initiating real time distance communication with a consumer: Art. 4(3) Distance Selling D.

“Moreover, in the case of telephone communications, the identity of the supplier and the commercial purpose of the call shall be made explicitly clear at the beginning of any conversation with the consumer.”

Art. 6 E-Commerce D.

“In addition to other information requirements established by Community law, Member States shall ensure that commercial communications which are part of, or constitute, an information society service comply at least with the following conditions: (a) the commercial communication shall be clearly identifiable as such; (b) the natural or legal person on whose behalf the commercial communication is made shall be clearly identifiable;”

Art. 3(3)(a) Financial Services Distance Selling D.

“In the case of voice telephony communications the identity of the supplier and the commercial purpose of the call initiated by the supplier shall be made explicitly clear at the beginning of any conversation with the consumer.”

The Financial Services Distance Selling D. also contains a specific provision on the burden of proof:

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Article 4:104 Information duties in real time communication

Art. 15 Financial Services Distance Selling D.

Art 4:104 2

“Without prejudice to Article 7(3), Member States may stipulate that the burden of proof in respect of the supplier’s obligations to inform the consumer and the consumer’s consent to conclusion of the contract and, where appropriate, its performance, can be placed on the supplier...”

The Distance Selling D. does not specify which sanction applies in case of violation of this duty of disclosure. The E-Commerce D. provides the following: Art. 20 E-Commerce D.

“Member States shall determine the sanctions applicable to infringements of national provisions adopted pursuant to this Directive and shall take all measures necessary to ensure that they are enforced. The sanctions they provide for shall be effective, proportionate and dissuasive.”

The most explicit provision on sanctions is contained in the Financial Services Distance Selling D.: Art. 11 Financial Services Distance Selling D.

2.

“Member States shall provide for appropriate sanctions in the event of the supplier’s failure to comply with national provisions adopted pursuant to this Directive. They may provide for this purpose in particular that the consumer may cancel the contract at any time, free of charge and without penalty. These sanctions must be effective, proportional and dissuasive.”

Development

The rules of the acquis reflected in the Article at hand have undergone a long develop- 2 ment in Community law. The starting point was the Distance Selling D. of 1997, which was the first to contain a rule on information duties in real time communication in its Art. 4(3). The E-Commerce D. adopted in 2000, through its Art. 6(a), (b), extends the information duties known from the Distance Selling D. to all forms of “Information Society Services”. Voice telephony services and telephone or telefax direct marketing are excluded from this notion (see Art. 1(2), Art. 2(a) of the E-Commerce D. in conjunction with Annex V of Directive 98/48 / EC). Yet the Directive applies to other forms of real time communication over the internet, such as chat rooms or instant messaging. In 2002, the Financial Services Distance Selling D. was adopted. Its Art. 3(3)(a) closely follows the model of Art. 4(3) of the Distance Selling D. Yet important technological development had taken place between 1997, the year in which the Distance Selling D. was promulgated, and 2002, the year of adoption of the Financial Services Distance Selling D. This is reflected in the text of the later directive. While the Distance Selling D. referred to “telephone communications”, the Financial Services Distance Selling D. uses the term “voice telephony communications”. This wording clarifies that the disclosure Matthias Lehmann

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Art 4:104 3, 4

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rule also applies to electronic means such as voice over internet protocol (“voice over IP”) which are similar to telephone services. It was necessary to cover these technologies because they are explicitly excepted from the E-Commerce D. (see supra). Art. 4(3) of the Distance Selling D. and Art. 3(3)(a) of the Financial Services Distance Selling D. require the business to disclose its “identity”. Similarly, under Art. 6(1)(b) of the E-Commerce D., “the natural or legal person on whose behalf the commercial communication is made shall be clearly identifiable”. In contrast, paragraph (1) of the present Article obliges the business to provide its “name”. This was done to avoid any confusion with the duties under Chapter 2 of the Principles to disclose the identity and address (e.g. Art. 2:202(2)(a) ACQP). 3 Neither the E-Commerce D. nor the Distance Selling D. contain an explicit rule on the burden of proof. The Financial Services Distance Selling D. provides in its Art. 15 that the business bears the burden of proving that the consumer received the information required in the Directive. With regard to sanctions, the Distance Selling D. is silent. The E-Commerce D. requires Member States to provide for “effective, proportionate and dissuasive” sanctions applicable to infringements of national provisions adopted pursuant to the directive, but fails to specify any measures (see Art. 20 of the E-Commerce D.). The clearest provision on consequences for violations of the information duties can be found in the latest of the three directives, the Financial Services Distance Selling D. After reminding that the Member States must enact sanctions for such violations, it states that they can in particular provide that “the consumer may cancel the contract at any time, free of charge and without penalty” (Art. 11 of the Financial Services Distance Selling D.). Thus, the sanction is a right of withdrawal. In the first version of the ACQP, these rules were mirrored by Art. 2:204. However, for the reasons indicated below at B 2, it was subsequently decided that this provision should be moved to Chapter 4 as the present Article.

3.

Political Issues

4 Looking at the three directives, one can discern how the Community legislator has constantly been striving to adapt the disclosure rule to technological advancements. Today, the same information duties apply independently of the media employed and to all forms of real time communication. It is thus possible to distil a rule of the acquis that applies to all forms of commercial communication. With regard to the burden of proof, the situation is less clear. Neither the Distance Selling D. nor the E-Commerce D. contain an explicit rule in this regard. But since they have the purpose of improving consumer protection, one can draw the inference that the business, rather than the consumer must prove the fact that the required information has been given. This rule is confirmed by the Financial Services Distance Selling D.

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Article 4:104 Information duties in real time communication

Art 4:104 5, 6

The sanctions in case of violation of the information duties are largely left to the Member States. However, an explicit rule is contained in the Financial Services Distance Selling D., which sets out that the consumer must have a right of withdrawal. Consistently with the protective purpose of the information duties, this sanction can be extended to violations of information duties under the other directives as well. Thus, paragraph (4) provides as a general rule that a violation of the disclosure rule for real time distance communication can result in the termination of the contract. Since a consumer who does not know about the commercial purpose of a contact is in a similar situation as one that has not received the information under Art. 2:203 ACQP, the withdrawal period has been set at one year (cf. Art. 2:208(1) sent. 2 ACQP). However, once both parties have completely discharged their obligations under the contract, any previous failure to provide the required information under the present Article no longer justifies a withdrawal right, so that an exception has been made accordingly. Both issues are not addressed explicitly by the acquis and are thus subject to a political decision. The rule that allows for damages is equally not found explicitly in the acquis. It was added because a right of the consumer to be awarded damages is an effective, proportionate and dissuasive way of giving effet utile to the information duties contained in this provision.

B.

Commentary

1.

Meaning and Purpose

The Article imposes certain information duties on businesses when contacting consu- 5 mers directly. The goal is to protect the non-commercial party wherever real time communication is used for commercial purposes. The business must inform the consumer about the nature of the contact and its name. This information is to make the other party aware that the communication is not about private matters, but serves a business purpose. The provision shall stop the time-wasting and misleading practice of some businesses which seek to entrap customers by disguising their intention to market goods or services behind alleged research projects or sweepstake wins.

2.

Context

In the first version of the Principles, the present Article was placed in the section on pre- 6 contractual information duties (see Acquis Group, Contract I, Art. 2:204). This was justified to the extent that the provision obliges the business to give information before the conclusion of a contract. Yet it became clear later that the rule is more closely connected to the formation of the contract (see Zoll, Die Grundregeln der Acquis-Gruppe im Spannungsverhältnis zwischen acquis commun und acquis communautaire, in: Zeitschrift für Gemeinschaftsprivatrecht [GPR] 2008, 106, 108). This connection results from the fact that the consumer, who is not informed about the commercial purpose of a communication, will hardly be aware that his acts may be legally relevant. In particular, he or she

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Art 4:104 7, 8

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may not realise that they may be interpreted as an acceptance of an offer for a contract. That is why the rule has been moved to Chapter 4.

3.

Explanation

7 If contracts are formed using real time distance communications, the two parties, while not physically present at the same place, nevertheless are in direct contact with each other so that both can immediately respond to the acts of the opposite side. Typically, such communications require the use of certain technology, like telephone or internet. Examples of such technological means are given in paragraph (2). Another example is instant messaging. The rule applies when one of the parties to the communication is a business and the other is a consumer. For an explanation of these terms, see Art. 1:201 and 202 ACQP. The rule presupposes that the business initiates the real time distance communication. If a consumer calls a business, one can expect that he or she will be aware of the commercial nature of the contact and the name of the business. The same is true if the consumer has asked to be contacted by a business. A difficult question arises, however, in case that the consumer already had some non-commercial connection with the business, e.g. by participating in a lottery, and is later called for commercial purposes. Such previous contact would not normally imply that the consumer “initiated” the communication. 8 The business must provide explicit information about its name. This is the name of the corporation, company or merchant that is contacting the consumer. Any further details are not required, in particular the address of the business need not be given. The rules in Chapter 2 of the Principles that require to reveal the business’ identity and address (e.g. Art. 2:202(2)(a) ACQP) are not applicable. If the consumer is interested in this information, he or she is free to ask for it. Furthermore, the business must inform the consumer about the commercial purpose of the communication. This requirement is fulfilled, for instance, if the caller states that he wishes to offer certain goods or services to the consumer. He is not required to specify which goods or services are meant, as long as the general commercial purpose is made clear. The information must be provided at the moment when the communication is initiated. This means that the business has to disclose its name and the purpose of the contact at the very beginning of the conversation. A business may not at the outset make a “free offer” and mention only later on that this is connected to an order for which the consumer will be expected to pay. According to paragraph (3), in case of doubt, it is the business that must prove the fulfillement of its information duties. If it is unable to do so, it will be presumed not to have given the information. In this case, paragraph (4) applies.

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Article 4:105 Formation by electronic means

Art 4:104, 9–11 Art 4:105

Paragraph (4) provides for two sanctions in case that the information duties under para- 9 graph (1) have not been fulfilled. The first sanction is a right of withdrawal of the consumer. He or she can thus free himself or herself of the obligations by withdrawing from the contract. The right must be exercised within one year after the parties have entered into the contract. It is excluded if both have already fulfilled their mutual obligations. Thus, the right expires after one year or earlier, depending on the performance of the parties. Further rules on the exercise of the right of withdrawal and its effects can be found in chapter 5 of the ACQP. The second sanction is that the consumer may claim damages from the business for breach of the information duties under paragraph (1). In most cases this sanction will be of no relevance because the consumer will be sufficiently protected by his or her right to withdraw from the contract. However, damages may play a role where the consumer suffers an additional loss not connected to the contract itself, for instance, if he or she loses time at work because of the communication.

4.

Examples

Example 1 Representative X of A, a pharmaceutical company, calls doctor B at home. Because X 10 does not disclose the name of A and the commercial purpose of the communication, B thinks that X is calling to warn him of certain medical problems. After half an hour of conversation with X, B finds out that X’s true intention is to convince him to buy a new medication. B can claim damages for the time he lost. If X is duly authorized by A, this will make A liable for damages. Example 2 Business C calls D at his home and gives the impression that D has won a lottery prize. In 11 order to get his prize, D agrees to buy certain goods. D can withdraw from the contract within one year. The right lapses once D has received the goods and has paid for them.

Article 4:105: Formation by electronic means (1) If a contract is to be concluded by electronic means, a business, before the other party makes or accepts an offer, must provide reference to any contract terms used, which must be available in textual form. This rule is mandatory in the sense of Article 1:203 (Mandatory nature of consumer rules) in relations between businesses and consumers. (2) A business which offers the facility to conclude contracts by electronic means and without individual communication must make available to the other party appropriate, effective and accessible technical means for identifying and correcting input errors before the other party makes or accepts an offer. This rule is mandatory in the sense of Article 1:203 (Mandatory nature of consumer rules) in relations between businesses and consumers.

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Art 4:105 1

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(3) If a contract is to be concluded by electronic means and without individual communication, a business must provide the following information before the other party makes or accepts an offer: (a) which technical steps must be followed in order to conclude the contract; (b) the languages offered for the conclusion of the contract; (c) the technical means for identifying and correcting input errors; (d) whether or not the concluded contract will be filed by the business and whether it will be accessible. This paragraph is mandatory in the sense of Article 1:203 (Mandatory nature of consumer rules) in relations between businesses and consumers. (4) If a business has failed to comply with the duties under paragraphs (2) and (3), the other party has the right to withdraw from the contract. The right of withdrawal must be exercised no later than one year after the conclusion of the contract, and not after the contract has been fully performed by both parties. The other party may also claim damages caused by the failure to comply.

A. Foundation in the Acquis 1.

Sources

1 The E-Commerce D. establishes specific information duties for contracts which are to be concluded electronically. Art. 10(1) contains a list of information items necessary for the proper conclusion of a contract by electronic means: Art. 10(1) E-Commerce D.

“In addition to other information requirements established by Community law, Member States shall ensure, except when otherwise agreed by parties who are not consumers, that at least the following information is given by the service provider clearly, comprehensibly and unambiguously and prior to the order being placed by the recipient of the service: (a) the different technical steps to follow to conclude the contract; (b) whether or not the concluded contract will be filed by the service provider and whether it will be accessible; (c) the technical means for identifying and correcting input errors prior to the placing of the order; (d) the languages offered for the conclusion of the contract.”

While the information items enumerated in Art. 10(1) E-Commerce D. mostly refer to the technical aspects of the conclusion of a contract by electronic means, Art. 10(3) ECommerce D. contains a complementary provision regarding the terms of the contract: Art. 10(3) E-Commerce D.

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“Contract terms and general conditions provided to the recipient must be made available in a way that allows him to store and reproduce them.”

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Article 4:105 Formation by electronic means

Art 4:105 2, 3

Art. 10(4) of the E-Commerce D. clarifies that the information duties listed in Art. 10 (1) do not apply to contracts concluded exclusively by exchange of electronic mail or by equivalent individual communication. Art. 11(2) of the E-Commerce D. requires that the provider must make available certain technical means to identify and correct input errors to the consumer. According to Art. 11(3), this duty does not apply to contracts concluded by email or equivalent individual communication: Art. 11 E-Commerce D.

2.

“(1) ... (2) Member States shall ensure that, except when otherwise agreed by parties who are not consumers, the service provider makes available to the recipient of the service appropriate, effective and accessible technical means allowing him to identify and correct input errors, prior to the placing of the order. (3) ... paragraph 2 shall not apply to contracts concluded exclusively by exchange of electronic mail or by equivalent individual communications.”

Development

This Article is modelled on Art. 10 E-Commerce D. However, there are some deviations. 2 While most of these concern drafting issues, a few also relate to substance. The ACQP start out in paragraph (1) with the obligation to provide information about the contract terms. This paragraph corresponds to Art. 10(3) of the E-Commerce D. The terminology used in the provision has been adapted to that of the ACQP. Thus, the term “service provider”, which is peculiar to the E-Commerce D. (cf. Art. 2(b) E-Commerce D.), has been replaced with the expression “business” that is preferred by the Principles. This change does not affect the substance of the provision. Furthermore, instead of “contract terms and general conditions”, the Principles only speak of “contract terms”, as general conditions that are made part of the contract are contract terms. Moreover, the phrase of Art. 10(3) of the E-Commerce D. that requires that the contract terms “must be made available to the recipient in a way that allows him to store and reproduce them” has been shortened to “must be available in textual form”. The meaning of this formula is explained in Art. 1:305 ACQP. Again, there is no substantial difference from the Directive. Art. 10(1)(c) of the E-Commerce D. requires a business to give information about the 3 technical means for identifying and correcting input errors. This presupposes that such technical means exist. Therefore, it seems logical to first spell out the obligation of the business to provide such means. This is done by paragraph (2), which mirrors Art. 11(2) of the E-Commerce D. The means for identifying and correcting input errors must comply with certain requirements: Art. 11(2) of the E-Commerce D. sets out that they need to be appropriate, effecMatthias Lehmann

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tive and accessible. Paragraph (2) reproduces this. The obligation to provide these means does not apply to any contract that is concluded electronically, but only to those that are entered into without individual communication (see Art. 11(3) of the E-Commerce D.). Thus, a clarification to this effect has been added in paragraph (2). Paragraph (3) copies Art. 10(1) of the E-Commerce D. with some deviations. While the Directive requires the service provider to give the required information “clearly, comprehensibly and unambiguously”, no such requirement needed to be spelled out in the present Article because of the general provision on clarity of information in Art. 2:204 ACQP. Furthermore, the wording of paragraph (3) slightly deviates from Art. 10(1) of the E-Commerce D. While the Directive requires information to be given “prior to the order being placed by the recipient of the service”, under the ACQP the information has to be given “before the other party makes or accepts an offer”. This ensures that this rule applies regardless of how the contract is formed, and in particular of which party makes or accepts the offer. Art. 10(4) of the E-Commerce D. excludes that the information duties under Art. 10(1) apply to contracts concluded by exchange of individual communications only (e.g. email, phone). This provision is reflected in paragraph (2) sent. 1. 4 Throughout the text of the present Article, it has been clarified that the obligations set out are mandatory in the sense of Art. 1:203 ACQP in relations between businesses and consumers. This was necessary, because Acquis Principles are mandatory only if expressly provided. That contrasts with the provisions of the E-Commerce D., which generally cannot be derogated because they aim at establishing a harmonized framework for electronic commerce within the internal market. An exception applies, however to B2B contracts according to Art. 10(1) of the E-Commerce D. It provides that parties which are not consumers can exclude the information duties that apply in e-commerce. This possibility has been extended by the Principles to all the duties under the present Article since they are mandatory only in relations between businesses and consumers (paragraphs (1) sent. 2, (2) sent. 2, (3) sent. 2). 5 Unlike Art. 10(2) of the E-Commerce D., the current wording of the Article at hand does not oblige the business to indicate the relevant codes of conduct to which it has subscribed. For reasons, see under 3. The acquis does not make clear what precise consequences follow in case of a violation of the duties set out in the E-Commerce Directive. This Directive merely asks the Member States to provide efficient, proportionate and dissuasive sanctions for any infringement of national rules adopted pursuant to the directive. As this is not an option for Acquis Principles, paragraph (4) contains more specific rules on sanctions. In the first version of the ACQP, these rules were mirrored by Art. 2:205. However, for the reasons indicated below at B.2., it was subsequently decided that this provision should be relocated to Chapter 4 and become the present Article.

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3.

Art 4:105 6, 7

Political Issues

Given that the Article largely reproduces the acquis as resulting from Art. 10 and 11 of 6 the E-Commerce D., there are very few political issues remaining open. A first question is to what extent the provision may be deviated from. The E-Commerce D. provides that parties who are not consumers can only waive the information rights set out in Art. 10(1) of the Directive. The other provisions of Art. 10 seem to be mandatory even in situations which involve businesses on both sides of the bargain. In contrast, all provisions of the present Article allow for a derogation in B2B relations. Given that EC Directives are not normally so protective of businesses, it is not clear whether all of this was intentional. For instance, businesses will normally be able to estimate whether they need contract terms to be given in writing (paragraph (1)). In order to increase consistency with other rules in the acquis, it seems justified to generalize the exception of Art. 10(1) of the E-Commerce D. The right to withdraw from the contract under paragraph (4) is not part of the acquis. The E-Commerce D. requires the Member States to provide for efficient, proportionate and dissuasive sanctions, but does not specify them. That is not an option for the ACQP. The most efficient sanction for a violation of the duties is a right of withdrawal for the other party. At the same time, this consequence is proportionate because it does not harm the interest of the business more than necessary. The sanction is also dissuasive, since the business risks losing all profit from a contract if it gives the consumer the opportunity to withdraw from the obligations incurred. Thus, it seems justified to specify the sanction which gives effet utile to the requirements in the E-Commerce D. as it has been done by paragraph (4). An express reference to codes of conducts, as it is provided for in Art. 10(2) of the E-Commerce D., has been omitted mainly for two reasons. Firstly, the Member States’ experience does not show clearly that the duty to indicate relevant codes of conduct would play an important role in legal practice across the European Union. Secondly, in those cases in which the specific provisions of a code of conduct are of importance for the contractual relationship, these provisions will be referred to or included in the contract. Consequently, the duty set out in paragraph (1) sufficiently covers the problem.

B.

Commentary

1.

Meaning and Purpose

E-commerce is crucial for an efficient and competitive internal market because it allows 7 to compare the products of businesses from different countries and to choose the most attractive offer no matter where the offeree is located. For this reason, Community law strives to give consumers and businesses an incentive to use electronic means instead of more conventional methods of contracting. Yet parties who want to buy goods or services over the internet face some major obstacles. These obstacles are mainly due to the ephemeral character of information sent over the web and the difficulty to correct mis-

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Art 4:105 8–10

Chapter 4: Formation General Provisions

takes. The present Article is designed to overcome these problems. Its purpose is to give consumers the confidence that ordering over the internet is as safe and reliable as buying in a shop.

2.

Context

8 As Art. 2:204 ACQP, the provision had previously been inserted in Chapter 2 on precontractual duties. However, the duties set out are closely connected to the formation of the contract. For instance, the duty to provide means for correcting input errors directly relates to the way in which the contract is concluded. The duty to produce the terms of the contract in textual form also is a matter of contract formation. Thus it was decided to move the provision to Chapter 4.

3.

Explanation

9 The provision applies if a contract is to be concluded by “electronic means”. This covers various situations: a contract can be entered into electronically by filling out a form on a webpage, or clicking on a button, or by exchanging emails. It can equally be concluded in a chat room or video conference or by internet telephony. The Article applies only if a business is marketing its goods or services over the internet. Hence, a website of a consumer does not need to respect the obligations set out in the provision. All duties under paragraphs (1) to (3) need to be fulfilled before the other party makes or accepts an offer. The requirement aims at guaranteeing that the other party is sufficiently informed about its rights and obligations and the technical steps of contracting. The clause leaves open the question of how the contract will effectively come about. In particular, it does not say who places the order in a legal sense (this is a difference to Art. 10 (1) of the E-Commerce D., see under A 2). 10 Paragraph (1) obliges the business to provide reference to any contract term used, and that these must be available in textual form. The notion “contract term” encompasses both individually negotiated terms and standard terms (see under A 2). The wording of the present Article makes it clear that “reference” must be distinguished from “making available”. Whereas it is sufficient for the reference that the other party is informed that some terms are to apply, the requirement of “making available” is fulfilled only if the contract terms are provided in their entirety and in textual form. A typical example is a website transaction where the business alerts the other party to its standard terms, which the other party can then look up by following a link. The form requirement follows from Art. 10(3) of the E-Commerce D. and has been adapted to ACQP terminology. “Textual form” is generally defined in Art. 1:305 ACQP as a “text which is expressed in alphabetical or other intelligible characters by means of any support that permits reading, recording of the information contained therein and its reproduction in tangible form.” A website which can be easily downloaded and printed is an obvious example for this.

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Article 4:105 Formation by electronic means

Art 4:105 11, 12

According to paragraph (2), the business must provide technical means that allow the 11 other party to identify and correct input errors. These means must be appropriate, effective and accessible. A web page must therefore be set up in a such a way that the customer can read clearly what he or she is typing in and that he or she can delete any input, for instance by using the “backspace” or the “delete” key. The acquis imposes no requirement of an automated control of the data filled in by the customer. Before the data is sent to the business, it should be displayed in a summarized form so that the customer can verify it. At this point, the customer must be given a final opportunity to revise the data and correct any errors. Paragraph (3) requires the business to give certain information to the customer before the 12 conclusion of the contract. Firstly, the business must clarify how the contract will be concluded, i.e. which measures the customer must take in order to be legally bound. The easiest way to do so is to display a line that indicates all the steps to be followed to enter into the contract, with the current step highlighted (so-called crumb trail, see Elle Todd, Gringras: The Laws of the Internet, 3rd ed., Trottel Publishing, Haywards Heath, 2008, p. 21). In addition, some explanation of the steps in a text is needed. Secondly, the business must set out in which languages the contract can be concluded. This can be done for example by icons taking the shape of little national flags on which the customer can click to obtain a different language version. It should be noted that there is no obligation to offer specific languages or translations, just a duty to inform which languages can be used for contracting. If a text is used to explain which languages are offered, this text must be provided in all available languages. If the contract can be concluded only in one language, no express mention must be made of this fact, as the language in which the contract can be concluded is then evident. Thirdly, the business must inform about the technical means to identify and correct input errors. The means have been described above. The business does not need to explain the basic functions of the client’s computer, such as the use of the “backspace” or the “delete” key. It is fair to assume that the user is familiar with them. Nevertheless, before the data are transmitted the business must inform the client about the possibility to rectify any errors. To this effect, buttons displaying very short terms can be used, such as “Go back” or “Delete”. Fourthly, the business must clarify whether it will store the contract terms and whether they will be accessible. In fact, it follows from paragraph (1) that the business must make the contract terms accessible to the client. In most cases, this will require that the business keeps a record of the terms. Thus, the real meaning of the provision is that the business must inform the customer how he or she can access the contract terms. The most obvious possibility is to allow the consumer to download the terms and print them out. Another way is to send a confirmation containing the terms to the email address of the customer.

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Chapter 4: Formation General Provisions

Paragraphs (2) and (3) apply only if the contract is formed “without individual communication”. This excludes contracts concluded by exchange of email or by equivalent individual communications (cf. also Art. 10(4) of the E-Commerce D.). As equivalent, one must consider chat rooms, instant messaging, internet telephony and video conferences, because they proceed on an individual basis. 13 Paragraph (4) contains a rule on sanctions. It corresponds to Art. 4:104(4) ACQP (see there under B 3). The provision applies if the duties under paragraphs (2) or (3) have not been fulfilled. For violations of paragraph (1), a different sanction applies: If the contract terms have not been made available in text form, they will not become part of the contract, see Art. 6:201(3) ACQP.

4.

Examples

Example 1 14 Consumer A wants to order a laptop from company B. He fills out a form on the company’s website. After completing his order, his data are immediately transmitted without there being any possibility to correct input errors. A can withdraw from the contract, independently of whether he has erred while filling out the form. The right of withdrawal lapses one year after the conclusion of the contract or earlier, or once B has delivered the laptop and A has paid the price. Example 2 15 Consumer C wants to buy a book published by company C. The website of C states that C’s standard conditions apply without giving a reasonable possibility to download or print them. The standard conditions do not become part of the contract.

Article 4:106: Unsolicited goods or services If a business delivers unsolicited goods or services to a consumer, no obligation arises from the consumer’s failure to respond.

A. Foundation in the Acquis 1.

Sources

1 This rule is derived from Art. 9, 2nd indent of the Distance Selling D. and from Art. 9, 2nd indent of the Financial Services Distance Selling D. According to these provisions, the consumer is exempt from any obligation if he or she receives unsolicited supplies, and the absence of a reply by the consumer does not amount to consent. These provisions are 200

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Article 4:106 Unsolicited goods or services

Art 4:106 2, 3

based on paragraphs 18 and 19 of the Annex to the Council resolution of 14 April 1975 on a preliminary programme of the European Economic Community for a consumer protection policy. The resolution drew attention to a “need to protect the purchasers of goods or services from demands for payment for unsolicited goods” as well as “from high pressure selling methods” generally. This resolution was expressly referred to in Recital 5 of the Distance Selling D.

2.

Development

The Article summarises the content of the aforementioned provisions from the Distance 2 Selling D. and the Financial Services Distance Selling D. These provisions state that the consumer may not be required to provide any consideration and that the absence of a response does not constitute consent. Both these elements of the provisions in the directives can be summarised in the rule that no obligation arises from the consumers’ failure to respond. This applies in the aforementioned provisions in cases of unsolicited delivery to a consumer. Article 4:106 more precisely defines this requirement with the wording “unsolicited goods or services” on the basis of Art. 9, 1st indent of the Distance Selling D., which expressly refers to “the supply of goods or services”. These provisions in the directives apply exclusively to the supply to consumers; there is no basis for an extension to other contracts.

3.

Political Issues

The present Article protects the consumer in accordance with the provisions of the di- 3 rectives upon which it is based (cf. supra No. 1) from demands for payment for unsolicited goods and services, both in the individual case as well as generally to influence market behaviour. The main political issue in its interpretation is the kind of claims by the supplier which must be excluded according to the policy of this provision. Without doubt, the claim to payment of the price for the goods or service is excluded (apart from the case where the consumer, despite the absence of any obligation, decides to conclude a contract with the supplier according to the requirements of Art. 4:101 and 4:102 ACQP). Whether further possible claims by the business are excluded requires a principled decision. On the one hand, the consumer must be protected not only in the individual case but also generally through a deterrent regulatory effect of the negative consequences for the market behaviour of the supplier. On the other hand, one cannot completely disregard the interests and rights of the business as recognised in Community law, especially proprietary rights. Article 4:106 therefore only excludes those obligations that arise from the consumer’s failure to respond (according to the corresponding directive provisions, the absence of a response by the consumer does not constitute consent and the consumer is exempted from the obligation to provide consideration). On the issue of which specific obligations these may be, cf. infra No. 9.

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Art 4:106 4–7

B.

Commentary

1.

Meaning and Purpose

Chapter 4: Formation General Provisions

4 The purpose of the rule is to shield the consumer from obligations in the context of the unsolicited delivery of goods or services. The rule is significant both in the individual case where a business requires payment from a consumer for the unsolicited delivery of goods or services as well as for the market behaviour of providers of goods and services in general. In the latter regard it should operate preventively by promoting correct behaviour through the threat of a sanction, namely that the unsolicited delivery of goods or services excludes claims by the business.

2.

Context

5 The rule partly overlaps with the scope of Art. 4:101 ACQP: so long as the consumer does not intend to be legally bound or no sufficient agreement exists with the business, according to Art. 4:101 ACQP no contract is formed between the consumer and the business with the consequence that the business has no contractual claims against the consumer. If the consumer does not react to the delivery of unsolicited goods or services and an offer thereby made, the function of the Article at hand, substantiating Art. 4:101 ACQP, is to make clear that the silence of the consumer is not to be understood as an acceptance (irrespective of whether a conclusion of contract between business and business under these circumstances might occur). Furthermore, Art. 4:106 can also affect extra-contractual claims, in particular claims based on unjust enrichment, tort or property rights (cf. infra No. 9).

3.

Explanation

6 The provision protects the consumer in the individual case and influences market behaviour generally, by excluding a claim by the business to any form of payment in return for unsolicited goods or services it supplies. Claims excluded relate not only to the price of the goods or in respect of services rendered, but also for instance to claims for replacement for deterioration or loss in the hands of the consumer. The function of Art. 9 of the Distance Selling D., namely to influence market behaviour, has a value basis for European contract law which markedly differs from the relevant concepts of most national contract laws. This is relevant for issues of claims relating to use of the goods or restitution (either of an unjust enrichment or to vindicate property rights). 7 The rule concerns both the supply of goods and the provision of services by a business to a consumer (for the notion of consumer and business cf. Art. 1:201 et seq. ACQP; the notion of goods and services can be interpreted in the light of Art. 23(1) and 50 EC-Treaty regarding the free movement of goods and services, cf. comment No. 11 to Art. 3:201 ACQP). The business does not necessarily have to deliver itself the goods or services to

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Article 4:106 Unsolicited goods or services

Art 4:106 8–10

the consumer; it is sufficient if it e.g. sends the goods by mail or otherwise arranges for delivery. The goods or services must be unsolicited. This is not the case where, prior to the supply 8 of the goods or the provision of the services, the consumer has made an offer (cf. Art. 4:102, 4:103 ACQP). If the consumer has made a proposal which did not amount to an offer (cf. Art. 4:103 ACQP; invitatio ad offerendum), and the business in response thereto delivered the goods or services in question together with an offer, it is doubtful whether the goods or services are unsolicited. In such cases, one can at least say that the goods or services are not unsolicited if the consumer knew or ought to have known in the circumstances that, in response to his or her proposal, the business would link its offer with the delivery of the goods. If a contract has already been concluded between consumer and business, but has been rendered void by a subsequent rescission (in particular under the applicable law of a Member State) the goods or services originally ordered do not thereby become unsolicited. In accordance with the laws of some Member States (cf. German CC § 241a(3)), it may not be qualified as unsolicited supply if the business has supplied goods or provided services which are different from those ordered, but which are similar in terms of price and value: if the business thereby makes clear that the consumer is not obliged to accept them and does not have to bear the costs of return. In such circumstances the consumer does not require the protection provided in the present Article. The rule prevents that any obligation can arise from the consumer’ failure to respond. If 9 the consumer does not state that he or she wishes to conclude a contract then all contractual claims against the consumer are precluded. Mere silence by the consumer is not to be regarded as offer or acceptance. This also applies if the consumer uses the goods supplied or disposes of them (unless other circumstances show that the consumer intends to conclude a contract with the business). In this case, all claims which are based on the existence of a contract are excluded. This applies in particular to all claims for payment of the price for the goods or services, and all contractual claims for non-performance and remedies associated therewith (e.g. damages). As no obligation can arise from the consumer’s failure to respond, all extra-contractual claims are also excluded, if they are based upon unjust enrichment relating to the use or value of the goods or services. This is a further consequence of the rule that no obligations arise from the fact that the consumer did not respond to the delivery of unsolicited goods or services. The customer does not need to return the goods or keep them or in any way treat them with care. This corresponds to the purpose of the rule, which aims to protect the individual consumer, and also to sanction improper market behaviour (cf. supra No. 4). The present Article therefore excludes all claims against the consumer for restitution for use and for value, provided they relate to the unsolicited goods or services, irrespective of whether such claims are based on unjust enrichment, tort or property rights, and irrespective of whether the consumer behaved negligently or intentionally. On the other hand, this rule does not affect claims of the business for restitution of the 10 unsolicited goods supplied which are based on property rights under domestic law, because these claims do not arise from the consumer’s failure to respond. The property law Reiner Schulze

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Art 4:106 11–15

Chapter 4: Formation General Provisions

issue is deliberately left open by the present Article and is instead governed by property law rules as invoked by European law or applicable domestic law. The same applies to claims in unjust enrichment for restitution of the goods in kind. These must be distinguished from unjust enrichment claims against the consumer for restitution of the value of having useed the goods, or for claims for recovery of the diminished value or deterioration of them (cf. supra No. 4).

4.

Examples

Example 1 11 Business A sends consumer B a product together with a statement that, if B does not object, then B will be billed for the product in two weeks time. B does nothing and receives a bill from A after two weeks. B is under no obligation to pay for the product. Example 2 12 Same as Example 1, except that B, without making any statement towards A, has used the product a few times. The mere use of the product by consumer B is not to be regarded as an acceptance of business A’s offer; a contract has therefore not been concluded. B is under no obligation to pay for the product. Neither need B pay any damages for use of the product. Example 3 13 Same as Example 1, except that one week later B dumps the product in her rubbish bin. B is under no obligation to pay damages to business A. Example 4 14 Consumer B has ordered a men’s wrist watch from business A. By mistake, business A sends a ladies’ wrist watch to B. B assumes that A has made a mistake and throws the ladies’ wrist watch away. In this case, Art. 4:106 does not – according to the purpose of the rule (to prevent improper market behaviour – cf. supra No. 4) – cover the behaviour of A, as A has sent B the wrist watch in response to the latter’s order and has thus acted in the context of an acceptable market behaviour, but has merely made a mistake. Article 4:106 therefore does not apply, and thus does not exclude possible damages claims by A against B. Example 5 15 Consumer B has ordered a men’s wrist watch for 50 EUR from business A. A intentionally sends B a different, higher value model and, without any further explanation, invoices him for 200 EUR. This case concerns the supply of unsolicited goods. B is under no obligation to pay the 200 EUR.

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Article 4:107 Pre-contractual statements by a contract party

Art 4:107 1

Article 4:107: Pre-contractual statements by a contract party (1) Any public statement which a business, prior to the conclusion of the contract, makes about the specific characteristics of the goods or services which it supplies is binding under the contract unless: (a) when the contract was concluded, the other party was aware, or should have reasonably been aware that the statement was incorrect; or (b) the other party’s decision to conclude the contract could not have been influenced by the statement; or (c) the statement had been corrected by the time of the conclusion of the contract. (2) Paragraph (1) is mandatory in the sense of Article 1:203 (Mandatory nature of consumer rules) in relations between businesses and consumers.

A. Foundation in the Acquis 1.

Sources

Paragraph (1) of the present Article is derived from the following provisions:

1

Article 2(2)(d) of the Consumer Sales D. According to this provision, there is a presumption that consumer goods are in conformity with the contract if they show the quality and performance that are normal in goods of the same type and which the consumer can reasonably expect, given the nature of the goods and taking into account any public statements on the specific characteristics of the goods made about them by the seller, the producer or his representative, particularly in advertising or labelling. Article 2(3) and (4) of the Consumer Sales D., which contain some exceptions to the aforementioned provision. Article 6(1) of the Consumer Sales D. which provides that a guarantee is binding on the offeror under the conditions laid down in the guarantee statement and the associated advertising. Article 3(2) of the Package Travel D. According to this provision, details given in a brochure bind the organiser or the retailer of a travel package, unless certain exceptions named in this provision apply. Paragraph (2) is based on Art. 7(1) of the Consumer Sales D. According to this provision, “[a]ny contractual terms or agreements concluded with the seller before the lack of conformity is brought to the seller’s attention which directly or indirectly waive or restrict the rights resulting from this Directive shall, as provided for by national law, not be binding on the consumer.”

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Art 4:107 2– 4

2.

Chapter 4: Formation General Provisions

Development

2 The listed sources provide that pre-contractual statements, including statements in advertising, on labelling and in the brochure, bind the seller, even if at the “magic moment” of conclusion of contract the seller did not want to include them and the buyer was completely unaware of them. It suffices that the buyer could merely have been influenced by them, and that none of the exceptions under Art. 2(3) and (4) of the Consumer Sales D. apply. These rules of the Consumer Sales D. and the Package Travel D. are the result of special legislative efforts made to protect consumer buyers and package tour travellers. Nevertheless, they should not be regarded only as a special protective measure but rather as a result of a general principle in cases where a contract does not explicitly address certain questions, but where those issues have been dealt with by one of the parties in a pre-contractual statement. Under such circumstances, it is a reasonable expectation of the other party to the contract that the terms are in accordance with the pre-contractual statement made by a party to the contract, also when the statement is made in an advertisement, brochure etc. If the pre-contractual statement rules of the Consumer Sales D. and the Package Travel D. are regarded as rules protecting the reasonable expectations of a party rather than special protection rules for individual situations there seems to be no reason to restrict the rules to consumer sales and package travel contracts, which would make the principle inapplicable to business-to-business sales and other types of contracts than contracts of sale. 3 This approach is in accordance with that taken by a series of Member States. For example in Germany CC § 434(1) sent. 2 expands the rule in Art. 2(2)(d), and 2(4) of the Consumer Sales D. beyond consumer transactions. Cf. also the English case of Bowermann v Association of British Travel Agents Ltd [1996] CLC 456: a notice displayed in a travel agency constituted a clear promise, thus entitling the traveller also to reimbursement of his travel insurance premium in the event of the tour operator’s insolvency (this was not included in the original reimbursement). Similar rules concerning the effect of public statements are found in the Finnish, Norwegian and Swedish acts on consumer services contracts (the Finnish Consumer Protection Code Chapter 8 § 13, Norwegian Act (63/1989) on Craftsmen’s Services § 18, and the Swedish Consumer Services Act (1985:716) § 10). In Nordic law there seems to be no doubt that the pre-contractual, public statement rules found in the acts concerning consumer sales and services are concrete manifestations of a general principle of contract law also applicable outside the scope of the positive statutory rules (cf. Wilhelmsson, in Collins [ed.], The Forthcoming EC Directive on Unfair and Commercial Practices, p. 223-240, The Hague (2004)). Also Art. 6:101(1) and (2) PECL apply beyond consumer relations and are not limited to sales contracts but also applicable to contracts concerning services etc. 4 Instead of repeating more or less literally Art. 7(1) of the Consumer Sales D., paragraph (2) of the present Article refers to Art. 1:203 ACQP. Under that general provision, contract terms which are prejudicial to the consumer and which deviate from the rules applicable specifically to relations between businesses and consumers are not binding on the consumer. This technique avoids the repetitive (and also inconsistent) style of the

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Article 4:107 Pre-contractual statements by a contract party

Art 4:107 5, 6

acquis which contains a number of “mandatory law” provisions spread out over various Directives.

3.

Political Issues

The general pre-contractual, public statement rule can be seen as a concrete example of 5 contract law rules counteracting misleading advertising by allowing the reasonable understanding of advertisements etc. to become a part of the contract and thus at the same time protecting the reasonable expectations of a contractual party and by providing a contractual remedy for violations of the prohibition of misleading advertising. This is consistent with the effet utile and the effective remedies approach which generally characterise the acquis. The fact that the Unfair Commercial Practices D. is without prejudice to contract law and, in particular, to the rules on the validity, formation or effect of a contract (cf. Art. 3(2) of the Unfair Commercial Practices D.) does not preclude that general principles of contract law may be employed as tools for giving violations of marketing practices law a civil law remedy (Wilhelmsson, in ERA-Forum, scripta juris europaei, Special Issue 2006, European Contract Law, p. 24).

B.

Commentary

1.

Meaning and Purpose

Paragraph (1) binds the business to pre-contractual statements which it has made prior to 6 the conclusion of the contract about the specific characteristics of the goods or services that it supplies. In business reality, such pre-contractual statements occur frequently in advertising, labelling and in brochures or catalogues. They can lead buyers of goods or services to form decisive expectations on the quality of the subject matter of the contract before he or she commences concrete negotiations or makes personal contact with the supplier of goods or services at all. It is well possible that, precisely because of this prior information, the consumer does not mention important aspects of the qualities of the goods or services at all. In such circumstances, the buyer of goods or services must be able to rely upon the pre-contractual information as being accurate (unless one of the exceptions in paragraph (1)(a), (b), (c) applies). The rule thus protects the expectations which the other party can normally have on the basis of these statements. If a statement falls within the scope of Art. 4:105 ACQP, it therefore becomes part of the contract and binding according to the same principles as any other statement that is part of the contract. Thus, if the business does not perform its obligations under the contract (taking into account the pre-contractual public statement) there is a case of non-performance; cf. Chapter 7 ACQP on performance. Paragraph (2) prevents that that paragraph (1) is excluded by contract terms in B2C contracts.

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Art 4:107 7–11

2.

Chapter 4: Formation General Provisions

Context

7 The pre-contractual public statement rule of the present Article deals with the formation and the content of the contract in cases where there is no question concerning the existence of a contract between the parties. Unlike the situation dealt with in Art. 4:103(3) ACQP (where the question is whether an advertisement etc. is in itself an offer or merely an invitation to treat), the present Article concerns the legal impact of pre-contractual statements in advertisements etc. on the content of the contract. The rule concerns statements of the supplier of goods or services which are the subject of the contract, whereas pre-contractual statements of a third party are dealt with in Art. 4:108 ACQP. If a pre-contractual public statement is binding according to present Article and has thus become part of the contract, the details of the obligations to perform are governed by Chapter 7 ACQP on performance. In the case of non-performance the provisions of a future chapter on remedies apply that is currently being drafted.

3.

Explanation

8 Paragraph (1) applies to a broad spectrum of pre-contractual public statements, including advertising and labelling. In order to be binding, the statement must contain concrete information concerning the goods or services and not just unspecified general sales talk. 9 The term “specific characteristics of the goods or services” should be understood broadly as referring to information which will typically influence the decision to purchase the product or service, i.e. quality, origin, price etc. If the specific product or service related information in question, e.g. environmental claims, is likely to influence the decision of a significant number of potential buyers in the market in question it is within the scope of paragraph (1). 10 If it is established in an individual case that a statement falling within the scope of paragraph (1) actually did not influence the other party’s decision to conclude the contract, the exception in paragraph (1)(b) applies. According to the exception in paragraph (1)(a), the pre-contractual public statement is not binding if the other party actually was or should have been aware of the fact that the statement was incorrect. The additional exception in paragraph (1)(c) applies beyond paragraph (1)(a) in cases where the public statement was corrected before the other party concluded the contract notwithstanding that the party was not informed of the correction. In order for a correction to have effect according to paragraph (1)(c) it must be made public in a way which is at least as effective as the original statement. 11 Paragraph (2) makes clear that paragraph (1) is only binding in B2C relations. In principle, the binding nature of pre-contractual statements set out in paragraph (1) applies to B2B relations as well, but it can be contractually excluded.

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Article 4:108 Pre-contractual statements by third parties

4.

Art 4:107, 12–15 Art 4:108

Examples

Example 1 According to a decision of the Danish Supreme Court from 1984, a contract for the 12 supply of oil to a weekend cottage would have to be interpreted in the light of the marketing material of the oil company in question. According to the marketing material the delivery system of the oil company would ensure that at all times there would be oil in the tank so that the customers would not have to worry about the risk of running dry. When the oil tank actually did run dry and the furnace consequently went out, this was due to the fact that the oil company had disregarded its contractual obligations. Therefore, the company was considered liable in damages to the customer for the loss incurred by water damage after the water pipes froze and burst (Reported in Ugeskrift for Retsvæsen 1984, 392). Example 2 A is a wholesaler of foodstuffs. During negotiations with retailer B he states that he can 13 supply B with wild Scottish Salmon for 15 EUR per kilogram. A few days later B places an order for 10 kilograms salmon and the parties agree on a price of 150 EUR. A in fact supplies farmed salmon. This represents a nonconformity of contract, as A is bound by his pre-contractual statement to supply wild salmon. B thus has a remedy in contract. Example 3 Retailer B above makes an enquiry about the supply of Swedish Salmon. A replies that he 14 cannot supply Swedish salmon, but instead can supply Finnish salmon. B replies that this does not matter and places an order for Finnish salmon. The salmon A in fact supplies is Swedish salmon. Here A is not bound by his pre-contractual statement to provide Finnish salmon, as B is indifferent whether his salmon is Swedish or Finnish. B has no contractual remedy. Example 4 Wholesaler A above advertises in January that he can supply Norwegian salmon. In Feb- 15 ruary he corrects the advertisement in the same way that he made it in January, stating that he has only Danish salmon. In March, B, who has not seen the advertisement since January, places an order for salmon believing it to be Norwegian. He is supplied with Danish salmon. B has no remedy in contract, as the statement was corrected before the time the contract was concluded.

Article 4:108: Pre-contractual statements by third parties (1) Article 4:107 (Pre-contractual statements by a contract party) also applies to public statements made by the producer, another person within the business chain between producer and ultimate customer, or any person advertising or marketing services or goods for the business, unless the business was not, and could not reasonably have been, aware of the statement.

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(2) Paragraph (1) is mandatory in the sense of Article 1:203 (Mandatory nature of consumer rules) in relations between businesses and consumers.

A. Foundation in the Acquis 1.

Sources

1 Paragraph (1) of the Article at hand follows from the following provisions in: Article 2(2)(d) of the Consumer Sales D. According to this provision, public statements on the specific characteristics of the goods made by the seller, the producer or his representative, particularly in advertising or labelling, are to be taken into account in determining whether consumer goods are in conformity with the contract. Article 2(3) and (4) of the Consumer Sales D., which contains some exceptions to the aforementioned provision. Article 6(1) of the Consumer Sales D. which provides that a guarantee shall be legally binding on the offeror under the conditions laid down in the guarantee statement and the associated advertising. Article 3(2) of the Package Travel D. According to this provision details given in a brochure bind the organiser or the retailer of a travel package, unless certain exceptions named in this provision apply. Paragraph (2) is based on Art. 7(1) of the Consumer Sales D. (see further No. 1, 4 and 11 to Art. 4:107 ACQP).

2.

Development

2 The listed sources provide that statements, particularly in advertising, labelling and other communications, can determine the content and scope of contractual obligations, even if they originate from a certain third party and the contractual parties themselves do not incorporate them when concluding the contract. These provisions can be considered as the expression of an overall principle (for sales contracts as well as for service contracts, and not limited to the narrow area of consumer law). In principle, the comments made above to Art. 4:107 ACQP at No. 2 et seq. also apply to this rule. The incorporation of pre-contractual public statements of third parties, not only in contracts between businesses and consumers, corresponds to the law in some Member States, for example Nordic law and German law (CC § 434(1) sent. 2) and Art. 6:101(3) PECL. The principle of European law, upon which the present Article is based (and which is also found in the laws of the Member States) does not create a contractual obligation or some kind of liability for the third party itself. It merely extends the content of the contract that exists between the seller of goods or services and the buyer. The basis for this is the fact that the advertising measures and similar public statements of the relevant third parties (such as

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Article 4:108 Pre-contractual statements by third parties

Art 4:108 3–5

for example the producer) influence the expectations of the customer just as much as (if not more than) the corresponding statements of the seller itself, of which the seller generally knows and which it often incorporates into its marketing strategy; and that such statements contribute to a successful sale. The seller or service provider should therefore in principle be bound to the same extent to such public statements as it is to its own precontractual public statements. The reasons that bring about this consequence generally relate to the relationship between sellers of goods or services and their customers and do not relate to a specific need for protection of consumers. Therefore the Article (just as Art. 4:107 ACQP) is formulated as a general rule. The Article furthermore specifies more precisely than the aforementioned sources, on as 3 clear a basis as possible for legal practice which persons fall within the scope of this provision as third parties. Instead of the vague wording of Art. 2(2)(d) of the Consumer Sales D. (“the producer or his representative”), this rule names as relevant persons “the producer, another person within the business chain between producer and ultimate customer, or any person advertising or marketing services or goods for the business”. Following Art. 2(4) 1st indent of the Consumer Sales D. the Article furthermore lays down that the seller is not bound by a third party statement if the seller shows that he or she was not and could not reasonably have been aware of the statement.

3.

Political Issues

The rule can thus be seen as counteracting misleading advertising by providing the final 4 customer with a contract law remedy where advertising, wherever it may occur within the business chain, does not conform with the end product. It takes account of the fact that the final customer in practice has little possibility of finding out to what extent public statements concerning products in advertisements originate from the producer, importer or the seller respectively. The source of the misleading advertising should therefore not be decisive for the interpretation of the contract. Irrespective of the source, the business party benefits from the positive effects of the statements concerning the product and it is, therefore, reasonable that the business party has to take also the negative consequences if an advertisement turns out to be misleading.

B.

Commentary

1.

Meaning and Purpose

Statements in advertising, labelling and other communications in particular can partly 5 determine the content and scope of contractual obligations, even if they originate from a third party and the contractual parties themselves do not incorporate them when concluding the contract (cf. No. 2 supra). In this respect the same observations apply as given to Art. 4:107 ACQP on the rule and its exceptions. The additional exception for paragraph (1) is that the seller or supplier is not bound by a third party statement if the seller provides proof that he was not and could not reasonably have been aware of the statement.

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Art 4:108 6–11

2.

Chapter 4: Formation General Provisions

Context

6 The Article at hand extends Art. 4:107 ACQP regarding corresponding public statements of certain third parties. In respect of context, the observations made under Art. 4:105 ACQP at No. 2 et seq. apply correspondingly. Additional regard must be had for the fact that the Article is particularly relevant in the context of misleading advertising. There it provides the final customer with a contract law remedy where advertising, wherever it may occur within the business chain, does not conform with the end product.

3.

Explanation

7 Paragraph (1) concerns, just like Art. 4:107 ACQP, the effect of public pre-contractual statements on contracts. But unlike Art. 4:107 ACQP, paragraph (1) deals with such statements made by certain third parties. Whether some kinds of public statements are offers (binding per se) or merely invitations to treat is a separate issue and is dealt within Art. 4:103 and Art. 4:109 ACQP. 8 The rule applies to all prior professional links in the chain of distribution, including importers and wholesalers (in accordance with Art. 6:101(3) PECL). In favour of this broader approach is the fact that it should not be decisive for the interpretation of the contract between the later link in the business chain and the final customer, whether the public statements on the specific characteristics of the goods or services were made by the producer or by e.g. the importer. According to paragraph (1) a business party is bound by public statements made by a previous link in the same chain of distribution, but not by advertising made by competitors or parallel importers etc. 9 For further explanation cf. the comments to Art. 4:107 ACQP at No. 7-9.

4.

Examples

Example 1 10 Consumer C purchases from retailer B Scottish salmon that is advertised as being sourced from wholesaler A. Wholesaler A advertises that the Scottish salmon it supplies is exclusively wild salmon. B is aware that the salmon in question is in fact farmed salmon, but does not inform C of this fact. B is bound by the advertisement of A according to Art. 4:108. Example 2 11 Consumer C in Spain purchases from retailer B salmon which is declared as being sourced from wholesaler A. A states that it supplies fresh Scottish salmon, caught and then put on display within two hours. C has no claim on the basis of Art. 4:108, as C must have been

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Art 4:108, 12, 13 Art 4:109, 1

Article 4:109 Binding force of unilateral promises

aware that it is impossible to sell salmon in Spain that was caught in Scotland within the previous two hours. Example 3 Consumer C cannot tell the difference between Swedish and Finnish salmon of equal 12 quality. If C purchases salmon which is in fact Swedish but declared as being Finnish C has no claim based on Art. 4:108. Example 4 In January consumer C sees a television advertisement by wholesaler A stating that A 13 exclusively distributes wild Swedish salmon. A in fact also distributes farmed Danish salmon. He makes a corresponding correction to the advertisement in February. Consumer C does not see the corrected advertisements and in March purchases from retailer B salmon declared as being sourced from wholesaler A, believing it to be wild Swedish salmon. What C purchases is in fact farmed Danish salmon. C has no claim on the basis of Art. 4:108, as the statement has been corrected by the time the contract is concluded.

2

Article 4:109: Binding force of unilateral promises

(1) A valid unilateral promise or undertaking is binding on the person giving it, if it is intended to be legally binding without acceptance. (2) If a unilateral promise is binding, provisions of contract law which protect one particular party apply in its favour.

A. Foundation in the Acquis As to paragraph (1) There is no sufficient basis in the acquis for formulating such a rule. Only some individual 1 provisions – such as Art. 6 of the Consumer Sales D. on the binding force of commercial guarantees – can be seen as an example of the acquis acknowledging that unilateral promises can have a binding effect. Therefore the wording of the present Article has been taken from Art. 2:107 PECL in order to show the context in which the Acquis Principles – in particular the subsequent paragraph (2) of the present rule – can operate. As a result the wording of the Article may be partially inconsistent with the general terminology of the Acquis Principles.

2

Partial grey rule from Art. II. – 1:103 DCFR.

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2 As to paragraph (2):

1.

Sources

3 Article 6 of the Consumer Sales D. on the binding force of commercial guarantees demonstrates that Community law recognises the binding effect of unilateral promises (cf. the comments above to paragraph (1)). 4 Many of the directives containing provisions that protect one particular party only refer to contracts. However, to achieve effective protection of the respective party, these provisions have to be applied also to unilateral promises. The principle of effet utile is recognised in the case law of the ECJ in a series of decisions and has been applied to numerous areas of Community law, cf. for example: joined cases C-46/93 and C-48/93 – Brasserie du Pêcheur SA v Federal Republic of Germany and R v Sectretary of State for Transport ex parte Factortame Ltd; C-381/93 – Commission v France; C-144/93 – Pfanni Werke Otto Eckart KG v Landeshauptstadt München; C-128/93 – Geertruida Catharina Fisscher v Voorhuis Hengelo BV and Stichting Bedrijfspensioenfonds voor de Detailhandel; joined cases C-6/90 and C-9/90 – Andrea Francovich and Danila Bonifaci and others v Italian Republic.

2.

Development

5 The binding effect of unilateral promises is recognised in individual provisions of Community law (cf. supra No 3 for commercial guarantees in Art. 6 of the Consumer Sales D.), but is not the subject of general regulation (cf. supra as to paragraph (1)). According to the law of most Member States, unilateral promises can have a binding effect (subject to different respective provisions and to differing extents). In particular in Nordic law, the unilateral promise can constitute a basis for obligations. Under the so-called Løfteteori (promise theory), familiar in Nordic doctrine, contractual parties’ obligations arise not only from their agreement, but from the duty undertaken by each party in its promise. Consequently, the offeror is bound by the offer and, if it is accepted, the offeror’s contractual obligation dates back to the time in which the offer became known to the offeree (Møgelvang-Hansen, in: Dahl/Melchoir/Tamm [eds.], Danish Law in a European Perspective, Copenhagen (2002), pp. 238 et seq.). Other Member States recognise the binding nature of a promise at least in exceptional circumstances (e.g. in Germany for rewards (“Auslobung”) or in England for offers made to the general public for which acceptance does not have to be communicated, cf. Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256). Provisions concerning promised winnings that have been introduced by some Member States in connection with the transposition of the Distance Selling D. (e.g. German CC § 661a) also point in the same direction. This provision seeks to influence market behaviour by protecting the legitimate interest of addressees of declarations of winnings; it thus prevents businesses soliciting business under the pretence that the promisee has won something for nothing. Article 2:107 PECL provides that unilateral promises generally can have a binding effect.

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Art 4:109 6–8

Unilateral promises thus have considerable significance in business practice in the inter- 6 nal market as well as in respect of the further development of European contract law. This must also be reflected in the scope of application of protective provisions of Community law. Most provisions which protect one party will, unsurprisingly, mention expressly only contractual obligations, or refer to contractual or statutory circumstances (cf. Art. 2(2) of the Late Payment D.). Their purpose, however, is to protect a party from disadvantages which typically exist against the other party in certain situations of conclusion or performance of contract. This purpose would not be achieved (and could even be intentionally circumvented), if the party which is to be protected could bind itself by a unilateral promise (for example at the suggestion of the other party or in response to pressure from the other party), without the corresponding protective provisions of Community law applying. Such a result could not be reconciled with the purpose of the protective provisions and the principle of effet utile. The latter ensures that the aims of the Community law provisions are effectively realised as far as this is possible. This requires that the protection, that Community law gives a party on entering or performing an obligation, must not be limited to obligations based on contract (i.e. based on the agreement of the parties, cf. Art. 4:101 ACQP) but rather extended to obligations based on unilateral promises, insofar as Community law or the law of the Member States permits such a unilateral creation of obligations.

3.

Political Issues

For the cases in which the law of the Member States or Community law gives a binding 7 effect to unilateral promises, Community law thus far contains no express and clear general rule that the protective provisions, which exist for the benefit of one party, are likewise applicable. The purpose of these protective provisions could, however, only be achieved to a sufficient degree if either unilateral promises in the relevant situations are not permissible at all, or the protective provisions of contract law are also applicable to unilateral contracts. The former option would constitute an unnecessary incursion into the freedom of action of the relevant parties and into the law of the Member States. Paragraph (2) therefore contains, on the basis of the principle of effet utile, the decision to apply protective provisions of contract law to unilateral promises.

B.

Commentary

1.

Meaning and Purpose

Paragraph (2) responds to the fact that in the law of the Member States and Community 8 law obligations of one party can arise from a unilateral promise, but that there appear to be no clear rules on the extent to which a particular unilateral promise is permissible. Insofar as unilateral promises have a binding effect according to the law of the Member States or Community law, the rule ensures that a party which under applicable provisions is protected in a contractual situation will enjoy the same protection if the same obligation arises from its unilateral promise. It thus forestalls a circumvention or erosion of the protection which mandatory provisions of contract law prescribe for the protection of one party.

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2.

Chapter 4: Formation General Provisions

Context

9 Paragraph (2) supplements the rules of contract law. The rule can only apply insofar as unilateral promises have a binding effect according to paragraph (1) or the law of the Member States. It relates to all provisions of contract law which protect one particular party (cf. No. 11 infra).

3.

Explanation

10 The rule relates to unilateral promises as opposed to contracts that are based on the agreement of at least two people. Such unilateral promises can be made to one or more specific persons or to the public at large. Whether they have a binding effect is determined, in the framework of this text, according to paragraph (1). 11 The rule lays down that certain provisions on contract law apply to such unilateral promises, namely those provisions which protect one particular party. It does therefore not extend to provisions, which, in principle, give both parties the same rights, rather than protecting one party which deserves particular protection. Examples for the former are general remedies such as termination, reduction in price and damages according to a specific chapter of the Acquis Principles on remedies (which is currently being developed), insofar as these are applicable for all parties and, in particular, not limited to the businessconsumer context. The protection of one particular party can relate to the conclusion of the contract as well as to its performance; both types of protective provisions are accordingly applicable to unilateral promises. In the former respect, a consumer is, for example, protected in a doorstep situation if it makes a promise of payment to the business. Article 5:A-01 ACQP provides that a consumer who enters into a contract in a doorstep situation has a right of withdrawal. Under paragraph (2), this protection is extended in the event that the consumer unilaterally promises payment, whereas the business does not perform anything at all in return, or disguises its counter-performance as a “gift”. Contract law provisions are, however, applied only in favour of the protected party (e.g., of the protected consumer in the case of Art. 5:A-01 ACQP).

Article 4:110: Acknowledgment of receipt (1) A business which offers the facility to conclude a contract by electronic means and without individual communication must acknowledge by electronic means the receipt of an offer or an acceptance by the other party. Article 1:303 (Electronic notice) applies. (2) If the other party does not receive such an acknowledgment or an acceptance without undue delay, that other party may withdraw its offer or acceptance and may also claim damages. (3) Paragraphs (1) and (2) are mandatory in the sense of Article 1:203 (Mandatory nature of consumer rules) in relations between businesses and consumers.

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Art 4:110 1

Article 4:110 Acknowledgment of receipt

A. Foundation in the Acquis 1.

Sources

The provision is largely modelled on Art. 11(1) first indent and Art. 11(3) of the 1 E-Commerce D.: Art. 11 E-Commerce D.

“(1) Member States shall ensure, except when otherwise agreed by parties who are not consumers, that in cases where the recipient of the service places his order through technological means, the following principles apply: – the service provider has to acknowledge the receipt of the recipient’s order without undue delay and by electronic means, – the order and the acknowledgement of receipt are deemed to be received when the parties to whom they are addressed are able to access them. (2) Member States shall ensure that, except when otherwise greed by parties who are not consumers, the service provider makes available to the recipient of the service appropriate, effective and accessible technical means allowing him to identify and correct input errors, prior to the placing of the order. (3) Paragraph 1, first indent, and paragraph 2 shall not apply to contracts concluded exclusively by exchange of electronic mail or by equivalent individual communications.”

Art. 11(1) second indent of the E-Commerce D. is mirrored by Art. 1:303 ACQP. For a provision corresponding to Art. 11(2) of the Directive, see Art. 4:105(2) ACQP. As regards sanctions, the E-Commerce D. provides the following: Art. 20 E-Commerce D.

“Member States shall determine the sanctions applicable to infringements of national provisions adopted pursuant to this Directive and shall take all measures necessary to ensure that they are enforced. The sanctions they provide for shall be effective, proportionate and dissuasive.”

A more specific rule on sanctions is set out in the Financial Services Distance Selling D. Art. 11 Financial Services Distance Selling D.

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“Member States shall provide for appropriate sanctions in the event of the supplier’s failure to comply with national provisions adopted pursuant to this Directive. They may provide for this purpose in particular that the consumer may cancel the contract at any time, free of charge and without penalty. These sanctions must be effective, proportional and dissuasive.”

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Although this Directive does not contain any provisions concerning the acknowledgement of the receipt of an offer or acceptance, its provisions on sanctions have been partly used as a source for paragraph (2).

2.

Development

2 Paragraph (1) is largely modelled on Art. 11(1) first indent in conjunction with Art. 11 (3) of the E-Commerce D. However, the wording of paragraph (1) slightly deviates from the E-Commerce D. While Art. 11(1) first indent of the E-Commerce D. requires an “acknowledgement of receipt for the recipient’s order”, the present Article speaks of a “receipt of an offer or an acceptance by the other party”. This modification allows for the application of the rule without taking a position as to how the conclusion of the contract takes place, i.e. which party makes or accepts the offer (cf. the wording of Art. 4:105(3) ACQP). 3 It has to be noted that neither damages nor other particular contract law remedies provided for in paragraph (2) are required by the E-Commerce D. The Directive leaves the matter of sanctions to the Member States. It merely calls on them to take all measures necessary to ensure that its provisions are enforced and to adopt “effective, proportionate and dissuasive sanctions” for infringements of national law provisions that transpose the Directive’s rules. Yet more specific sanctions can be found in Art. 11 of the Financial Services Distance Selling D., which states that a violation of the duties established by this directive with respect to distance communication may give the aggrieved party a right to “cancel” (i.e. withdraw from) the contract. Although this Directive does not contain any rules on the acknowledgement of the receipt of an offer or acceptance, this provision can be understood as an expression of a general principle of the acquis. Accordingly, a violation of the provisions which aim at assuring a smooth formation of a contract may lead to a premature end of the contract itself. Thus, paragraph (2) provides for a right to withdraw from the contract. In addition, or as an alternative, a right to damages has been added. This is in line with the requirement that sanctions must be “efficient, proportionate and dissuasive” (cf. Art. 20 of the E-Commerce D.) and with the remedies which are available for the violation of pre-contractual information duties (Art. 2:208(3) ACQP). 4 Paragraph (3) is derived from Art. 11(1) of the E-Commerce D. which allows “parties who are not consumers” to agree otherwise. Therefore, the duties set out in the provision are mandatory only in B2C contracts. The Article corresponds to Art. 4:108 ACQP in the first version of the Principles. However, the provision has been amended by merging its paragraphs (3) and (4) into one provision on remdies in paragraph (2) of the present Article.

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Article 4:110 Acknowledgment of receipt

3.

Art 4:110 5–8

Political Issues

Since the Article at hand closely follows the model of the E-Commerce D., very few po- 5 litical issues need to be addressed. Indeed, the only real issue is the regime of the sanctions under this Article. One can hardly deny to a party who has not received an acknowledgment of an offer or acceptance the right to withdraw from the contract. Such a right is necessary to put an end to the state of legal insecurity that such an omission creates. It might be more controversial to give that party a right to claim damages alternatively or even in addition to the right of withdrawal. This right is nowhere clearly provided for in Community law as a sanction for the violation of the duty in question. However, if one thinks of the typical case in which no acknowledgment has been sent and the other party withdraws from the contract, it becomes clear that such party may have incurred some costs during the process of contracting, which should not be wasted. Thus, it seems reasonable to give this party a right to claim damages in order to increase the effet utile of the provision.

B.

Commentary

1.

Meaning and Purpose

The conclusion of the contract by electronic means presents some pitfalls that may en- 6 danger the smooth formation of the contract by the parties. For example, there may be uncertainty whether an order or acceptance sent via electronic means has actually reached its addressee. In such a situation, it can will unclear whether a contract was concluded or not. In order to remove any doubt, paragraph (1) imposes a duty on the business that offers the possibility to conclude the contract by electronic means to acknowledge the receipt of the offer or acceptance of the other party. The purpose of this duty is to enhance legal certainty and consumer confidence in the use of electronic services (cf. Recital 7 of the E-Commerce D.). Paragraph (2) provides efficient sanctions for the violation of the duty. Finally, paragraph (3) makes clear that the preceding paragraphs cannot be derogated in B2C contracts.

2.

Context

The duty to acknowledge the receipt of an offer or acceptance is considered by the Prin- 7 ciples as a specific kind of information duty applicable in the phase of contract formation. It is complemented by other provisions which also tackle the particular problems arising in the process of contract formation via electronic means, e.g. Art. 4:104 and 4:105 ACQP.

3.

Explanation

Paragraph (1) sets out a duty that binds a business when it offers a facility to conclude a 8 contract by electronic means. On the notion of a business, see Art. 1:202 ACQP. “Elec-

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tronic means” can be, e.g., a webpage (see Art. 4:105 under B 3). However, electronic means that allow for individual communication do not fall under this provision. This is because an acknowledgment of receipt is not necessary if both parties are directly communicating with each other. The E-Commerce D. provides for the same exclusion in its Art. 11(3), which states that Art. 11(1), first indent, shall not apply to “contracts concluded exclusively by exchange of electronic mail or by equivalent individual communications”. Thus, paragraph (1) does not cover a contract that is concluded by email, in a chat room or video conference or by internet telephony. However, where only one declaration – e.g. the offer – has been made by email, or over internet telephone, and the other party still has to fill out a form on the internet to accept the offer, the duty to acknowledge receipt of the acceptance applies (see also the word “exclusively” in Art. 11 (3) of the E-Commerce D.). 9 Paragraph (2) provides two remedies for all violations of the duty under paragraph (1). They are available if the other party does not receive the acknowledgment “without undue delay”. The notion of “undue delay” makes several appearances in these Principles, see, e.g., Art. 1:302(2)(c) or Art. 7:201(1) ACQP. There is no general rule as to when delay is “undue”; everything will be depending on the circumstances. It must be noted, however, that it is decisive when the other party received the acknowledgment, not when the business sent it. This seems to exclude taking into account whether the delay was caused by any failure or omission of the business. The remedies for the violation of the duty under paragraph (1) are a right of withdrawal and a right to damages. The right of withdrawal concerns both the offer and the acceptance. It thus applies irrespective of whether a contract has been entered into. A right to withdraw from an offer may be useful, for instance, where a party has sent an order over the internet but is not sure whether it reached the other party. In order to put an end to this state of uncertainty, the sender may exercise its right of withdrawal. It is also possible that a contract has already been concluded without a party being aware of this fact because the other party did not acknowledge receipt. In this case, the right to withdraw from the offer or acceptance may equally be useful. If it is exercised, it will be clear that there is no valid contract. A right to damages also arises where a party who has filled out an online order form has good reason to believe that a contract has been concluded and the goods ordered will be delivered without acknowledgement of receipt. If this legitimate expectation is not met and if the price of the goods has increased in the meantime, the buyer may claim reliance damages. The right of withdrawal and the right to damages can exist independently, but they can be exercised simultaneously. For instance, if a contract has been concluded but the receipt of the acceptance has not been acknowledged by the business, the other party may withdraw from the contract and claim the costs related to the process of contracting. 10 Paragraph (3) makes it clear that paragraphs (1) and (2) are only binding in B2C relations. In principle, the duties and the remedies set out in both paragraphs apply to B2B 220

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Art 4:110 11, 12

relations as well, but they can be contractually excluded. It may appear difficult to imagine such an exclusion, given the fact that both rules do concern the formation of the contract. Yet such an exclusion is possible, for instance, where the parties are bound by a framework agreement which contains a clause to this effect.

4.

Examples

Example 1 A orders a notebook by filling out a form on the web page of business B. Two weeks later, 11 B has not acknowledged the receipt of the order. A may withdraw from the contract. Example 2 B offers conclusion of a particular contract via a facility for emails. A orders a notebook 12 by sending an email acceptance to B. Two weeks later, B has not acknowledged the receipt of the order. A has no right of withdrawal as the contract was concluded by individual communication.

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Specific Provisions Part C: Timeshare Contracts Article 4:C-01: Timeshare contracts (1) Timeshare contracts with consumers must be made in writing and must include all information required under Article 2:C-01 (Specific pre-contractual information duties for timeshare contracts). The consumer must be given a copy of the contract. (2) They must be formulated at least in an official language of the European Union which is either an official language at the place of residence of the consumer, or of the state of which the consumer is a national, at the consumer’s choice. This rule applies only to consumers who are nationals or residents of a Member State. (3) The consumer is entitled to a certified translation of the contract into an official language of the European Union which is the official language or one of the official languages of the Member State in which the immovable property is situated. (4) Articles 2:204 (Clarity and form of information) paragraph (4) and 2:207 (Burden of proof) apply.

A. Foundation in the Acquis 1.

Sources

1 As a general principle the acquis does not require any particular form for the conclusion of a contract (cf. comments No. 4 to Art. 1:304 ACQP). Similarly, the question of which language the parties may choose for concluding their contracts is in general left to the laws of the Member States (cf. comments No. 1 to Art. 7:105 ACQP). However, for timeshare contracts there are exceptions to both freedom of form and freedom of language. 2 Article 4 of the Timeshare D. 1994 requires that: – a timeshare contract is made in writing (Art. 4, 1st indent); – includes at least the items referred to in the Directive’s Annex, e.g. an accurate description of the timeshare property, related services, common facilities etc. (Art. 4, 1st indent); – the contract is drawn up, at the buyer’s option, “in the language or one of the languages of Member State in which the [buyer] is resident or in the language or one of the languages of the Member State of which he is national which shall be an official language of the Community” (Art. 4, 2nd indent, 1st sentence). The language rule was complemented by an option in Article 4, 2nd indent, 2nd sentence for the Member State in which the buyer is resident to require that:

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Article 4:C-01 Timeshare contracts

Art 4:C-01 3

– the contract be drawn up in at least the language or languages of this Member State, provided this is an official language of the EU; – “the vendor provides the purchaser with a certified translation of the contract in the language or one of the languages of the Member State in which the immovable property is situated”, provided this is an official language of the EU. This list of requirements has been considerably extended by Art. 5 of the Timeshare D. 3 2008: – the contract is in writing, on paper or on another durable medium (Art. 5(1)); – the contract includes, “as an integral part”, the information referred to in Art. 4(1) of the Timeshare D. 2008 which “shall not be altered unless the parties expressly agree otherwise or the changes result from unusual and unforeseeable circumstances beyond the trader’s control, the consequences of which could not have been avoided even if all due care had been exercised. These changes shall be communicated to the consumer on paper or on another durable medium easily accessible to him, before the contract is concluded. The contract shall expressly mention any such changes.” (Art. 5(2)); – the contract also includes “(a) the identity, place of residence and signature of each of the parties; and (b) the date and place of the conclusion of the contract” (Art. 5(3)); – before the conclusion of the contract, the business explicitly draws “the consumer’s attention to the existence of the right of withdrawal, the length of the withdrawal period ... and the ban on advance payments during the withdrawal period” (Art. 5 (4) sent. 1); – the contractual clauses relating to the right of withdrawal are signed separately by the consumer (Art. 5(4) sent. 2); – the contract includes a separate standard withdrawal form, as set out in an Annex to the Directive (Art. 5(4) sent. 3); – the consumer receives a copy or copies of the contract at the time of its conclusion (Art. 5(5)). With regard to the language of the contract, Art. 5(1) sent. 1 of the Timeshare D. 2008 contains the same basic rule as the Timeshare D. 1994 requiring that the contract is drawn up in the language or one of the languages of the Member State in which the consumer is resident or a national, at the choice of the consumer, provided that this is an official language of the EU. The options given to the Member State in which the consumer is resident are similar to those provided by the Timeshare D. 1994. According to Art. 5(1) sent. 2 of the Timeshare D. 2008 this Member State may thus further require that: – “in every instance, the contract be provided to the consumer in the language or one of the languages of that Member State, provided it is an official language of the Community”; – “in the case of a timeshare contract concerning one specific immovable property, the trader provide the consumer with a certified translation of the contract in the language or one of the languages of the Member State in which the property is situated, provided it is an official language of the Community”. In addition to these options, Art. 5(1) sent. 3 now also offers an option to the Member State on whose territory the business carries out its sale activities. This Member State may Hans Schulte-Nölke/Christoph Busch

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Art 4:C-01 4–7

Chapter 4: Formation Specific Provisions . Part C: Timeshare Contracts

require that, in every instance, the contract is provided to the consumer in the language or one of the languages of that Member State, provided it is an official language of the EU. 4 Both the 1994 and 2008 Timeshare D. provide only little guidance about the consequences of a breach of the above mentioned requirements. In particular the directives remain silent about whether a violation may affect the validity of the timeshare contract. The only sanction mentioned explicitly in the Timeshare D. 1994 was a prolongation of the consumer’s withdrawal period of 10 days by three months if certain items from the Directive’s Annex are missing in the contract (Art. 5(1) of the Timeshare D. 1994). Again the Timeshare D. 2008 contains a similar but more complex rule. If a separate standard withdrawal form as required by Art. 5(4) of the Timeshare D. 2008 has not been filled in by the business and provided to the consumer in writing, on paper or on another durable medium, the usual withdrawal period of 14 calendar days is prolonged by one year (Art. 6 (3)(a) of the Timeshare D. 2008). If the information referred in Art. 4(1) of the Timeshare D. 2008 has not been provided in such form, the usual withdrawal period is prolonged by three months (Art. 6(3)(b) of the Timeshare D. 2008).

2.

Development

5 Paragraph (1) of the present Article is modelled broadly on Art. 4, 1st indent of the Timeshare D. 1994. The reference to the Directive’s Annex is replaced by a reference to a provision on pre-contractual information requirements for timeshare contracts which is still to be adopted by the Acquis Group (cf. placeholder in Art. 2:C-01 ACQP). While under the Timeshare D. 1994 the contract had to be made “in writing”, Art. 5(1) of the Timeshare D. 2008 requires only that the contract is “is in writing, on paper or on another durable medium” (e.g. a CD). It was discussed in detail whether the previously adopted rule should be amended to reflect the 2008 Directive. Preference was given to the more stringent form requirement of the Timeshare D. 1994 as timeshare contracts usually involve a long-term investment of considerable sums requiring thus a high degree of consumer protection, which may not be served by a timeshare contract which a consumer in 1994 might have received in file format of a now long extinct word processor on a now equally extinct medium such as a 5 ¼ inch floppy disk. 6 Regarding the information to be included in the contract, the Timeshare D. 1994 has been particularly criticised for requiring too much detailed information which is likely to cause an “information overload” and thus reduce the quality of consumer decision making. The Timeshare D. 2008 has addressed this problem by introducing standard information forms which make it easier for consumers to compare offers. This approach could serve as a model for the Art. 2:C-01 ACQP (still to be adopted by the Acquis Group) which is referred to in paragraph (1) sent. 1. In any case the information to be provided in the contract must be well structured and key information items suitably highlighted (cf. also Schulte-Nölke/Twigg-Flesner/Ebers (eds.), ConsLC, p. 264). 7 Unlike Art. 5(4) sent. 2 of the Timeshare D. 2008, the ACQP do not require that the contractual clauses relating to the right of withdrawal are signed separately by the consumer. This requirement is out of step with those for other withdrawal rights, and it is 224

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Article 4:C-01 Timeshare contracts

Art 4:C-01 8–10

furthermore questionable whether such a signing requirement really improves the level of consumer protection. Practical experience from Member States where such signing requirements have been used for particular contract clauses suggests that consumers tend to sign such clauses without reading them. In contrast, the duty to provide the consumer with a copy of the contract, which is now explicitly mentioned in Art. 5(5) of the Timeshare D. 2008, has been included in paragraph (1) sent 2. The language rule in paragraph (2) is modelled on Art. 4, 2nd indent, sent. 1 of the 8 Timeshare D. 1994 and Art. 5(1) of the Timeshare D. 2008. Both the Timeshare D. 1994 and 2008 contain several options for Member States to introduce further language requirements for timeshare contracts. Of particular practical importance is the option to grant the consumer a right to receive a certified translation of the contract into an official language of the Member State in which the immovable property is situated, provided this is an official language of the EU. This rule, which has been transposed by a great majority of Member States (cf. Schulte-Nölke/Twigg-Flesner/Ebers (eds.), ConsLC, p. 281), has been taken on board by the ACQP as paragraph (3) of the present Article as binding rule, rather than as a simple option. Both the Timeshare D. 1994 and the Timeshare D. 2008 provide only little guidance re- 9 garding the consequences of a breach of the requirements regarding the conclusion of a contract, in particular whether a violation may affect the validity of the contract (cf. supra No. 4). In several Member States (Austria, Belgium, Bulgaria, Cyprus, France, Germany, Greece, Italy, Luxembourg, the Netherlands, Poland and Romania) non-compliance with the obligation to conclude a timeshare contract in written form results in the nullity of the contract (cf. Schulte-Nölke/Twigg-Flesner/Ebers (eds.), ConsLC, p. 283). It was discussed in detail whether the ACQP should follow this approach. However, preference was given to a different solution. The main purpose of the formal requirements set up by both the Timeshare D. 1994 and 2008 is to ensure that the customer is properly informed and that he or she receives a copy of the contract containing information on the other party’s “performance programme”. From this perspective, the Article is less a form requirement stricto sensu than a complement to the pre-contractual information requirements under Chapter 2 ACQP. Therefore, according to paragraph (4) a breach of paragraphs (1) to (3) does not affect the validity of the timeshare contract but has the same consequences as a breach of a pre-contractual information duty.

3.

Political Issues

From a political perspective one could consider to drop the limitation to official langua- 10 ges in paragraph (2) and include languages which are not a official languages of the EU but a official languages of a specific region (e.g. Catalan). Furthermore, although the ACQP have expressed a preference for the requirement that the contract must be in writing, others might argue that the requirement of a written document is not really necessary for a timeshare contract which does not involve a transfer of real property.

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Art 4:C-01 11–14

B.

Commentary

1.

Meaning and Purpose

Chapter 4: Formation Specific Provisions . Part C: Timeshare Contracts

11 Paragraph (1) sets out formal requirements, paragraph (2) stipulates language requirements for the conclusion of a timeshare contract. The purpose of these provisions is to ensure that the customer is properly informed about the “performance programme” under the contract and receives a durable documentation of such information. Paragraph (3) gives the consumer a right to receive a certified translation of the contract into an official language of the Member State where the immovable property is situated, provided that this is an official language of the EU. This provision takes into consideration the fact that the consumer is likely to need such a translation e.g. for dealing with local authorities of the place where the timeshare property is situated. According to paragraph (4) a violation of the requirements set out in paragraphs (1) to (3) has the same consequences as a breach of a pre-contractual information duty.

2.

Context

12 The Article contains an exception to the general principle of freedom of form expressed in Art. 1:304 ACQP. The reference to Art. 2:C-01 ACQP (which is not yet adopted by the Acquis Group and is currently merely a placeholder) indicates that the provision complements the pre-contractual information duties set out in Chapter 2 ACQP. The language requirements in paragraphs (2) and (3) are complemented by other language provisions regarding pre-contractual communications (Art. 2:202(2) ACQP) as well as communications during the performance of the contract (Art. 7:105 ACQP). Art. 5:C-01 ACQP grants the consumer a right to withdraw from the timeshare contract.

3.

Explanation

13 The first sentence of paragraph (1) requires that a timeshare contract must be made “in writing”. According to Art. 1:307 ACQP a statement is “in writing” if it is in “textual form” (Art. 1:305 ACQP) and in characters which are directly legible for human senses from paper or another “durable medium” (Art. 1:306 ACQP) on which the statement is stored. In contrast, a signature is not required (cf. comment No. 14 to Art. 1:307). Differently from what is required in other contracts (e.g. package travel, cf. Art 4:E-01(1) ACQP), writing may not be replaced by another textual form on a durable medium (e.g. a CD). 14 The provision also contains requirements regarding the content of a package travel contract. According to the first sentence of paragraph (1) the contract must include all information required under Art. 2:C-01 ACQP (which is yet to be adopted by the Acquis Group and is currently merely a placeholder). As this rule would not be effective if the customer did not receive a copy of the contract, the second sentence of paragraph (1) sets up such a “copy duty”.

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Article 4:C-01 Timeshare contracts

Art 4:C-01 15–18

Paragraph (2) requires that the timeshare contract is formulated at least in an official 15 language of the European Union which is either an official language at the place of residence of the consumer, or of the state of which the consumer is a national, at the consumer’s choice. This rule, however, applies only to consumers who are nationals or residents of a Member State. As the consumer might need a certified translation to deal with local authorities at the place where the timeshare property is situated, paragraph (3) grants him or her such a right. Paragraph (4) states that Art. 2:204(4) and 2:208 ACQP apply. According to Art. 2:204 16 (4) ACQP the failure to observe a particular form has the same consequences as a breach of information duties. Therefore, the double reference to Art. 2:204(4) and Art. 2:208 ACQP in paragraph (2) is – strictly speaking – redundant. It avoids, however, a chain of references which could impair clarity. Article 2:208 ACQP provides three possible sanctions for the violation of one of the duties regarding form, content or language of the contract: – The commencement of the period during which the consumer is entitled to withdraw from the timeshare contract under Art. 5:C-01 ACQP is postponed (Art. 2:208(1) ACQP); – The timeshare contract contains the obligations which the customer could reasonably expect in the light of the omission of information thast should have been provided, or of the incorrectness of information which has been provided (Art. 2:208(2) ACQP). If, for example, information about extra fees for ancillary services is provided in a language other than the one(s) required according to paragraph (2), the consumer doees not have to pay such fees if he or she could reasonably expect not to be charged any extra fees. – In any case, the business is liable to the consumer for reliance damages (Art. 2:208(3) ACQP).

4.

Examples

Example 1 Consumer A, a resident and national of Germany whose mother tongue is Russian, enters 17 into a timeshare contract for a holiday home in Estonia. According to Art. 4:C-01(2) sent. 1, the contract must be formulated at least in German. In addition, A is entitled to a certified translation in Estonian. However, since Russian is not an official language of the EU, A is not entitled to a Russian version of the contract either under Art. 4:C-01(2) sent. 1 or Art. 4:C-01(3). This may seem harsh in the individual case, but otherwise the business would have to be able to provide translations in all the languages of the world, if the EU official language requirement would be dropped. In addition, the purpose of Art. 4:C-01(2) is only to facilitate the contact with local authorities. For this purpose in our case an Estonian translation will be sufficient. Example 2 Consumer B, a resident and national of Denmark concludes a timeshare contract with a 18 Danish developer for a holiday home at the island of Madeira. The contract is drawn up in Danish (Art. 4:C-01(2) sent. 1), but the business refuses to provide B with a certified

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Art 4:E-01 1, 2

Chapter 4: Formation Specific Provisions . Part E: Package Travel Contracts

translation of the contract into Portuguese. As a result, the commencement of the 14 day withdrawal period under Art. 5:103 ACQP is postponed according to Art. 4:C-01(4) in connection with Art. 2:208(1) ACQP up to a maximum of one year counted from the time of the conclusion of the contract. In addition, B is entitled to damages from the business under Art. 2:208(3) ACQP if she had to procure a translation at her own expense.

Part E: Package Travel Contracts Article 4:E-01: Package travel contracts (1) Package travel contracts must be made in writing and include all information required under Article 2:E-01 (Specific pre-contractual duties for package travel contracts) paragraph (4). Writing may be replaced by another textual form on a durable medium, provided this is reasonably accessible to the customer. The customer must be given a copy of the contract. (2) Articles 2:204 (Clarity and form of information) paragraph (4) and 2:207 (Burden of proof) apply.

A. Foundation in the Acquis 1.

Sources

1 As a general principle the acquis does not require any particular form for the conclusion of a contract (cf. comments No. 4 to Art. 1:304 ACQP). However, the principle of freedom of form knows several exceptions, and one of them relates to package travel contracts. Article 4(2) of the Package Travel D. sets out three requirements regarding the conclusion of a package travel contract: Art. 4(2)(a) Package Travel D.

The contract must contain at least the elements listed in the Directive’s Annex, e.g. destinations, means of transportation, price, payment schedule etc.

Art. 4(2)(b) sent. 1 Package Travel D.

All terms of the contract have to be “set out in writing or such other form as is comprehensible and accessible to the consumer and must be communicated to him before the conclusion of the contract”.

Art. 4(2)(b) sent. 2 Package Travel D.

The consumer must be given a “copy” of these terms.

2 The Package Travel D. remains silent about the consequences of breach of these requirements. Article 5(1) of the Package Travel D. merely stipulates that “Member States shall

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Article 4:E-01 Package travel contracts

Art 4:E-01 3–6

take the necessary steps to ensure that the organizer and/or retailer party to the contract is liable to the consumer for the proper performance of the obligations arising from the contract [...]”. In addition, Art. 4(2)(c) of the Package Travel D. underlines that the above mentioned requirements “shall not preclude the belated conclusion of last-minute reservations or contracts”.

2.

Development

Paragraph (1) of the present Article combines the requirements for the conclusion of a 3 package travel contract set up by Art. 4(2)(a) and (b) of the Package Travel D. The reference to the Directive’s Annex is replaced by a reference to the information requirements in paragraph (4). Strictly speaking this reference is redundant as paragraph (4) starts with the words “The contract must specify at least: [...]”. However, for the sake of clarity and in order to provide guidance to parties concluding a package travel contract Art. 4:E-01 makes such a reference (cf. comments No. 4 to Art. 2:E-01(4) ACQP). Article 4(2)(b) of the Package Travel D. states that instead of a written document “such 4 other form as is comprehensible and accessible to the consumer” can be used for the conclusion of the contract. This rather vague formula has not been taken over by the ACQP. Instead, the second sentence of paragraph (1) takes up the general rule set out for information duties expressed in Art. 2:204(3) ACQP and states that writing may be replaced by another textual form on a durable medium, provided it is reasonably accessible to the customer. In addition, regarding terminology, paragraph (1) replaces the term “consumer” used in Art. 4(2) of the Package Travel D. by the term “customer”, as the notion of “consumer” in the Package Travel D. covers also those who conclude contracts for business related purposes and therefore is much broader in scope than the term “consumer” defined in Art. 1:201 ACQP. The Package Travel D. is more or less silent about the consequences of a breach of the 5 requirements set up by Art. 4(2) of the Package Travel D. (cf. supra No. 2). Within the ACQP this apparent gap is filled having regard to the purpose of Art. 4(2) of the Package Travel D. The main purpose of this provision is to ensure that the customer is properly informed (hence the reference to the information requirements in the Directive’s Annex) and that he or she receives a copy containing information on the other party’s “performance programme”. From this perspective, Art. 4(2) of the Package Travel D. is less a form requirement stricto sensu than a complement to the pre-contractual information requirements under Chapter 2. Therefore, according to paragraph (2) a breach of paragraph (1) does not affect the validity of the package travel contract but has the same consequences as a breach of a pre-contractual information duty.

3.

Political Issues

From a political point of view one might question whether it is appropriate to provide the 6 protection offered by the Package Travel D. also to those who conclude contracts for business related purposes (as the current acquis does) or whether the Article at hand

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Art 4:E-01 7–10

Chapter 4: Formation Specific Provisions . Part E: Package Travel Contracts

should be brought in line with other consumer law provisions and be limited to consumers in the sense of Art. 1:201 ACQP (cf. comments No. 2 to Art. 7:E-01 ACQP).

B.

Commentary

1.

Meaning and Purpose

7 Paragraph (1) sets out formal requirements for the conclusion of a package travel contract, as defined in Art. 7:E-02(1) ACQP. The purpose of these requirements is to ensure that the customer is properly informed about the “performance programme” under the contract and receives a durable documentation of such information. According to paragraph (2), a violation of the formal requirements has the same consequences as a breach of a pre-contractual information duty.

2.

Context

8 The Article contains an exception to the general principle of freedom of form expressed in Art. 1:304 ACQP. The reference to paragraph (4) in the first sentence of paragraph (1) indicates that the provision complements the pre-contractual information duties set out in Chapter 2. According to paragraph (2) the Art. 2:204(4) and Art. 2:208 ACQP apply.

3.

Explanation

9 The first sentence of paragraph (1) requires that a package travel contract must be made “in writing”. According to Art. 1:307 ACQP, a statement is “in writing” if it is in “textual form” (Art. 1:305 ACQP) and in characters which are directly legible with human senses from paper or another “durable medium” (Art. 1:306 ACQP) on which the statement is stored. In contrast, a signature is not required (cf. comment No. 14 to Art. 1:307). The second sentence of paragraph (1) states that writing may be replaced by another textual form on a durable medium. For example, the contract terms can be stored on a CD (which contains information not “directly legible”, as technical means will be required in order to extract the information from this binary data carrier). However, such a form is only allowed if it is “reasonably accessible to the customer”. If for example, the business has no reason to assume that the customer has a computer with a CD drive, the contract must be made “in writing”. 10 The provision also contains requirements regarding the content of a package travel contract. According to the first sentence of paragraph (1), the contract must include all information required under paragraph (4), e.g. destinations, means of transport, price etc. This rule would not be effective if the customer did not receive a copy of the contract. Therefore, the third sentence of paragraph (1) introduces such a duty. The meaning of the term “copy” differs according to the form of contract chosen by the parties: it could be

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Art 4:E-01 11

Article 4:E-01 Package travel contracts

either a written document or another durable medium containing information in textual form, for example a CD. Paragraph (2) states that Art. 2:204(4) and 2:208 ACQP apply. According to Art. 2:204 11 (4) ACQP, the failure to observe a particular form has the same consequences as a breach of information duties. Therefore, the double reference to Art. 2:204(4) and Art. 2:208 ACQP in paragraph (2) is – strictly speaking – redundant. It avoids, however, a chain of references which could impair clarity. Art. 2:208 ACQP provides three possible sanctions in case the “form duty”, the “content duty” or the “copy duty” is violated: – If the customer has a right to withdraw (e.g. under Art. 5:A-01 ACQP if the contract was negotiated away from business premises), the commencement of the withdrawal period is postponed (Art. 2:208(1) ACQP); – The package travel contract contains the obligations which the customer could reasonably expect as a consequence of the omission or incorrectness of the information to be provided (Art. 2:208(2) ACQP). – In any case, the business is liable to the customer for reliance damages (Art. 2:208(3) ACQP).

4.

Example

Consumer C concludes a package travel contract via the internet. After filling in a booking form on a website, she receives an e-mail with a confirmation of her booking. In this case the formal requirements of Art. 4:E-01(1) are fulfilled provided that the confirmation e-mail contains all information required under Art. 2:E-01(4) ACQP. While the website form as such does not qualify as a “durable medium”, the e-mail does (cf. comment No. 6 to Art. 1:305 ACQP).

Part F: Consumer Credit Contracts Article 4:F-01: Consumer credit contracts

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Chapter 5: Withdrawal General Provisions Article 5:101: Mandatory nature Where a party has a statutory right of withdrawal from a contract, the provisions in this section apply as mandatory rules.

A. Foundation in the Acquis 1.

Sources

Within the existing European Community law, various directives provide rights of with- 1 drawal. The following rules are mainly based on the Doorstep Selling D., the Distance Selling D., the Timeshare D. 1994, the Financial Services Distance Selling D., the Life Assurance D., and the Timeshare D. 2008. The particular provisions entitling a party to withdraw from a contract are laid down in: Art. 5(1) sent. 1 Doorstep Selling D.

The consumer shall have the right to renounce the effects of his undertaking by sending notice within a period of not less than seven days from receipt by the consumer of the notice referred to in Article 4, in accordance with the procedure laid down by national law.

Recital 14 Distance Selling D.

[...] whereas provision should be made, unless otherwise specified in this Directive, for a right of withdrawal from the contract ...

Art. 6(1) sent. 1 Distance Selling D.

For any distance contract the consumer shall have a period of at least seven working days in which to withdraw from the contract without penalty and without giving any reason.

Recital 23 Financial Services Distance Selling D.

With a view to optimum protection of the consumer, it is important that the consumer [...] has a right of withdrawal.

Art. 6(1) sent. 1 Financial Services D.

The Member States shall ensure that the consumer shall have a period of 14 calendar days to withdraw from the contract without penalty and without giving any reason.

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Art 5:101 2

Chapter 5: Withdrawal General Provisions

Recital 11 Timeshare D. 1994

[...] the purchaser [...] should be allowed a period during which he may withdraw from the contract without giving reasons [...]

Recital 11 Timeshare D. 2008

[...] consumers [...] should be allowed a period during which they may withdraw from the contract without having to justify the withdrawal and without bearing any cost.

Art. 5(1) 1st indent Timeshare D. 1994

[...] the purchaser shall have the right: – to withdraw without giving any reason within 10 calendar days of both parties’ signing the contract or of both parties’ signing a binding preliminary contract. [...]

Art. 6(1) and (2) Timeshare D. 2008

[...] the consumer [has to be] given a period of 14 calendar days to withdraw from the contract [...] without giving any reason. The withdrawal period shall be calculated from the day of the conclusion of the contract or of any binding preliminary contract [...]

Recital 45 Life Assurance D.

For life assurance contracts the policy holder should be given the opportunity of cancelling the contract within a period of between 14 and 30 days.

Art. 35(1) sent. 1 Life Assurance D.

Each Member State shall prescribe that a policy holder who concludes an individual life-assurance contract shall have a period of between 14 and 30 days from the time when he/she was informed that the contract had been concluded within which to cancel the contract.

The directives use different terms: Art. 5 Doorstep Selling D.

“right to renounce”

Art. 5(1) 1st indent Timeshare D. 1994

“right to withdraw”

Art. 6 Distance Selling D.

“right of withdrawal”

Art. 6 Financial Services Distance Selling

“right of withdrawal”

Art 6(1) Timeshare D. 2008

“right of withdrawal”

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Art 5:101 3

Article 5:101 Mandatory nature

Art. 1(1) Doorstep Selling D.

This Directive shall apply to contracts under which a trader supplies goods or services to a consumer ...

Art. 1 Distance Selling D.

“distance contract” means any contract concerning goods or services concluded between a supplier and a consumer ...

Art. 2(1) Financial Services Distance Selling D.

“distance contract” means any contract concerning financial services concluded between a supplier and a consumer

The Life Assurance D. does not explicitly provide such a limitation (Art. 2 Life Assurance D.), although in practice this will probably relate predominantly to consumer contracts. The following provisions of the acquis make a right of withdrawal mandatory in favour of 3 the entitled party: Art. 6 Doorstep Selling D.

The consumer may not waive the rights conferred on him by this Directive.

Recital 23 Distance Selling D.

Whereas there is a risk that, in certain cases, the consumer may be deprived of protection under this Directive through the designation of the law of a non-member country as the law applicable to the contract; whereas provisions should therefore be included in this Directive to avert that risk

Art. 12(1) and (2) Distance Selling D.

1. The consumer may not waive the rights conferred on him by the transposition of this Directive into national law. 2. Member States shall take the measures needed to ensure that the consumer does not lose the protection granted by this Directive by virtue of the choice of the law of a non-member country as the law applicable to the contract if the latter has close connection with the territory of one or more Member States.

Art. 12(1) and (2) Financial Services Distance Selling D.

1. Consumers may not waive the rights conferred on them by this Directive. 2. Member States shall take the measures needed to ensure that the consumer does not lose the protection granted by this Directive by virtue of the choice of the law of a non-member country as the law applicable to the contract, if this contract has a close link with the territory of one or more Member States.

Recital 14 Timeshare D. 1994

Whereas there is a risk, in certain cases, that the consumer may be deprived of the protection provided for in this Directive if the law of a non-Member State is specified as the law applicable to the contract; whereas this Directive should therefore include provisions intended to obviate that risk.

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Art 5:101 4, 5

Chapter 5: Withdrawal General Provisions

Art. 8 Timeshare D. 1994

The Member States shall make provision in their legislation to ensure that any clause whereby a purchaser renounces the enjoyment of rights under this Directive or whereby a vendor is freed from the responsibilities arising from this Directive shall not be binding on the purchaser, under conditions laid down by national law.

Art. 12 Timeshare D. 2008

(1) Member States shall ensure that, where the law applicable to the contract is the law of a member state, consumers may not waive the rights conferred on them by this directive. (2) Where the applicated law is that of a third country, consumers shall not be deprived from the protection granted by this directive, as implemented in the member states of the forum [...]

2.

Development

4 The application of common rules with regard to the exercise and effects of the various rights of withdrawal is based on the common features of these rights. Despite different terminology in the directives (cf. No. 1 supra), these rights are based upon a common concept. They all require the presence of specific situations of contract formation where in the eyes of the law one party, usually a consumer, deserves protection. In doorstep sales or distance sales, this need for protection arises from the way in which the contract is initiated. In distance sales, it reflects in particular the customer’s inability to visually inspect the goods before buying, as well as the customer’s lower inhibition threshold to buy goods. In timesharing and life assurance contracts, the complexity of the contract calls for protection of the consumer. In order to counteract the structural imbalance between the parties in such situations, a right of withdrawal allows the protected party to escape contractual obligations without having to give reasons. 5 Based on this concept, the rights of withdrawal provided by EC law can be distinguished from more general rights of withdrawal and of revocation of offers or acceptances under the law of Member States or under Art. 15(2), Art. 16 CISG and Art. 1:303(5), Art. 2:202 PECL in that the former are limited to certain situations where the consumer requires protection, and that they can also be exercised after a contract is concluded. Their primary aim is normally to allow the consumer time for further consideration (a so-called ‘cooling-off’ period) and for obtaining information. The entitled party can therefore rely on a right of withdrawal without having to show non-performance by the other party, as would be required for termination of contract under Art. 3(2) and (5) of the Consumer Sales D. (which uses the word ‘rescind’) or under Art. 49 CISG (which uses the term ‘avoidance’) or Art. 9:301 et seq. PECL, or for termination under the law of Member States. Nor is withdrawal linked to mistake, fraud or other conduct of which the law disapproves. The applicable principle is rather that withdrawal brings the contractual obligations to an end without there having to be any specific reasons, as long as the requirements for both the right and its exercise (such as time limits etc.) have been met.

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Article 5:101 Mandatory nature

Art 5:101 6–8

Against this background, the present Article provides that the rules of the present sec- 6 tion apply to all statutory rights of withdrawal. Such rights are provided in various European directives (cf. No. 1 supra), which have been transposed into the law of all Member States. Within the Acquis Principles, Chapter 5 Specific Provisions deal with the requirements of some particular rights of withdrawal (for contracts negotiated away from business premises and for timeshare contracts). Additional rules regarding rights of withdrawal may be provided by other parts of the Acquis Principles, such as Art. 2:208(1) ACQP.

B.

Commentary

1.

Meaning and Purpose

The general provisions of this chapter contain a set of rules which are applicable to all 7 individual rights of withdrawal within the different areas of European contract law (unless otherwise provided by rules for specific types of contract). These rules concern only the exercise and the effect of the rights of withdrawal, including some related matters such as time limits for exercising these rights and requirements to communicate these rights to the entitled party. Article 5:101 ACQP clarifies that these rules apply generally where a party has a statutory right of withdrawal from a contract. For example, a right of withdrawal may be provided for within EC law by a directive (or a future specific chapter of these Acquis Principles) for a customer who enters into a life assurance contract. The conditions under which this party is entitled to withdraw are governed by these particular provisions (e.g. by reference to the type of contract, or the circumstances under which the contract is concluded, etc.). Whether a right of withdrawal exists is governed by those specific provisions. Only if a right of withdrawal arises under those provisions, the rules of the present section apply and govern the modalities of the exercise of withdrawal and its effects on both parties (unless otherwise provided). Although the rules of this section apply expressly only where a party has a statutory right of withdrawal from a contract, this does not exclude an application of this section to contractually stipulated rights of withdrawal. In those cases, rules in this section are simply not mandatory. Negotiated rights of withdrawal do not have to be regulated expressly in the present chapter, as they are not based on statute, but on agreement between the parties, which in turn is based upon the principle of freedom of contract. According to the present Article, the following rules of this section generally regulate the 8 exercise and the effects of all these rights of withdrawal. The main purpose of these rules is to protect the party who is entitled to withdraw as far as the exercise and the effects of this right are concerned. This does not preclude that provisions for a particular right of withdrawal deviate from those general rules. As usual, such particular provisions will take precedence under the general principle of lex specialis derogat legi generali.

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Art 5:101 9–11

Chapter 5: Withdrawal General Provisions

9 In systematic terms, the concept of a right to be released from a contract (or, as the case may be under applicable national law, from an otherwise binding offer) does not necessarily have to be restricted to the field of consumer protection. Although the right to withdrawal did emerge in this sector, its purpose may transcend the concept of ‘consumer’, as protection for one party from being too hastily bound in a situation where that party is in a structurally disadvantageous position at the time when the contract is concluded. Correspondingly, in Art. 35(1) of the Life Assurance D. the right of withdrawal is available irrespective of whether the entitled party is a consumer. Thus, existing EC law does not restrict the right of withdrawal to consumer contracts, neither in its legal structure nor in all individual provisions. The (potentially) overarching nature of the principles for rights of withdrawal implies that they are more accurately categorised as general contract law than as belonging only to the specific field of consumer protection law. A statutory right of withdrawal is always, and only, present if the legislator assumes that a party who enters into particular types of contract, or under particular circumstances, deserves particular protection which is best served by a right of withdrawal.

2.

Context

10 One can think of situations in which all the requirements for a right of withdrawal are met, but where the contract is void, or where the obligations to perform have lapsed for other reasons (e.g., annulment or rescission by one of the parties). In this case, the entitled party should not be limited to remedies based on these other reasons, but should rather be entitled to exercise its right of withdrawal and benefit from the effects of withdrawal provided in the present section. It would counteract the protective effect of the right of withdrawal if it could be considerably compromised by the mere existence of a further defect of the contract, and even more so if this defect has been caused by the other party. Other parts of the Acquis Principles can also have an effect on the rights of withdrawal. Article 2:208(1) ACQP provides for a maximum time limit of one year for the withdrawal period if pre-contractual information duties are not fulfilled. The length of the withdrawal period depends upon the notification of the right of withdrawal which is laid down in Art. 5:104 ACQP.

3.

Explanation

11 The Article provides that the rules of this section apply as mandatory rules. They apply where a statutory right of withdrawal exists, but they do not indicate when a right of withdrawal exists. More specifically, the Article does not extend the rights of withdrawal beyond those that are established by other provisions. Because the main purpose of these rules is to protect the entitled party, the provision may not be amended to the disadvantage of the protected party by any agreement between the parties. However, for the same reason, the Article at hand does not prohibit any contractual amendments which are more favourable to the protected party. Freedom of contract must not be curtailed beyond what is strictly required by the purpose of the rules in question. Therefore, the parties to

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Article 5:102 Exercise of a right of withdrawal

Art 5:101, 12–15 Art 5:102, 1

the contract are allowed to facilitate the exercise of the withdrawal and to extend its effects by deviating from the rules of this section, for as long as this operates in favour of the entitled party. Parties may equally agree that the consumer may withdraw even where no statutory right to do so exists in the particular circumstances.

4.

Examples

Example 1 In a sales contract concluded outside of business premises within the meaning of 12 Art. 5:A-01 ACQP (and accordingly of e.g. Art. 1 of the Doorstep Selling D.), buyer and seller agree that the buyer must exercise his right of withdrawal within three days. This clause is contrary to Art. 5:103 ACQP. As Art. 5:101 ACQP states that the following provisions are mandatory, this clause is invalid. Example 2 As above, but buyer and seller agree that the notice of the right of withdrawal does not 13 have to contain the address of the person to whom the withdrawal must be communicated. This clause is equally invalid (cf. Art. 5:104 ACQP). Example 3 As above, but the buyer and the seller agree that the buyer must give reasons why his 14 right of withdrawal is exercised. Again, this agreement is not in accordance with Art. 5:102 ACQP, and this clause is therefore invalid. Example 4 Two parties conclude a contract which is void due to a fraudulent misrepresentation of 15 one party (under rules outside of the Acquis Principles, such as Art. 4:107 PECL). The other party may nevertheless withdraw from this contract and must not be confined to remedies for fraudulent misrepresentation.

Article 5:102: Exercise of a right of withdrawal A right to withdrawal is exercised by notice to the other party. No reasons need to be given. Returning the subject matter of the contract is considered a notice of withdrawal unless the circumstances indicate otherwise.

A. Foundation in the Acquis 1.

Sources

The rule that no reasons need to be given in order to exercise the right of withdrawal is 1 based on the following provisions of the existing EC law: Peter Møgelvang-Hansen/Evelyne Terryn/Reiner Schulze

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Art 5:102 2

Chapter 5: Withdrawal General Provisions

Art. 6(1) sent. 1 Distance Selling D.

[...] the consumer shall have a period of at least seven working days in which to withdraw from the contract without penalty and without giving any reason. [...]

Art. 6(1) sent. 1 Financial Services Distance Selling D.

[...] the consumer shall have a period of 14 calendar days to withdraw from the contract without penalty and without giving any reason. [...]

Recital 11 Timeshare D. 1994

[...] the purchaser [...] should be allowed a period during which he may withdraw from the contract without giving reasons [...]

Recital 11 Timeshare D. 2008

[...] consumers [...] should be allowed a period during which they may withdraw from the contract without having to justify the withdrawal [...]

Art. 5(1) 1st indent Timeshare D. 1994

[...] the purchaser shall have the right: – to withdraw without giving any reason [...]

Art. 6(1) Timeshare D. 2008

[...] consumers [has to be given] a period of 14 calendar day to withdraw from the [...] contract without giving any reason. [...]

2 As far as formal requirements of the communication of withdrawal are concerned, the following provisions refer to the Member States’ law: Art. 5(1) sent. 1 Doorstep Selling D.

[...] by sending notice within a period of not less than seven days from receipt by the consumer of the notice referred to in Article 4, in accordance with the procedure laid down by national law. It shall be sufficient if the notice is dispatched before the end of such period.

Art. 6(6) Financial Services Distance Selling D.

If the consumer exercises his right of withdrawal he shall, before the expiry of the relevant deadline, notify this following the practical instructions given to him in accordance with Article 3(1) (3) (d) by means which can be proved in accordance with national law. The deadline shall be deemed to have been observed if the notification, if it is on paper or on another durable medium available and accessible to the recipient, is dispatched before the deadline expires.

Art. 5(2) sent. 1 Timeshare D. 1994

[...] the purchaser [...] shall, before the expiry of the relevant deadline, notify the person whose name and address appear in the contract for that purpose by a means which can be proved in accordance with national law in accordance with the procedures specified in the contract pursuant to point (l) of the Annex. The deadline shall be deemed to have been observed if the notification, if it is in writing, is dispatched before the deadline expires.

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Article 5:102 Exercise of a right of withdrawal

Art. 7 Timeshare D. 2008

Art 5:102 3–5

Where the consumer intends to exercise the right of withdrawal the consumer shall, before the expiry of the withdrawal period, notify the trader on paper or on another durable medium of the decision of withdraw. The consumer may use the standard withdrawal form set out in Annex V and provided by the trader in accordance with article 5(4). The deadline is met if the notification is sent before the withdrawal period has expired.

It also has to be noted that the case law of the ECJ emphasises that Member States are not precluded from adopting rules which provide that the communication of withdrawal is not subject to any formal requirements (for the Doorstep Selling D. cf. in this respect case C-423/97 – Travel Vac, para. 51).

2.

Development

In accordance with the general principles of contract law, the entitled party has to com- 3 municate the withdrawal to the other party in order to exercise this right. This is also expressly stated in Art. 5 of the Doorstep Selling D., Art. 5(2) sent. 1 of the old Timeshare D and Art. 7 of the Timeshare D. 2008. It can be derived from these provisions that a communication is necessary. The communication can occur expressly. However, this is not the only possibility. Rather, there is no reason why the withdrawal cannot be exercised implicitly, namely by returning the subject matter of the contract. Therefore, sentence 3 of the Article at hand provides this alternative form of withdrawal. The provisions of the relevant directives do not establish any precise legal form which withdrawal must take. It thus corresponds with the purpose of the right of withdrawal that returning the subject matter should have the same effect as an express withdrawal, and that this differs only in the fact that the communication is not made expressly. If the returning of the subject matter of the contract is considered a tacit withdrawal, withdrawing from the contract is made simpler for the entitled party, without affecting the interests of the other party because this way withdrawal can still be distinguished from other rights which the entitled party wants to exert (cf. No. 5 infra). Furthermore, sentence 2 states that the party who is entitled to withdraw does not need 4 to give any reasons in order to exercise its right effectively. This is one of the main principles of the right of withdrawal. It is based on unambiguous provisions of various directives: Art. 6(1) sent. 1 of the Distance Selling D.; Art. 6(1) sent. 1 of the Financial Services Distance Selling D.; Art. 5(1) 1st indent of the Timeshare D. 1994. The present Article does not prescribe any form which the communication of withdrawal 5 is to take (e.g. written form or textual form on a durable medium). The reference to the provisions on notice makes clear that, according Art. 1:301 ACQP, the withdrawal may be communicated by any means appropriate to the circumstances. There seems to be no basis within the existing EC law to require any general formalities. The relevant directives deal with this question but leave it to the Member States whether or not to specify formal requirements (cf. No. 2 supra). Article 5(2) of the Timeshare D. 1994 mentions written form in the context of observing the time limit for withdrawal, Art. 7 of the Peter Møgelvang-Hansen/Evelyne Terryn/Reiner Schulze

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Art 5:102 6, 7

Chapter 5: Withdrawal General Provisions

Timeshare D. 2008 requires a note on paper or another durable medium. But this in itself does not mean that written form is a necessary requirement for withdrawal to be valid. Furthermore, it is at least questionable whether any such requirements can be regarded as an improvement of the acquis. It is true that the observance of such a form can help to verify the actual events. This is in the interest of both parties, and more particularly helps the entitled party to prove that it has exercised its right of withdrawal. However, formal requirements can make it more difficult for the entitled party to exercise its right of withdrawal. Matters would also become more complicated for the other party who would have to include information about the necessary form in order to meet the requirements for a reasonable notice of the right of withdrawal to the entitled party (cf. Art. 5:104 ACQP below). Moreover, a requirement as to textual form on a durable medium would not serve e.g. as a proof for the entitled party. If a formal requirement was to be probative, anything short of a registered letter could fall short of this function (note that Belgium, Malta and Luxembourg require that the communication of withdrawal must be in writing and sent by a registered letter in case of timeshare contracts, cf. ConsLC, p. 459). Textual form would rather serve as a notice to the other party. However, returning the subject matter of the contract clearly shows the other party that the entitled party wants to withdraw. It can also be distinguished from remedies which are aimed at performance, because in the latter case the entitled party has either to make clear what kind of supplementary performance (repair or replacement of the goods) it wants, or at least must demand supplementary performance (and leave to the other party to decide in which way the supplementary performance is to be fulfilled). 6 Moreover, not requiring the observance of any particular form is in line with the transposition of the relevant articles of the directives in most Member States. More than half of the Member States provide no formal requirements, even though the provisions in Member States’ laws differ significantly in this respect. But there seems to be a certain tendency to waive formal requirements for the exercise of the withdrawal as most of the Member States did not include these requirements when they transposed the Distance Selling D. into their national laws. A list of countries without formal requirements includes the following: Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Hungary, Ireland, Latvia, Luxembourg, Malta, The Netherlands, Portugal, Spain, Sweden. In contrast, Cyprus, Lithuania, Poland, Slovakia and the United Kingdom prescribe written form. Germany demands textual form, Italy a registered letter. Apart from this, the return of goods is sufficient in Germany, Greece, Slovenia and Spain to exercise the right of withdrawal (cf. ConsLC, p. 526 et seq.).

3.

Political Issues

7 The provisions of the directives do not clearly set out rules regarding the form of the communication of the withdrawal. According to the acquis, Member States have the competence to regulate the formal requirements for exercising the right of withdrawal (Art. 5(1) sent. 1 of the Doorstep Selling D.; Art. 6(6) of the Financial Services Distance Selling D.; Art. 5(2) sent. 1 of the Timeshare D. 1994). The acquis in this respect contains neither a principle on the existence of certain formal requirements, nor one on a 242

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Article 5:102 Exercise of a right of withdrawal

Art 5:102 8–11

general absence of formal requirements for communicating the withdrawal. Requirements as to form may provide a degree of certainty, but they also may act as a deterrent to the entitled party from exercising its statutory right. As anything short of a registered letter does not serve a probative function for the entitled party (cf. supra No. 5), no formal requirements are laid down in the present Article.

B.

Commentary

1.

Meaning and Purpose

The exercise of withdrawal effects the rights and obligations of both parties. In particular, 8 the other party must refund the price and can demand the return of the subject matter of the contract (cf. Art. 5:105 ACQP). The other party must therefore be informed of the withdrawal in order to realise that these effects have occurred. Accordingly, the entitled party has to communicate the withdrawal to the other party in order to exercise this right. This communication can occur expressly. However, a tacit withdrawal by returning the subject matter of the contract is also sufficient for exercise the withdrawal (cf. No. 3 supra). The right of withdrawal should give the entitled party the time that is necessary to re- 9 think its decision to conclude the contract. Thus, the rule aims to counterbalance the disadvantage which typically affects this party during the conclusion of the contract in the particular situation for which a right of withdrawal is given. Withdrawal does not require that the other party has not fulfilled its obligations or that similar special reasons exist (in contrast to rescission; the rules on rescission will show that a reason to rescind is necessary). That is why the entitled party does not need to give any reasons in order to exercise its right effectively. This is indeed one of the main principles of the right of withdrawal.

2.

Context

The entitled party must keep within the withdrawal period laid down in Art. 5:103 10 ACQP. The beginning of the withdrawal period depends upon adequate information of the right of withdrawal as provided in Art. 5:104 ACQP. For unilateral statements leading to the termination of a contract, cf. supra No. 10 to Art. 5:101 ACQP.

3.

Explanation

In stipulating that the right to withdraw is exercised by notice, the provision makes ap- 11 plicable Art. 1:302(1) ACQP, which lays down that notice becomes effective when it reaches the addressee. According to Art. 5:103(2) ACQP the notice is timely if it is dispatched within the withdrawal period. Generally, this requirement ensures that the entitled party communicates the withdrawal to the other party who thereby becomes aware

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Art 5:102 12–15

Chapter 5: Withdrawal General Provisions

of the withdrawal and, if necessary, can prepare the restitution of, e.g., goods delivered and payments made under the contract. According to Art. 1:301 ACQP the notice may be given by any means appropriate to the circumstances. As sentence 3 of the present Article clearly shows, the entitled party does not have to use the words “withdrawal” (cf. also Kantongerecht Haarlem (Dutch District Court), 23 November 2006). It is sufficient if the addressee can understand from the notice that it is meant as a communication of withdrawal. A right of withdrawal can be exercised by e.g. returning the subject matter of the contract, or orally. Nevertheless, the communication must be sufficiently precise to indicate that the entitled party is withdrawing from the contract, and it is also necessary that the withdrawing party can be clearly identified. “Returning” means sending back any delivered goods to the supplier in a way which the buyer can choose, for example by handing them over personally, or by sending them by mail. “Returning the subject matter of the contract” is of course not an option for services. As there is no basis in the existing EC law as to any form which the communication of withdrawal is to take (e.g. written form or textual form on a durable medium), no formal requirements have been provided.

4.

Examples

Example 1 12 A is entitled to withdraw from a contract. He sends a letter to the other party which states that he considers himself to be no longer bound to the contract. But he does not give any reasons for the withdrawal. Nevertheless, the withdrawal is effective. Example 2 13 B is entitled to withdraw from a contract. She simply returns the goods by mail without giving any further information. The goods reach the other party. In this case, the withdrawal is effective (cf. comments on Art. 5:103 ACQP). Example 3 14 C has a right of withdrawal from a contract with D. C wants to withdraw and tells this to his friend E, but not to D. In fact, C forgets about his intention to withdraw. E informs D without having being told to so by C. As C did not communicate the exercise of its right of withdrawal to D in the meaning of Art. 5:102 ACQP, C has not withdrawn. Example 4 15 F has a right of withdrawal from a contract with G. F communicates her withdrawal to G and indicates reasons for her withdrawal which in fact are unfounded. The withdrawal is effective (provided all other requirements have been met) as no reasons have to be given at all. Therefore, unfounded reasons do not affect this right.

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Art 5:103 1

Article 5:103 Withdrawal period

Article 5:103: Withdrawal period (1) Unless provided otherwise, the right of withdrawal must be exercised within fourteen days after both the contract has been concluded and notice of the right pursuant to Article 5:104 (Information on the right of withdrawal) has been given, and no later than one year after the conclusion of the contract. If the subject matter of the contract is the delivery of goods, the period lapses not earlier than fourteen days after the goods have been received. (2) The notice of withdrawal is timely if dispatched within this period.

A. Foundation in the Acquis 1.

Sources

The principle that the withdrawal period does not commence before the conclusion of 1 the contract is expressly laid down in the following provisions of the existing EC law: Art. 6(1) sent. 3 Distance Selling D.

The period for exercise of this right shall begin: – in the case of goods, from the day of receipt by the consumer where the obligations laid down in Article 5 have been fulfilled, – in the case of services, from the day of conclusion of the contract or from the day on which the obligations laid down in Article 5 were fulfilled if they are fulfilled after conclusion of the contract, provided that this period does not exceed the three-month period referred to in the following subparagraph.

Art. 6(1) sent. 3 Financial Services Distance Selling D.

The period for withdrawal shall begin: – either from the day of the conclusion of the distance contract, except in respect of the said life assurance, where the time limit will begin from the time when the consumer is informed that the distance contract has been concluded, or – from the day on which the consumer receives the contractual terms and conditions and the information in accordance with Article 5(1) or (2), if that is later than the date referred to in the first indent.

Art. 5 No. 1 Timeshare D. 1994

[...] the purchaser shall have the right: – to withdraw without giving any reason within 10 calendar days of both parties’ signing the contract or of both parties’ signing a binding preliminary contract. [...]

Art. 6(1) Timeshare D. 2008

[...] consumers [shall be] given a period of 14 calendar days to withdraw from the [...] contract without giving any reason. The withdrawal period shall be calculated (a) from the day of the conclusion of the contract or any binding preliminary contract; or (b)

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Art 5:103 1

Chapter 5: Withdrawal General Provisions

from the day when the consumer receives the contract or any binding preliminary contract if it is later than the date referred to in point (a) Art. 35(1) sent. 1 Life Assurance D.

Each Member State shall prescribe that a policy holder who concludes an individual life-assurance contract shall have a period of between 14 and 30 days from the time when he/she was informed that the contract had been concluded within which to cancel the contract.

In the existing EC law, the following provisions link the withdrawal period to adequate communication of the right of withdrawal by the business: Art. 5(1) sent. 1 Doorstep Selling D.

The consumer shall have the right to renounce the effects of his undertaking by sending notice within a period of not less than seven days from receipt by the consumer of the notice referred to in Article 4, in accordance with the procedure laid down by national law.

Art. 6(1) sent. 4 Distance Selling D.

If the supplier has failed to fulfil the obligations laid down in Article 5, the period shall be three months.

Art. 6(1) sent. 3, 2nd indent Financial Services Distance Selling D

The period for withdrawal shall begin from the day on which the consumer receives the contractual terms and conditions and the information in accordance with Article 5(1) or (2), if that is later than the date referred to in the first indent.

Art. 5(1) 2nd and 3rd indent Timeshare D. 1994

in addition to the possibilities available to the purchaser under national laws on the nullity of contracts, the purchaser shall have the right: – if the contract does not include the information referred to in points (a), (b), (c), (d) (1), (d) (2), (h), (i), (k), (l) and (m) of the Annex, at the time of both parties’ signing the contract or of both parties’ signing a binding preliminary contract, to cancel the contract within three months thereof. If the information in question is provided within those three months, the purchaser’s withdrawal period provided for in the first indent, shall then start, – if by the end of the three-month period provided for in the second indent the purchaser has not exercised the right to cancel and the contract does not include the information referred to in points (a), (b), (c), (d) (1), (d) (2), (h), (i), (k), (l) and (m) of the Annex, to the withdrawal period provided for in the first indent from the day after the end of that three-month period

Art. 6(3) Timeshare D. 2008

The withdrawal period shall expire (a) after one year and 14 calendar days from the day referred to in paragraph 2 of this Article, where a separate standard withdrawal form as required by Article 5(4) has not been filled in by the trader and provided to the con-

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sumer in writing, on paper or on another durable medium; (b) after three months and 14 calendar days from the day referred to in article 2 of this Article, where the information referred to in Article 4(1), including the applicable standard information form set out in Annexes I to IV, has not been provided to the consumer in writing, on paper or on another durable medium. With respect to the withdrawal period, Art. 6(1) sent. 3, 1st indent of the Distance Selling D. deals with the receipt of goods. The Life Assurance D. makes the beginning of the withdrawal period dependant upon the information that the contract from which the entitled party wants to withdraw has been concluded (Art. 35(1) sent. 1 of the Life Assurance D.): Art. 6(1) sent. 3, 1st indent Distance Selling D.

The period for exercise of this right shall begin in the case of goods, from the day of receipt by the consumer where the obligations laid down in Article 5 have been fulfilled.

Art. 35(1) sent. 1 Life Assurance D.

Each Member State shall prescribe that a policy holder who concludes an individual life-assurance contract shall have a period of between 14 and 30 days from the time when he/she was informed that the contract had been concluded within which to cancel the contract.

The withdrawal period is regulated by the directives in an incoherent way. The Doorstep 2 Selling D. provides a period of seven days (Art. 5(1) sent. 1 of the Doorstep Selling D.). According to the Distance Selling D. the time period lasts seven working days (Art. 6(1) sent. 1 of the Distance Selling D.) and Art. 6(1) of the Financial Services Distance Selling D. establishes a withdrawal period of 14 calendar days. Article 5(1) 1st indent of the Timeshare D. 1994 stipulates a period of ten calendar days whereas under the Life Assurance D. the withdrawal period lasts between 14 and 30 days (Art. 35(1) sent. 1 of the Life Assurance D.). Art 6(1) of the Timeshare D. 2008 establishes a withdrawal period of 14 calendar days. Art. 5(1) sent. 1 Doorstep Selling D.

The consumer shall have the right to renounce the effects of his undertaking by sending notice within a period of not less than seven days from receipt by the consumer of the notice referred to in Article 4, in accordance with the procedure laid down by national law.

Art. 6(1) sent. 1 Distance Selling D.

For any distance contract the consumer shall have a period of at least seven working days in which to withdraw from the contract [...]

Art. 6(1) Financial Services Distance Selling D.

The Member States shall ensure that the consumer shall have a period of 14 calendar days to withdraw from the contract without penalty and without giving any reason. However, this period shall be extended to 30 calendar days in distance contracts relating to

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life assurance covered by Directive 90/619 / EEC and personal pension operations. The period for withdrawal shall begin: – either from the day of the conclusion of the distance contract, except in respect of the said life assurance, where the time limit will begin from the time when the consumer is informed that the distance contract has been concluded, or – from the day on which the consumer receives the contractual terms and conditions and the information in accordance with Article 5(1) or (2), if that is later than the date referred to in the first indent. Member States, in addition to the right of withdrawal, may provide that the enforceability of contracts relating to investment services is suspended for the same period provided for in this paragraph. Art. 5(1) 1st indent Timeshare D. 1994

[...] the purchaser shall have the right: – to withdraw without giving any reason within 10 calendar days of both parties’ signing the contract or of both parties’ signing a binding preliminary contract. If the 10th day is a public holiday, the period shall be extended to the first working day thereafter

Art. 6 (1) and (2) Timeshare D. 2008

[...] the consumer [shall be] given a period of 14 calendar days to withdraw from the contract [...] without giving any reason. The withdrawal period shall be calculated from the day of the conclusion of the contract or of any binding preliminary contract [...]

Art. 35(1) sent. 1 Life Assurance D.

Each Member State shall prescribe that a policy holder who concludes an individual life-assurance contract shall have a period of between 14 and 30 days from the time when he/she was informed that the contract had been concluded within which to cancel the contract.

The maximum time limit is also regulated incoherently. Whereas the Doorstep Selling D., the Financial Services Distance Selling D. and the Life Assurance D. do not provide for a maximum time limit, the Distance Selling D. and the Timeshare D. 1994 do. Article 6(1) of the Distance Selling D. and Art. 5(1) 2nd indent of the Timeshare D. 1994 establish a maximum time limit of three months. Article 6(3)(a) of the Timeshare D. 2008 constitutes a maximum time limit of one year and 14 calendar days. Art. 6(1) Distance Selling D.

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[...] If the supplier has failed to fulfil the obligations laid down in Article 5, the period shall be three months. The period shall begin: – in the case of goods, from the day of receipt by the consumer, – in the case of services, from the day of conclusion of the contract. If the information referred to in Article 5 is supplied within this three-month period, the seven working day period referred to in the first subparagraph shall begin as from that moment.

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Art. 5(1) 2nd indent Timeshare D. 1994

[...] the purchaser shall have the right: – if the contract does not include the information referred to in points (a), (b), (c), (d) (1), (d) (2), (h), (i), (k), (l) and (m) of the Annex, at the time of both parties’ signing the contract or of both parties’ signing a binding preliminary contract, to cancel the contract within three months thereof. [...]

Art. 6(3)(a) Timeshare D. 2008

The withdrawal period shall expire after one year and 14 calendar days from the day referred to in paragraph 2 of this Article, where a separate standard withdrawal form as required by Article 5(4) has not been filled in by the trader and provided to the consumer in writing, on paper or on another durable medium .

2.

Development

In respect of the time period for exercising the right of withdrawal, the provisions in EC 3 law differ in many details. However, they can be traced back to some general principles. The principle that the withdrawal period does not commence before conclusion of the contract results partly from the wording of the provisions (cf. No. 1 supra) and partly from their aim. Otherwise, the party entitled to withdraw could lose this right even before the contractual obligations have been conclusively fixed. This principle does not preclude other provisions from providing for a later start, according to specific needs for protection. The most important of these provisions concerns the receipt of goods (cf. Art. 6(1) 1st indent Distance Selling D.) to which paragraph (1) sent. 2 of the Article at hand refers. Other sections of the Acquis Principles may provide special requirements as leges speciales (e.g. for life assurance contracts based on Art. 35(1) of the Life Assurance D.). Both the Doorstep Selling D. and the Financial Services Distance Selling D. link the beginning of the withdrawal period to the consumer being given reasonable notice of the withdrawal right (Art. 5(1) of the Doorstep Selling D.; Art. 6(1) sent. 3, 2nd indent of the Financial Services Distance Selling D.). In other directives, the duration (rather than the beginning) of the withdrawal period is conditional upon such sufficient notification (Art. 5 of the Timeshare D. 1994; Art. 6(3) of the Timeshare D. 2008; Art. 6(1) of the Distance Selling D.). Both approaches are based on two common principles: firstly, the other party must sufficiently inform the entitled party of the right of withdrawal. Secondly, failure to notify causes an extension of the withdrawal period. For additional information requirements (i.e. other than the obligation to inform about the right of withdrawal), the rules on pre-contractual information duties can provide that for some rights of withdrawal the time limit is extended if the relevant duty to inform has not been fulfilled (cf. Art. 2:208(1) ACQP). In a coherent contract law, as much uniformity as possible is desirable in relation to the length of the time period after conclusion of the contract and notice of the right of withdrawal by the other party, as long as there are no opposing special requirements of individual situations in which these protective provisions apply. As mentioned above, the Peter Møgelvang-Hansen/Evelyne Terryn/Reiner Schulze

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time period has been set by the relevant directives partly at seven days, and partly at ten, fourteen or thirty days. An overall principle can be seen here, in that the provisions of the acquis attempt to guarantee a suitable period of time for calm consideration (‘cooling off’ period) and for obtaining information. On this basis it makes sense to assume a uniform standard time period within the Acquis Principles that does not necessarily have to be the minimum seven days. Instead, taking into account the Financial Services Distance Selling D. (which seeks a full harmonisation and prescribes a withdrawal period of fourteen days) and the implementation by the Member States it should be more like fourteen days (so long as a lex specialis does not provide for different determinations in accordance with specific needs of protection). 4 Several directives consistently provide that the punctual dispatch of the statement of withdrawal suffices to comply with the time limit (Art. 5(1) sent. 2 of the Doorstep Selling D.; Art. 5 No. 2 sent. 2 of the Timeshare D. 1994; Art. 7 of the Timeshare D. 2008). The wording of the directive clearly expresses that the notice of withdrawal is timely if it is dispatched within the withdrawal period, even if the other party receives it later. This rule is provided by paragraph (2). It could be considered whether the consumer protection purpose of the relevant directives should extend the dispatch rule beyond a rule for timeliness to a rule for effectiveness, i.e. that withdrawal becomes effective when dispatched, even if the other party did not receive it at all. As a consequence, the business would bear the risk of the communication getting lost on its way. But this interpretation might strain the wording of the relevant directives too much and it seems to differ from the understanding expressed by their transposition in most Member States. Therefore, the provision of paragraph (2) is limited to the question of whether the withdrawal is timely. 5 Paragraph (1) sent. 1 provides a maximum time limit and in this way at the same time extends and restricts the rights of the entitled parties. But it has to be noted that the acquis is incoherent in this respect and that more coherency is preferable. In the acquis, there is no predominant provision as to the maximum time limit. Therefore, a relatively long period of time should be chosen as a general rule; where a shorter period is really needed for particular rights of withdrawal, this can be provided in specific legislation.

3.

Political Issues

6 The Article establishes a uniform withdrawal period and in this way extends the rights of the entitled parties in comparison to the situation under the Doorstep Selling D., Distance Selling D. and the Timeshare D. 2008. From the provisions of the acquis, an overall principle can be derived in that the entitled party must be guaranteed a suitable period of time for calm consideration (‘cooling off’ period) and for obtaining information. On this basis it would make sense to assume a uniform standard time period within the Acquis Principles. This uniform standard time period should not be one of seven days. Instead, taking into account the experiences of the implementation by the Member States (e.g. Estonia and Latvia have a uniform time limit of fourteen days for doorstep and distance sales, cf. ConsLC, p. 188, 528; Germany also establishes a uniform time limit of 250

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fourteen days in German CC § 355(1) sent. 2) it should be fourteen days. The wording “Unless provided otherwise” makes clear that the time limit of fourteen days only applies if a lex specialis does not provide for different determinations in accordance with specific needs of protection (e.g. special rules for life assurance contracts are not excluded). Paragraph (1) sent. 1 moreover provides a maximum time limit of one year. In this respect 7 the rights of the entitled parties are extended and restricted at the same time. Some directives do not state a maximum time limit (cf. No. 2 supra). The Distance Selling D. and the Timeshare D. 1994 stipulate three months as a maximum time limit, whereas the Timeshare D. 2008 extends the maximum time limit to one year and 14 days. The ECJ held that the Member States may not provide for a maximum time limit if this is not intended by the relevant directive (cf. ECJ 31 December 2001 C-481/99 – Heininger). Therefore, a maximum time limit as an overarching rule cannot easily be extracted from existing Community law. The acquis is incoherent in this respect. To improve coherence in this point, it appears necessary to formulate a general rule. In this regard, it is preferable to opt for a maximum time limit. Otherwise, the entitled party would have an eternal right of withdrawal. The entitled party could, for instance, withdraw five years after conclusion of the contract and return goods and claim restitution of payment merely because the other party neglected to observe a minor element of its information duties. Such extreme cases could of course be excluded by the principle of good faith, with the consequence that the entitled party is precluded from exercising its right of withdrawal. But the principle is not very precise and leads to uncertainty. That is why a maximum time limit is preferable.

B.

Commentary

1.

Meaning and Purpose

The withdrawal period does not commence before the conclusion of the contract. The 8 reason for this rule is that the entitled party must not lose its right even before the contractual obligations have been conclusively fixed. As this principle does not preclude other provisions from providing for a later start according to specific needs for protection, in contracts for the sale of goods the withdrawal period does not lapse earlier than fourteen days after the receipt of the goods. The reason for this latter rule is that the buyer can only assess the contract once he or she has received the goods. The purpose of the withdrawal period is to give the entitled party appropriate time to consider the merits of the transaction. This must not be very brief, as the entitled party must be given sufficient time for consideration. The withdrawal period can, according to the specific needs of protection, be of varying length for particular situations as provided by specific legislation. Generally, in respect of transactions for which a right of withdrawal is available, a period of fourteen days seems necessary and sufficient to achieve this aim (which is to provide a “cooling off” period to consider the merits of the transaction). In order to be able to properly reflect on a transaction, the party must know all the terms and conditions of the contract, which is generally only the case when the contract is con-

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cluded. Therefore, the withdrawal period cannot start to run before the time of conclusion of contract. 9 Moreover, the beginning of the withdrawal period is also conditional upon a reasonable notice of the right of withdrawal. Linking the beginning of the withdrawal period to a reasonable notice is necessary as the entitled party must be protected because it is in a disadvantageous position and is sometimes not informed of its rights. 10 Paragraph (1) provides a uniform withdrawal period of fourteen days and in this way accomplishes more coherence. The notice of withdrawal is timely if it is dispatched within the withdrawal period, even if the other party receives it later (paragraph (2)). The purpose of this provision is to protect the entitled party by giving this party the benefit of the full withdrawal period for reflection, rather than having to bear the risk and the burden of proof associated with a delay in the transmission of the notice.

2.

Context

11 The beginning of the withdrawal period is conditional upon the conclusion of the contract and the information of the right of withdrawal. For the latter, the other party has to inform the entitled party in compliance with the requirements laid down in Art. 5:104 ACQP. For the conclusion of the contract the relevant rules are laid down in Chapter 4 of the Acquis Principles. As Art. 5:101 ACQP states, this rule is mandatory in favour of the entitled party. The length of the withdrawal period can also depend upon pre-contractual information duties as laid down in Art. 2:208(1) ACQP.

3.

Explanation

12 The entitled party can withdraw from the contract within a uniform withdrawal period of fourteen days. The end of the time limit is to be calculated under the rules provided by the Computation of Time Reg. 1182/71. This implies that a time limit which would otherwise end on a Saturday, a Sunday or a national holiday will instead expire at the end of the next working day (cf. ConsLC, p. 528). 13 The withdrawal period starts after both conclusion of the contract and information of the right of withdrawal pursuant to Art. 5:104 ACQP. If the contract is not concluded, the withdrawal period does not start and therefore may possibly never end (cf. Kantongerecht Maastricht (Dutch District Court), 15 November 1979). If goods have to be delivered, the withdrawal period lapses not earlier than fourteen days after the goods have been received by the entitled party. It is not sufficient that the other party has just fulfilled its obligation to deliver as the time of delivery and the time of receipt do not necessarily correspond. 14 According to the present Article the beginning of the withdrawal period depends on the conclusion of the contract. In case of a contract of sale on approval, the time at which the withdrawal period starts to run (assuming that adequate information has been given) is

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the time at which the contract is to be regarded as approved (cf. BGH (German Supreme Court), judgment of 1 March 2004, Neue Juristische Wochenschrift-Rechtsprechungsreport (NJW-RR) 2004, 1058 et seq.). If the other party does not comply with Art. 5:104 ACQP, i.e. fails to give adequate in- 15 formation to the entitled party about its right of withdrawal, the withdrawal period nevertheless lapses after one year (the precise date being again determined under the rules of Computation of Time Reg. 1182/71). The situation might arise – although very unlikely – that the entitled party has not received the goods for more than one year. As the time period lapses not earlier than fourteen days after having received the goods, the entitled party can still withdraw. In order to comply with the time limit, the entitled party merely has to dispatch its no- 16 tice. It is not necessary that the notice reaches the recipient within the time limit. It is an open question whether the entitled party bears the risk of a loss of the notice. The acquis does not provide a sufficient basis for establishing such a rule. However, it is more plausible to impose the risk of loss upon the entitled party. This solution corresponds with the principle set up by Art. 1:303 ACQP according to which an electronic notice reaches the addressee (only) when it can be accessed by the addressee. If the entitled party exercises its right of withdrawal by returning the goods by mail and the goods get lost on their way to the other party, the withdrawal might have been timely but is not effective. The entitled party may re-effect the communication of withdrawal. This will be the case in particular when the entitled party claims reimbursement. If this latter communication actually reaches the other party, the withdrawal is effective even if it is communicated outside the withdrawal period of fourteen days (cf. OLG Dresden (German Court of Appeal), 20 October 1999, Neue Juristische Wochenschrift-Rechtsprechungsreport (NJW-RR) 2000, 354).

4.

Examples

Example 1 A party is entitled to withdraw from a contract. The goods are delivered, but the other 17 party fails to indicate in its information of the right of withdrawal the name of the person to whom the notice of withdrawal should be addressed. The entitled party can withdraw even after expiry of fourteen days, and loses its right of withdrawal after one year has passed. Example 2 The other party delivers goods, but the anticipated conclusion of contract has not yet 18 materialised (e.g. because applicable form requirements have not yet been complied with). The entitled party can withdraw any time. As the withdrawal period does not start to run before the conclusion of the contract, the maximum time limit of one year does not apply to this situation.

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Example 3 19 A party is entitled to withdraw from a contract. The entitled party writes to the other party a letter which contains a notice of withdrawal. The entitled party places this letter in the mail box on the last day of the withdrawal period. The withdrawal reaches the other party three days later. As the notice of withdrawal was dispatched within the withdrawal period, and actually reached the other party, withdrawal is effective. Example 4 20 A party is entitled to withdraw from a contract. The notice of withdrawal is dispatched within the withdrawal period, but the letter gets lost in the mail and therefore never reaches the other party. If the risk of a loss of the notice of withdrawal is borne by the entitled party according to the applicable national law, the withdrawal is not effective in this example. Example 5 21 Even before conclusion of a sales contract, the seller gives the buyer adequate information of the buyer’s right of withdrawal in case the contract is concluded. The withdrawal period starts to run on the date of the conclusion of the contract and not on the date of the information of the right of withdrawal.

Article 5:104: Information on the right of withdrawal The entitled party must receive adequate information of the right of withdrawal from the other party. Such information must be brought appropriately to the entitled party’s attention, and provide in textual form on a durable medium and in plain and intelligible language information about the right of withdrawal, the withdrawal period, and the name and address of the person to whom the withdrawal must be communicated.

A. Foundation in the Acquis 1.

Sources

1 The requirements of this Article have been extracted from the following provisions of the Doorstep Selling D., the Distance Selling D., the Financial Services Distance Selling D., the Timeshare D. 1994, the Timeshare D. 2008 and the Life Assurance D.: Art. 4 Doorstep Selling D.

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In the case of transactions within the scope of Article 1, traders shall be required to give consumers written notice of their right of cancellation within the period laid down in Article 5, together with the name and address of a person against whom that right may be exercised. Such notice shall be dated and shall state particulars enabling the contract to be identified. It shall be given to the consumer:(a) in the case of Article 1 (1), at the time of conPeter Møgelvang-Hansen/Evelyne Terryn/Reiner Schulze

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clusion of the contract; (b) in the case of Article 1 (2), not later than the time of conclusion of the contract; (c) in the case of Article 1 (3) and 1 (4), when the offer is made by the consumer. Member States shall ensure that their national legislation lays down appropriate consumer protection measures in cases where the information referred to in this Article is not supplied. Recital 11 Distance Selling D.

Whereas the use of means of distance communication must not lead to a reduction in the information provided to the consumer; whereas the information that is required to be sent to the consumer should therefore be determined, whatever the means of communication used; whereas the information supplied must also comply with the other relevant Community rules, in particular those in Council Directive 84/450 / EEC of 10 September 1984 relating to the approximation of the laws, regulations and administrative provisions of the Member States concerning misleading advertising (7); whereas, if exceptions are made to the obligation to provide information, it is up to the consumer, on a discretionary basis, to request certain basic information such as the identity of the supplier, the main characteristics of the goods or services and their price

Art. 4 Distance Selling D.

In good time prior to the conclusion of any distance contract, the consumer shall be provided with the following information: [...] the existence of a right of withdrawal, except in the cases referred to in Article 6 (3)

Art. 5 Distance Selling D.

The consumer must receive written confirmation or confirmation in another durable medium available and accessible to him of the information referred to in Article 4 (1) (a) to (f), in good time during the performance of the contract, and at the latest at the time of delivery where goods not for delivery to third parties are concerned, unless the information has already been given to the consumer prior to conclusion of the contract in writing or on another durable medium available and accessible to him. In any event the following must be provided: – written information on the conditions and procedures for exercising the right of withdrawal, within the meaning of Article 6, including the cases referred to in the first indent of Article 6 (3) [...]

Recital 20 Financial Services Distance Selling D.

Durable mediums include in particular floppy discs, CD-ROMs, DVDs and the hard drive of the consumer’s computer on which the electronic mail is stored, but they do not include Internet websites unless they fulfil the criteria contained in the definition of a durable medium.

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Recital 23 Financial Services Distance Selling D.

With a view to optimum protection of the consumer, it is important that the consumer is adequately informed of the provisions of this Directive and of any codes of conduct existing in this area and that he has a right of withdrawal.

Art. 3(3) Financial Services Distance Selling D.

In the case of voice telephony communications [...] the existence or absence of a right of withdrawal in accordance with Article 6 and, where the right of withdrawal exists, its duration and the conditions for exercising it, including information on the amount which the consumer may be required to pay on the basis of Article 7(1). [...]

Art. 5(1) Financial Services Distance Selling D.

The supplier shall communicate to the consumer all the contractual terms and conditions and the information referred to in Article 3(1) and Article 4 on paper or on another durable medium available and accessible to the consumer in good time before the consumer is bound by any distance contract or offer.

Art. 3(1) Timeshare D. 1994

The Member States shall make provision in their legislation for measures to ensure that the vendor is required to provide any person requesting information on the immovable property or properties with a document which, in addition to a general description of the property or properties, shall provide at least brief and accurate information on the particulars referred to in points (a) to (g), (i) and (l) of the Annex and on how further information may be obtained.

Art. 5(4) Timeshare D. 2008

Before the conclusion of the contract, the trader shall explicitly draw the consumer’s attention to the existence of the right of withdrawal, the length of the withdrawal periods referred to in Article 6 [...]

Art. 36(1) and (2) Life Assurance D.

1. Before the assurance contract is concluded, at least the information listed in Annex III(A) shall be communicated to the policy holder. 2. The policy-holder shall be kept informed throughout the term of the contract of any change concerning the information listed in Annex III(B).

2.

Development

2 In accordance with the general focus on the protection of the entitled party, the directives that confer rights of withdrawal upon this party also provide that the business must inform this party of the existence of these rights. The directives use different terminology to describe what kind of information about the right of withdrawal must be given. However, the high degree of congruence between many directives (‘written notice’ in Art. 4 (1) of the Doorstep Selling D.; ‘document’ in Art. 3(1) of the Timeshare D. 1994; ‘writ256

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ten’ in Art. 5(1) sent. 2, 1st indent of the Distance Selling D.; ‘on paper or on another durable medium’ in Art. 5(1) of the Financial Services Distance Selling D.) reveals overall principles with respect to the form and content of the information of the right of withdrawal. In terms of form, the principle of writing applies, even though this principle is defined quite differently in each of the directives. With respect to content, the principle that the entitled party must be informed of its right of withdrawal in ‘clear and comprehensible language’ (consolidated to ‘plain and intelligible language’ within the Acquis Principles) and that this information must include the withdrawal period and the addressee for the withdrawal can be seen in most directives, despite individual deviations and the lack of uniform terminology. Irrespective of the different wording used in the directives, this principle corresponds to their common purpose of ensuring that the entitled party has a basis of knowledge and comprehension for making a decision on whether to exercise the right of withdrawal. This also requires that the information is appropriately brought to the entitled party’s attention (cf. also Art. 6:201 ACQP).

B.

Commentary

1.

Meaning and Purpose

To ensure that the entitled party can effectively use its right of withdrawal, the entitled 3 party must receive adequate information of the right of withdrawal from the other party. Sentence 2 specifies the modalities of adequate information.

2.

Context

If the other party does not give adequate information as laid down in the present Article, 4 the withdrawal period of one year according to Art. 5:103 ACQP applies. Moreover, the entitled party is not limited to withdrawing, but is also entitled to damages as provided for in Art. 2:208 ACQP. If adequate information is given, this has also an effect on the entitled party’s liability. According to Art. 5:105(2) sent. 3 ACQP the entitled party is liable for the diminished value of the received goods that results from their normal use, unless the party had not received adequate information of its right of withdrawal. So, if the other party does not inform in compliance with the requirements laid down in Art. 5:104, the entitled party is not liable for the diminished value that results from the normal use of the received goods.

3.

Explanation

Adequate information of the right of withdrawal by the other party is necessary for the 5 withdrawal period of fourteen days to start. Thus, it is of importance for both parties what the requirements for such information are. The information of the right of withdrawal must be given in textual form on a durable medium. Therefore, oral information – e.g.

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Art 5:104 6

Chapter 5: Withdrawal General Provisions

in the situation of a doorstep sale – is certainly not sufficient. As information of the right of withdrawal has to be appropriately brought to the entitled party’s attention, it is not sufficient for the other party to state the right of withdrawal in its standard terms in such a way that it is hidden and will most likely not be read by the entitled party (cf. also Art. 6:201(2) ACQP). The present Article requires more than the mere possibility of the entitled party to read of its right of withdrawal. To enable the entitled party to make use of its right of withdrawal, the other party must inform the entitled party about the address of the person to whom the withdrawal must be communicated. “Address” means the postal address under which the other party will actually receive an express notice of withdrawal or the goods. If the other party provides details of its company’s name, a PO box number and the municipality in which the company is based, but fails to give more precise geographical indicators (as the street name), the requirements of the present Article are not fulfilled, at least with respect to contracts for the supply of goods. A PO box number can not be regarded as an address. The street name is a necessary part of the address as this ensures that goods which are sent back actually reach the other party (cf. OGH (Austrian Supreme Court) 23 September 2003, 4 Ob 175/03v). Following a deviating judgment of the German Supreme Court (cf. BGH, judgment of 11 April 2002, Neue Juristische Wochenschrift ((NJW) 2002, 2391 et seq.) a PO box number can be regarded as an “address”. However, regardless of possible divergences between the national mail systems, there are at least limits to the amount and size of packages that can be sent to a PO box number. Therefore, taking into account that according to Art. 5:102 sent. 3 ACQP returning the subject matter of the contract is considered a tacit withdrawal, it would not be appropriate to use the judgment of the German Supreme Court as a persuasive example with regard to contracts for the delivery of goods. Providing the PO box number would deter the entitled party from exercising its right, because it would not be able to exercise it by returning the subject matter of the contract. 6 Information of the right of withdrawal pursuant to the present Article does not include that the entitled party must also be informed of the dates on which the withdrawal period starts and ends. It is necessary but also adequate, if the entitled party is informed about the length of the withdrawal period and the incident which triggers its start (similar to BGH (German Supreme Court), judgment of 27 April 1997, BGHZ 126, 56 (62)). Nevertheless, if any date that is given turns out to be incorrect, the information requirements of the present Article are not fulfilled. Moreover, the information must not be capable of being misunderstood as this would deter the entitled party from exercising its right. If this information is capable of being misunderstood, according to Art. 5:103(1) sent. 1 ACQP, the withdrawal can be exercised up to one year after the conclusion of the contract (similar to BGH (German Supreme Court), judgment of 27 April 1997, BGHZ 126, 56 (62)). The incident that triggers the start of the withdrawal period is not sufficiently indicated if the information of the right of withdrawal does not make clear whether the withdrawal period starts when the consumer signs the contract or when the business signs the contract or when the contract is handed over to the consumer (cf. BGH (German Supreme

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Article 5:104 Information on the right of withdrawal

Art 5:104 7–11

Court), judgment of 18 April 2005, Neue Juristische Wochenschrift-Rechtsprechungsreport (NJW-RR) 2005, 1217 et seq.). Adequate information of the right of withdrawal does not necessarily have to include in- 7 formation about the fact that no reasons need to be given for the withdrawal. The Article at hand provides no such requirement. Moreover, excessively onerous requirements on the notification of the right of withdrawal could make this notice too difficult for the entitled party to understand, and thereby contradict the initial purpose.

4.

Examples

Example 1 A party has a right of withdrawal but the other party omits one necessary piece of infor- 8 mation (e.g. the address of the person to whom the withdrawal must be communicated). In this case the withdrawal period lasts one year in accordance with Art. 5:103(1) sent. 1 ACQP. Example 2 A party has a right of withdrawal, but the information of the right of withdrawal is pro- 9 vided within one of many standard clauses. This can not be regarded as adequate information. According to Art. 5:103(1) sent. 1 ACQP the maximum time limit applies. Example 3 A party to a sales contract gives information of the right of withdrawal to the other party 10 as set forth in Art. 5:104 ACQP but does not inform the entitled party that the withdrawal period lapses no earlier than fourteen days after the goods have been received. The entitled party is merely informed that it can withdraw within fourteen days after both the contract has been concluded and information of the right of withdrawal has been given. This is not in accordance with Art. 5:104 ACQP. Therefore, the maximum time limit in Art. 5:103(1) sent. 1 ACQP applies. Example 4 A party to a sales contract information of the right of withdrawal to the other party 11 equivalent to Art. 5:104 ACQP but does not inform the entitled party that the withdrawal period is timely if dispatched within the withdrawal period. This is not in accordance with Art. 5:104 ACQP. Therefore, the maximum time limit in Art. 5:103(1) sent. 1 ACQP applies.

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Art 5:105 1

Chapter 5: Withdrawal General Provisions

Article 5:105: Effects of withdrawal (1) Withdrawal from a contract terminates the obligations to perform the contract. Each party has to return at its own expense to the other what it received under the contract, unless the contract provides otherwise in favour of the entitled party. The withdrawing party is not liable to pay any other costs and does not incur any other liability through the exercise of its rights of withdrawal. The other party must return any payment received from the party that has withdrawn free of charge and as soon as possible, and in any case not later than thirty days after the withdrawal becomes effective. (2) The party withdrawing from the contract is not liable for damage to the received goods, provided that it exercised reasonable care. The same party is not liable for diminished value of the received goods caused by inspecting and testing. It is liable for the diminished value that results from their normal use, unless the party had not received adequate information of its right of withdrawal.

A. Foundation in the Acquis 1.

Sources

1 The requirements of this Article are mainly based on Art. 6(1) and (2) Distance Selling D., Art. 7(4) and (5) Financial Services Distance Selling D. as well as on Art. 5(2) of the Doorstep Selling D. as interpreted by the ECJ in C-350/03 – Schulte and C-299/04 – Crailsheimer. Art. 6(1) and (2) Distance Selling D.

1. [...] The only charge that may be made to the consumer because of the exercise of his right of withdrawal is the direct cost of returning the goods. [...] 2. Where the right of withdrawal has been exercised by the consumer pursuant to this Article, the supplier shall be obliged to reimburse the sums paid by the consumer free of charge. The only charge that may be made to the consumer because of the exercise of his right of withdrawal is the direct cost of returning the goods. Such reimbursement must be carried out as soon as possible and in any case within 30 days.

Art. 7(4) and (5) Financial Services Distance Selling D.

4. The supplier shall, without any undue delay and no later than within 30 calendar days, return to the consumer any sums he has received from him in accordance with the distance contract, except for the amount referred to in paragraph 1. This period shall begin from the day on which the supplier receives the notification of withdrawal. 5. The consumer shall return to the supplier any sums and/or property he has received from the supplier without any undue delay and no later than within 30 calendar days. This period shall begin from the day on which the consumer dispatches the notification of withdrawal.

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Art 5:105 2– 4

Article 5:105 Effects of withdrawal

Art. 5(2) Doorstep Selling D.

The giving of the notice shall have the effect of releasing the consumer from any obligations under the cancelled contract.

The ECJ held in C-350/03 – Schulte that ‘cancellation’ (as withdrawal is called in the 2 terminology of the Doorstep Selling D.) has the effect of releasing the consumer from any obligations under the ‘cancelled’ contract. This entails for both the consumer and the business that the status quo ante must be restored. The ECJ further held that the Doorstep Selling D. does not preclude national legislation which obliges the consumer, in the event of withdrawal from a secured credit agreement, not only to repay the amounts received under the contract but also to pay to the lender interest at the market rate. These principles were further refined in C-299/04 – Crailsheimer for the case that the consumer has not been informed of his or her right of withdrawal.

2.

Development

In respect of the effects of the withdrawal, the directives are based upon the main prin- 3 ciple that by virtue of the withdrawal the performance obligations under the contract cease to exist and that effectuated performance must be returned or reimbursed for. The Article at hand is based on this principle which is clearly expressed in various provisions of the relevant directives, particularly Art. 5(2) of the Doorstep Selling D., Art. 6(2) of the Distance Selling D. and Art. 7(4) of the Financial Services Distance Selling D. The doctrinal background of this principle may be discussed in view of a number of different aspects. First, it follows from the relatively new Distance Selling D. that the entitled party has a 4 claim for performance during the withdrawal period and accordingly until the exercise of the right of withdrawal, the contract should (initially) be considered valid and enforceable (cf. Art. 6(1) sent. 3 of the Distance Selling D. which calculates the period for withdrawal in the case of goods, from the day of receipt by the consumer and Art. 6(1) sent. 3 in conjunction with Art. 7(1) of the Distance Selling D.). Therefore, according to this directive, the existence of a right of withdrawal does not preclude the validity of the contract, although an unstable situation exists until the right of withdrawal ceases to exist (‘provisional validity’). This approach may be doubted with regard to some other directives and their transposition in some Member States (cf. e.g. Art. 6(1) sent. 4 of the Financial Services Distance Selling D. with the possibility of suspending the ‘enforceability of contracts relating to investment services’ under Member State law). However, this provision could also be interpreted as a confirmation that enforceability and full validity from the outset is the rule and that specific provisions are needed to depart from such rule). National implementing measures of the Doorstep Selling D. sometimes provide that the contract is not ‘concluded’ before the expiry of the period for withdrawal (cf. e.g. Art. 89 of the Belgian Unfair Trade Practices Act). In Germany, the concept of “pending invalidity” (schwebende Unwirksamkeit) that was originally adopted with regard to doorstep selling (BGH (German Supreme Court), Peter Møgelvang-Hansen/Evelyne Terryn/Reiner Schulze

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Art 5:105 5, 6

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Neue Juristische Wochenschrift (NJW) 1996, 57 et seq.), was abandoned when the legislator implemented the Distance Selling D. in 2000 and harmonised the legal nature of the right of withdrawal in German CC § 361a and § 361b (German CC now § 355). Now the concept of “pending validity” (schwebende Wirksamkeit) applies. As the rule of Art. 6(1) sent. 3 of the Distance Selling D. for the calculation of the period of withdrawal was generalised in Art. 5:103(1) ACQP, it follows that this draft assumes that the existence of a right of withdrawal does not preclude the validity of the contract. 5 Second, neither the current provisions in the acquis nor the case law of the ECJ determine conclusively whether in case of withdrawal the contract ceases to have effect retrospectively or whether the contract only ceases to have effect for the future. The Advocate General in case C-299/04 – Crailsheimer did state that withdrawal ‘has the effect of making the agreement void from the outset’, so that ‘it seems that the status quo that existed before the conclusion of the agreement should be restored’. The wording of the ECJ was not conclusive. The ECJ did not refer to the contract being void, but merely to the restoration of the status quo ante. The status quo ante can be achieved either way, be it by considering that the contract has never existed and is to be regarded as void (restitutionary claims are then often based on principles of unjustified enrichment), or by establishing specific legal obligations to return what one has received under the contract. The directives and the case law thus seem to leave it open to the Member States whether the contract from which a party withdraws ceases to have effect retrospectively or only for the future. This question also remains subject to debate in a number of Member States. In the Netherlands, the right of withdrawal is referred to as a right to ‘terminate’ the contract in the legal provisions which implement the directives. However, it has been suggested in scholarly writing (Hijma/Valk, Wettelijke bedenktijd, Deventer (2004), p. 33) that the restitutionary obligations of the parties should rather follow the rule which apply when a contract is rescinded (Dutch CC Art. 6:201 et seq.). Similarly, in France, some authors have argued that withdrawal should be qualified as an rescission of the contract (Detraz, Contrats-Concurrence-Consommation, May 2004, p. 7-13). In Germany the effects of withdrawal are principally linked to the rules on termination of the contract. Under this approach, the original contractual duties to perform are replaced by duties to return and to reimburse which could also be regarded as a kind of contractual obligation (e.g. German CC § 357, 346 et seq.). 6 The present acquis does not provide for clear answers to these doctrinal questions. Against this background paragraph (1) only states that withdrawal terminates the obligations to perform the contract. As a consequence of this rule, both parties are no longer obliged to perform. But this rule does not add anything to the discussion whether withdrawal extinguishes all contractual obligations completely (even ex ante) or whether it only ends the original obligations to perform at the moment of its exercise and replaces them by obligations to return and reimburse.

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Article 5:105 Effects of withdrawal

B.

Commentary

1.

Meaning and Purpose

Art 5:105 7–10

Paragraph (1) sent. 1 implies that the consumer is released from any obligations under the 7 contract. Parties no longer have to perform the contract. Paragraph (1) sent. 2 provides the general rule on the effects of the withdrawal as concerning goods and payments received under the contract. The following sentences 3 and 4 regulate details on costs for returning the received goods and other costs of the withdrawing party, and on return of the payment made by this party. The rules in paragraph (2) are not directly expressed in the acquis, but they appear ne- 8 cessary in order for the provisions of the acquis to be effective. They are based on the principle which is implied in some provisions (e.g. in Art. 6(1) and (2) Distance Selling D.) and in the jurisprudence of the ECJ – particularly case C-350/03 – Schulte and C-229/ 04 – Crailsheimer, that the entitled party must not be deterred from exercising its right of withdrawal by its factual consequences. On the other hand, abuse of the right of withdrawal must be avoided and the other party must not be made to bear excessive risks. Paragraph 2 balances these aspects.

2.

Context

The current acquis does not provide for detailed solutions for all problems that can arise 9 when unwinding a contract. More detailed rules are needed to determine, for example, how the monetary value is to be determined in case a party cannot, as such, return what it has received under the contract. What is the maximum and minimum liability of a party and what defences can be invoked in order to escape liability? Similar questions arise when a contract is terminated or rescinded, and a reference to the effects of termination or of rescission (restitutionary claims are then often based on principles of unjustified enrichment) could again provide for a solution. In the further development of European legislation, a choice will need to be made whether to refer to the rules on the effects of termination or of rescission. Regardless of this issue, the ECJ has made clear in case C-299/04 – Crailsheimer that a different standard of liability is required depending on whether the consumer had or had not been informed of his right or her of withdrawal. A similar differentiation in liability can be observed in many national rules on unjustified enrichment that reduce the liability of the enriched person who is acting in good faith. Any future reference to such rules would have to clarify how these notions are to be interpreted and applied to a consumer who withdraws from a contract. There are other obvious problems which surround return and reimbursement; but the ex- 10 isting European Community law does not provide for clear solutions. For example, the situation may arise that the business is obliged under Art. 6(2) of the Distance Selling D. and the corresponding Article at hand, to reimburse the payment made by the entitled party within thirty days, but that the entitled party has not returned the goods within this

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Art 5:105 11–14

Chapter 5: Withdrawal General Provisions

period, and the business cannot be sure whether the entitled party will ever return the goods. In some national systems, it is accepted that the rules on withholding performance will also apply to the reciprocal obligations of return and reimbursement that arise when a contract is extinguished ab initio (for Belgium, cf. Cass. 12 September 1986, Arr. Cass. 1986-87, 43). Again, the general rules of returning and reimbursement which are based on other sources will have to be referred to in the further development of European legislation in order to have comprehensive and detailed rules dealing with the effects of withdrawal. In addition, a decision will have to be made whether one should generally refer to the rules that determine the effects of rescission, or those which govern termination.

3.

Explanation

11 Withdrawal releases both parties from any obligations to perform the contract and it implies restoration of the status quo ante. Each party has to return to the other what it has received under the contract. Each party must do so at its own expense. The contract can provide otherwise in favour of the party that is entitled to withdraw from the contract (paragraph (1) sent. 2). This principle is reflected in Art. 6(2) of the Distance Selling D. and it balances the interests of consumers and business. The entitled party can avoid the costs of returning the goods if it exercises its right of withdrawal before the goods have been delivered. 12 In any event, paragraph (1) sent. 3 excludes that the withdrawing party has to incur any other liability because of the exercise of its right of withdrawal. No damages or penalty can be imposed on the consumer for the sole reason that he or she has exercised his or her right of withdrawal. The ECJ held in Case C-423/97 – Travel Vac that a contract must not provide that the consumer must pay a specified lump sum for damage caused to the business on the sole ground that the consumer has exercised a right of withdrawal. In Case C489/07 – Messner v Krüger, the Advocate General did state that Art. 6(1) and (2) of the Distance Selling D. is to be interpreted as precluding a provision of national law which generally provides that a seller may claim compensation for the use of the consumer goods delivered. 13 Paragraph (1) sent. 4 corresponds to Art. 6(2) of the Distance Selling D. The period is calculated from the moment when the right of withdrawal becomes effective. According to Art. 5:102 ACQP, withdrawal must be communicated to the other party. Although withdrawal will be timely if it is dispatched within the period for withdrawal (Art. 5:103 (2) ACQP), it must still reach the other party in order to become effective. The Computation of Time Reg. 1182/71 applies to the calculation of the thirty days period. 14 Paragraph (2) sent. 1 excludes liability for damage due to circumstances beyond the reasonable care of the entitled party. Similar provisions can be found in several implementing provisions in some Member States such as the United Kingdom (for example, Regulation 17(2) Consumer Protection Distance Selling Regulations 2000). 264

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Article 5:105 Effects of withdrawal

Art 5:105 15–17

What can be considered to be reasonable care may vary depending on the circumstances. One of the circumstances that must be taken into account is whether the entitled party has been informed of the existence of a right of withdrawal. The standard of care which is considered to be reasonable will be lower if the entitled party was not aware of the possibility of returning the goods. A differentiation in the standard of care can also be found in some Member States, e.g. Germany. If the consumer has not been informed of his or her right of withdrawal, the standard of care is the diligentia quam in suis, i.e. the level of care which the consumer exercises in his or her own affairs (German CC § 357(3) sent. 3 in conjunction with § 346(3) sent. 1(3)). However, if the consumer was informed of the right of withdrawal, strict liability applies. Paragraph (2) sent. 2 deals with the delicate problem of diminished value caused by in- 15 spection and testing of the goods. As the right of withdrawal is meant to enable the entitled party to make an informed choice, it should not be deterred from inspecting and testing the goods. Such a rule is made explicit in Germany in CC § 357(3). In other Member States, although no explicit rule may be present, the same solution has been advocated in the literature (for the Netherlands, Hijma/Valk, Wettelijke bedenktijd, Deventer (2004), p. 82; for Belgium, Terryn, Het herroepingsrecht als instrument van consumentenbescherming, KU Leuven 2005, No.367). Paragraph (2) sent. 3 deals with liability for the diminished value of the goods due to 16 their normal use. Again, this provision balances the interests of consumers and businesses. Article 5:103(1) sent. 2 ACQP provides that if the subject-matter of the contract is the delivery of goods, the period lapses not earlier than fourteen days after the goods have been received. This implies that the other party is obliged to deliver the goods before the period for withdrawal starts to run. The other party cannot avoid possible diminished value due to the use of the goods by postponing performance and the entitled party can withdraw from a contract even if the other party did perform in accordance with the contract. But, if the entitled party has not been informed of the existence of a right of withdrawal, the balance of interests leads to a different solution: the entitled party will then not be held liable for diminished value due to normal use. The same solution has been advocated in the literature in the Netherlands (Hijma/ Valk, Wettelijke bedenktijd, Deventer (2004), p. 83). A similar provision can be found in German law but only on the condition that the consumer has been expressly informed of the consequences of normal use during the period for withdrawal (German CC § 357(3)). If the right of withdrawal is exercised before the contract is concluded, statements which 17 were made by the entitled party and which aimed at the conclusion of the contract cease to have effect. The present rule does not provide this expressly, but this effect follows from a combination of the present Article with Art. 5:102 and Art. 5:103 ACQP, which do not limit the exercise of the withdrawal to a certain time after the conclusion of the contract.

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Art 5:105, 18–20 Art 5:106

4.

Chapter 5: Withdrawal General Provisions

Examples

Example 1 18 A party buys a flat screen and uses it for a number of days, thus exceeding what is necessary to test the good. The buyer then withdraws from the contract. He will have to return the screen at his own costs, and is liable to compensate for the loss of value, or damage caused to the screen caused by its use (cf. OGH (Austrian Supreme Court), 27 September 2005, 1 Ob 110/05s). No such compensation is due if the buyer has not been informed of his right of withdrawal. Example 2 19 A party buys a camera on the internet. The camera is delivered, but on the same day the buyer’s house is struck by lightning and burns down. The camera is destroyed. The buyer can still withdraw from the contract and the other party will have to return buyer’s payment although latter will be unable to return the camera. Example 3 20 A party buys clothes by mail order, unpacks the clothes and tries them on. He decides they do not flatter him and sends them back. The buyer does not have to compensate for the damage caused by unpacking and trying the clothes.

Article 5:106: Linked contracts (1) If a consumer exercises a right of withdrawal from a contract for the supply of goods or services by a business, the effects of withdrawal extend to any linked contract. (2) Contracts are linked if they objectively form an economic unit. (3) If a contract is partially or exclusively financed by a credit contract, they form an economic unit in particular: (a) if the business supplying goods or services finances the consumer’s performance or (b) if the supplier of credit uses the supplier of goods or services for the formation of the credit contract or (c) if the credit contract refers to specific goods or services to be financed with this credit, and if this link between both contracts was suggested by the supplier of goods or services, or by the supplier of credit, unless other circumstances indicate that these two contracts do not form an economic unit. (4) Article 5:105 (Effects of withdrawal) applies accordingly to the linked contract. (5) Paragraph (1) does not extend the effect of withdrawal from a credit contract to a contract for goods or services whose price depends on fluctuations in the financial market outside the control of the business, and which may occur during the withdrawal period.

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Art 5:106 1

Article 5:106 Linked contracts

A. Foundation in the Acquis 1.

Sources

This Article is mainly based on Art. 6(4) of the Distance Selling D.; Art. 6(7) of the 1 Financial Services Distance Selling D., Art. 7 of the Timeshare D. 1994, Art. 9(1) of the Timeshare D. 2008, Art. 3(l) and Art. 15 of the Consumer Credit D. 2008 were also relied on for developing this general rule for linked contracts. The Doorstep Selling D. has no explicit provisions on linked contracts. Art. 6(4) Distance Selling D.

The Member States shall make provision in their legislation to ensure that: – if the price of goods or services is fully or partly covered by credit granted by the supplier, or – if that price is fully or partly covered by credit granted to the consumer by a third party on the basis of an agreement between the third party and the supplier, the credit agreement shall be cancelled, without any penalty, if the consumer exercises his right to withdraw from the contract in accordance with paragraph 1. Member States shall determine the detailed rules for cancellation of the credit agreement.

Art. 6(7) Financial Services Distance Selling D.

This Article does not apply to credit agreements cancelled under the conditions of Article 6(4) of Directive 97/7/ EC or Article 7 of Directive 94/47/ EC of the European Parliament and of the Council of 26 October 1994 on the protection of purchasers in respect of certain aspects of contracts relating to the purchase of the right to use immovable properties on a timeshare basis(11).

Art. 7 Timeshare D. 1994

The Member States shall make provision in their legislation to ensure that: – if the price is fully or partly covered by credit granted by the vendor, or – if the price is fully or partly covered by credit granted to the purchaser by a third party on the basis of an agreement between the third party and the vendor, the credit agreement shall be cancelled, without any penalty, if the purchaser exercises his right to cancel or withdraw from the contract as provided for in Article 5. The Member States shall lay down detailed arrangements to govern the cancellation of credit agreements.

Art. 9(1) Timeshare D. 2008

1. Member States shall ensure that in relation to timeshare, longtern holiday product ad exchange contract any advance payment, provision of guarantees of money on accounts, explicit acknowledgement of debt or any other consideration to the trader or any third party by the consumer, before the end of the withdrawal period according to in Article 6, is prohibited.

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Art 5:106 2

Chapter 5: Withdrawal General Provisions

Art. 3(n) Consumer Credit D. 2008

“linked credit agreement” means a credit agreement where (i) the credit in question serves exclusively to finance an agreement concerning the supply of goods or the provision of a service and (ii) those two agreements form from an objective point of view a commercial unit; a commercial unit is involved where the supplier or service provider himself finances the credit for the consumer or, if it is financed by a third party, if the creditor uses the services of the supplier or service provider in connection with the conclusion, or preparation, of the credit agreement, or if the credit agreement makes reference to the specific goods or services to be financed with the credit

Art. 15 Consumer Credit D. 2008

1. Where the consumer has exercised a right of withdrawal concerning a contract for the supply of goods or services by a trader, he shall no longer be bound by a linked credit agreement.

2.

Development

2 The contract from which the consumer withdraws often does not stand alone. An insurance contract may be linked to a sales contract for a car; a credit contract may have been concluded to finance a timeshare contract. Specific provisions are then needed to determine the effect of withdrawal from one contract on linked transactions. The effect on linked contracts determines to a large extent the effectiveness of a right of withdrawal. The regulation of linked contracts in the existing directives is currently incoherent and insufficient. Whereas some directives do not provide for specific provisions dealing with linked contracts, the provisions in other directives vary widely in scope and with regard to the consequences of the exercise of a right of withdrawal on linked contracts. A general rule on the fate of linked contracts such as the present Article avoids the uncertainty that presently governs the matter. Cases C-350/03 – Schulte and C-299/04 – Crailsheimer have illustrated that, in the absence of explicit provisions in a directive, the general concept of effectiveness of Community law can in principle not be relied on for determining the fate of linked contracts, as this remains a question of national law. In these cases, the effect which the withdrawal (‘cancellation in the terminology of the Doorstep Selling D.) from a secured credit contract concluded in a doorstep selling situation has on the contract for the sale of immovable property was at stake. The ECJ held in Schulte that ‘although the directive does not preclude national law from providing, where the two contracts form a single economic unit, that the cancellation of the secured credit contract has an effect on the validity of the contract for sale of the immovable property, it does not require such an effect in a case such as that described by the referring court’. The ECJ nevertheless did impose some limits on the discretion of the national legislator to determine the effects of the exercise of a right of withdrawal in case the necessary information with regard to the right of withdrawal had not been provided. It decided that ‘in a situation where, if the bank had complied with its obligation to inform the consumer of his right of cancellation, the consumer would have been able to avoid exposure to the 268

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Article 5:106 Linked contracts

Art 5:106 3–5

risks inherent in investments such as those at issue in the main proceedings, Art. 4 of the Doorstep Selling D. requires Member States to ensure that their legislation protects consumers who have been unable to avoid exposure to such risks, by adopting suitable measures to allow them to avoid bearing the consequences of the materialisation of those risks’. The exact implication of these cases relying on provisions of national law that deal with linked contracts remains controversial. The Article at hand avoids further uncertainty and is based on the general principles that 3 can be found in those directives that currently regulate the fate of linked contracts (the Distance Selling D., the Timeshare D. 1994, the Financial Services Distance Selling D. and the Consumer Credit D. 2008). Paragraph (1) sets out the general principle. Paragrpah (2) gives a definition of linked contracts by reference to the concept of an economic unit and paragraph (3) provides further guidance for the interpretation and application of this concept to linked credit contracts. Paragraph (4) makes it clear that the effects of withdrawal on the linked contract are the same for the main contract. In the Distance Selling D. and the Timeshare D. 1994 only credit contracts are men- 4 tioned as linked contracts (Art. 6(4) and Art. 7 respectively). In the Financial Services Distance Selling D., a wider concept of linked contracts has been adopted. Article 6(7) sent. 2 of the Financial Services Distance Selling D. mentions ‘another distance contract (that) has been attached concerning services provided by the supplier or by a third party on the basis of an agreement between the third party and the supplier’ without further defining what the exact link between the main contract for financial services and the attached contract ought to be. It is clear that contracts other than credit agreements can also be linked contracts (e.g. assurance contracts, maintenance contracts). The Financial Services Distance Selling D. acknowledges this but does not define the exact relationship between the contracts, leading to problems of interpretation. The Timeshare D. 2008 states that any exchange contract ancillary to the timeshare contract or “any other ancillary contract” is automatically terminated (Art. 11(1)). However, no further guidance on the notion of “ancillary” is given. The concept of the ‘economic unit’ that stems from German law (former § 9 Consumer Credit Act as later codified in German CC § 358), which was a source of inspiration for the Consumer Credit D. 2008 (Art. 3(n)), is a useful concept in this context. It is the economic link, the commercial point of view and not the exact legal constellation that determines whether the contracts can be considered to form a unit. This concept leaves some discretion to the judge who will have to decide, on the basis of objective factors, depending on the specific circumstances of the case, whether the contracts can be considered to form a commercial unit. This concept is referred to in the present Article. The Article goes somewhat further than the current provisions on linked contracts in 5 that it does not exclude that the withdrawal from the credit contract has implications for the sales contract. To avoid speculation by the consumer, it is therefore necessary to add an exception in paragraph (5) withdrawal from a credit contract financing a speculative transaction will not affect this sales contract.

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Art 5:106 6, 7

Chapter 5: Withdrawal General Provisions

6 Withdrawal from one contract automatically entails withdrawal from the linked contract. No separate communication of withdrawal is needed. This rule has been read into the wording of Art. 6(4) of the Distance Selling D. (Micklitz, Zeitschrift für Europäisches Privatrecht (ZEuP) 1999, 888) and can be generalised. Where the supplier under the main contract is not the same person as the supplier under the linked contract, one may want to consider imposing an obligation on the supplier under the main contract to inform without delay the supplier under the linked contract of the notice of withdrawal. This is currently not provided for in the directives, but such a useful obligation can inter alia be found in the U. K. Consumer Protection Distance Selling Regulations 2000 (regulation 15(2): “Where a related credit agreement is cancelled by virtue of paragraph (1), the supplier shall, if he is not the same person as the creditor under that agreement, forthwith on receipt of the notice of cancellation inform the creditor that the notice has been given.”).

B.

Commentary

1.

Meaning and Purpose

7 The Article ensures the effectiveness of a right of withdrawal, as the consumer will not be bound by a linked contract. Withdrawal from one contract automatically entails withdrawal from the linked contract. This also has the consequence that the consumer cannot choose to uphold the linked contract. However, the parties can deviate from this rule in favour of the entitled party and allow the consumer to choose to uphold the linked contract. Paragraph (2) refers to the concept of an ‘economic unit’ to determine under what circumstances the connection between two contracts is close enough for the withdrawal from one contract to have legal consequences for the other contract. Usually, linked contracts will be credit contracts financing sales contracts, but other contracts are not excluded from being linked contracts as well. The non-exhaustive list in paragraph (3) provides further guidance for the interpretation of the concept of the economic unit and sets out under what circumstances credit contracts form an economic unit with the contract they finance. The legal consequences of withdrawal from the main contract for the linked contract are determined by paragraph (4). This rule refers to Art. 5:105 ACQP which deals with the effects of withdrawal on the obligations of the parties that stem from the main contract. Withdrawal has the same effect on the obligations stemming from the linked contract. The Article does not exclude that withdrawal from a credit contract may have consequences for the sales contract with which it forms an economic unit. Paragraph (5) is meant to avoid speculation by the consumer.

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Article 5:106 Linked contracts

2.

Art 5:106 8–10

Context

The Article determines the consequences of withdrawal on linked contracts. Withdrawal 8 from one contract also entails withdrawal from a contract that forms an economic unit with that contract. The exact consequences for the linked contract of such ‘indirect’ withdrawal are determined by reference to Art. 5:105 ACQP, to which paragraph (4) refers. There is no reason to adopt different rules with regard to restitutionary obligations stemming from withdrawal for these linked contracts. Article 5:105 ACQP deals with the effects of withdrawal on the obligations of the parties that stem from the ‘main’ contract. The same principles can apply to the obligations that stem from the linked contract. The current directives do not determine the effects of the withdrawal of a linked contract in sufficient detail and only provide that withdrawal from the linked contract is to occur ‘without any penalty’ (Art. 6(4) of the Distance Selling D.), Art. 7 of the Timeshare D. 1994 and Art. 6(7) sent. 2 of the Financial Services Distance Selling D.) or ‘at no cost to the consumer’ (Art. 11(1) of the Timeshare D. 2008). The same principle can be found in Art. 5:105 ACQP. It further follows from Art. 5:105 ACQP in conjunction with paragraph (4) that the obligations to perform the linked contract are terminated (Art. 5:105(1) sent. 1 ACQP) and that both parties have to return what they received under the linked contract at their own expense (Art. 5:105(1) sent. 2 ACQP). Payments received under the linked contract will have to be returned in accordance with Art. 5:105(1) sent. 4 ACQP. Liability for damages to goods that may have been received under the linked contract will be governed by Art. 5:105(2) ACQP.

3.

Explanation

The Article ensures the effectiveness of a right of withdrawal. A right of withdrawal from 9 a main contract will not benefit the consumer if he or she remains bound by a linked contract. The Article ensures that a consumer does not remain bound by a contract that is of no use to him or her if the consumer withdraws from the main contract. The Article also protects the consumer against a contract being artificially split up into legally separate contracts. Withdrawal from one contract automatically entails withdrawal from the linked contract. No separate communication of withdrawal is needed. The consumer cannot choose to uphold the linked contract. Parties can deviate from this rule in favour of the entitled party and allow the consumer to choose to uphold the linked contract. Paragraph (2) sets out under what circumstances the connection between two contracts 10 is close enough for the withdrawal from one contract to have legal consequences for the other contract. Contracts are linked if they form an economic unit from an objective point of view. This will be so when both contracts are linked in such a way that one contract could not have been concluded without the other or when one contract only has a reason of existence because of the existence of the other contract. Reference to objective factors bars businesses from avoiding this effect on a linked contract by pointing out to consumers that they cannot expect the contracts to be linked.

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Art 5:106 11–15

Chapter 5: Withdrawal General Provisions

Linked contracts will most often be credit contracts financing sales contracts, but it is not excluded that other contracts, such as e.g. maintenance contracts or assurance contracts are also linked contracts. Contracts between the same parties can form an economic unit. It is also possible that contracts in a tripartite relationship form an economic unit. This may in particular be the case if a third party provides goods or services to a consumer on the basis of a contract with a business with whom the consumer has concluded the main contract. 11 Paragraph (3) provides a non-exhaustive list of situations in which a credit contract forms an economic unit with a contract that is wholly or partially financed by this credit contract. The elements in this list are based on German CC § 358 and the Art. 3(n) of the Consumer Credit D. 2008. 12 Paragraph (4) determines the legal consequences of withdrawal for the linked contract. The current directives do not determine the effects of the withdrawal of a linked contract in sufficient detail. A reference to Art. 5:105 ACQP (dealing with the effects of withdrawal on the obligations of the parties stemming from the main contract) ensures consistency. How Art. 5:105 ACQP is to be applied to linked contracts has been set out above (cf. No. 8). 13 The Article at hand does not exclude that withdrawal from a credit contract may have consequences for the sales contract with which it forms an economic unit. Speculation by the consumer should, however, be excluded. If a consumer can withdraw from a credit contract that forms an economic unit with a contract for the supply of goods or services whose price depends on fluctuations in the financial market which are outside the suppliers control and which may occur during the withdrawal period (Art. 5:A-01(3)(f) ACQP), withdrawal from the credit contract will not affect this speculatively linked contract. A similar exception to paragraph (5) can be found in German CC § 491(3) No. 2.

4.

Examples

Example 1 14 A consumer is contacted on his doorstep by a business A. He concludes a contract for the installation of a burglary alarm by business A as well as a separate five year contract for the maintenance of this system with business B, the latter being represented by business A. He withdraws from the contract for the installation of the alarm by sending a registered letter to business A. The consumer will automatically no longer be bound by the maintenance contract. Example 2 15 A consumer opens an account through the internet and takes out a “cash account assurance” policy. (A “cash account assurance” is an assurance policy that entitles the next-ofkin of the account holder to an amount equal to the amount in the account or to a clearance of the balance in case of death by accident of the account holder). If the consumer 272

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Article 5:106 Linked contracts

Art 5:106 16

withdraws from the contract for the opening of the account, this will automatically terminate the assurance contract. Example 3 A consumer is contacted by car dealer ‘Ford’ and concludes in her house a contract for 16 the sale of a car. A credit contract between the consumer and Ford-Bank for financing the sale of the car is concluded on the same day, and the consumer fills out the forms with the help of car dealer Ford. The contract for the sale of the car and the contract financing that sale form an economic unit and are linked contracts (cf. LG Braunschweig (German Regional Court), judgment of 16 June 1994, 7 S 7/94). Withdrawal from the contract for the sale of the car will entail automatic withdrawal from the credit contract.

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Specific Provisions Part A: Contracts Negotiated Away from Business Premises Article 5:A-01: Right to withdraw from contracts negotiated away from business premises (1) A consumer has the right to withdraw from the contract under which a business supplies goods or services, including financial services, if the consumer’s offer or acceptance was expressed away from the business premises. (2) Unless the business has exclusively used means of distance communication for concluding the contract, paragraph (1) applies only to contracts under which a consumer has to pay at least a statutory minimum amount. (3) Paragraph (1) does not apply to (a) contracts concluded by means of automatic vending machines or automated commercial premises, (b) contracts concluded with telecommunications operators through the use of public payphones, (c) contracts concluded for the construction and sale of immovable property or relating to other immovable property rights, excluding tenancy contracts, (d) contracts for foods, beverages or other goods intended for everyday consumption supplied by regular roundsmen to the home, residence or workplace of the consumer, (e) contracts concluded by means of distance communication, but outside of an organized distance sales or service-provision scheme run by the business, (f) contracts for goods or services whose price depends on fluctuations in the financial market which may occur during the withdrawal period and which are outside the control of the business, (g) contracts concluded at an auction, (h) travel and baggage or similar short-term insurance policies of less than one month’s duration. (4) If the business has exclusively used means of distance communication for concluding the contract, paragraph (1) does also not apply to contracts (a) for accommodation, transport, catering or leisure services, where the business undertakes at the time of conclusion of the contract to supply these services on a specific date or within a specific period, (b) for the supply of services other than financial services if performance has begun, at the consumer’s express and informed request, before the end of the withdrawal period referred to in Article 5:103 (Withdrawal period) paragraph (1), (c) for goods made to the consumer’s specifications or which are clearly personalised or which, by reason of their nature, cannot be returned or are liable to deteriorate or expire rapidly,

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Article 5:A-01 Right to withdraw from contracts negotiated away from business premises

Art 5:A-01 1–3

(d) for audio or video recordings or computer software (i) which were unsealed by the consumer, or (ii) which can be downloaded or reproduced for permanent use, in case of supply by electronic means. (e) for newspapers, periodicals and magazines, (f) for gaming and lottery services. (5) With regard to financial services, paragraph (1) does also not apply to contracts that have been fully performed by both parties, at the consumer’s express and informed request, before the consumer purports to exercise a right of withdrawal.

A. Foundation in the Acquis 1.

Sources

This Article aims to regulate more coherently the rights of withdrawal introduced by 1 Art. 5(1) sent. 1 of the Doorstep Selling D., Art. 6(1) sent. 1 Distance Selling D. and Art. 6(1) sent. 1 of the Financial Services Distance Selling D. Paragraph (2) and (3) of the present Article reorganise the current inconsistent excep- 2 tions established by the following provisions: Art. 3 of the Doorstep Selling D., Art. 3(1) and (2) and Art. 6(3) of the Distance Selling D. and Art. 6(2) and (3) of the Financial Services Distance Selling D. The exception in Art. 3(2), 2nd indent of the Distance Selling D. was interpreted by the ECJ in C-336/03 – EasyCar.

2.

Development

The Article at hand adopts a more coherent approach to some of the rules concerning 3 withdrawal from a contract by generalising those preconditions which are based upon a common fundamental precept. This refers to the Doorstep Selling D., the Distance Selling D. and the Financial Services Distance Selling D. The first of these directives concerns “contracts negotiated away from business premises” according to its official English title. But the contracts within the scope of the Distance Selling D. and the Financial Services Distance Selling D. are not negotiated in the professional supplier’s business premises either; in these cases the consumer also expresses its intention to conclude the contract away from the professional supplier’s business premises. The rights of withdrawal mentioned in Art. 5 of the Doorstep Selling D. and in Art. 6 of the Distance Selling D. as well as in Art. 6 of the Financial Services Distance Selling D. are concordant in this respect: they all recognise that risks exist for consumers when a contract is concluded away from the professional supplier’s business premises (‘out of shop contracts’). In these situations, it is assumed that consumers are usually less prepared for (or focused on) contractual negotiations, or are less informed about relevant contractual circumstances than they are when they enter the professional supplier’s business premises. This is why a structural imbalance in the negotiations can arise. Each of the three directives seeks to counter this imbalance by introducing a ‘cooling off’ period

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Art 5:A-01 4–6

Chapter 5: Withdrawal Specific Provisions . Part A: Contracts Negotiated Away from Business Premises

and a right of withdrawal for a specific situation. An overall rule that consolidates the rules applicable to the situations presently regulated by the three directives could make European contract law more coherent in this area. There are nevertheless some peculiarities to doorstep and distance selling contracts that demand a certain differentiation. This is the reason of the exceptions introduced to the general principle of paragraph (1) in paragraphs (2) to (4). 4 In accordance with the aim of obtaining more coherence, paragraph (1) refers to all the contracts under which a business supplies goods or services, if the consumer’s offer or acceptance was expressed away from the business premises. By this general rule, some particular situations, which are not covered by the three directives mentioned above, are included too (particularly the supply of goods and services on public streets and spaces). But this extension does not seem to be so profound as to completely abandon the advantages of a coherent rule. Moreover, the laws of some of the Member States support such a solution. In the implementation of the relevant directives, some of the national laws already go beyond the rules of the directives to a greater or lesser extent, for instance where they include contracts which have been concluded on public streets or places (e.g. Austria, § 3(2) KSchG; Germany, CC § 312; Spain, Art. 1(1)(a) of the Law 26/1991; also in Estonia contracts negotiated away from the business premises fall within the scope of protection (ConsLC, p. 176)). This general rule also implies that the period for withdrawal will be calculated differently for doorstep selling. The Doorstep Selling D. does not require that the goods have to be delivered for the withdrawal period to start, but some Member States have already introduced a similar solution in their national laws (Denmark, Hungary, Slovenia, Sweden, Greece, cf. ConsCL, p. 191). Such a generalisation seems justified as the consumer may have not been able to inspect the goods when he or she bought them in a doorstep selling situation. The same informational asymmetry that is a feature of distance selling may therefore be present. In any event, the consumer has an incentive to withdraw from the contract before the goods have been delivered, as this allows him to avoid incurring the costs of returning the goods (cf. Art. 5:105 ACQP). Finally, this general rule also allows to overcome a gap in the current Doorstep Selling D. and Distance Selling D.: contracts that were negotiated in a doorstep selling situation but concluded afterwards, by means of distance communication, for example by phone, were not covered by either of these directives.

3.

Political Issues

5 Both in doorstep selling and in distance selling situations, there may be a problem of asymmetric information. The consumer may have less information than the business due to the circumstances in which the contract is concluded. 6 The consumer buying in a doorstep selling situation is usually unable to compare products and prices. He or she will also often not be able to inspect the goods offered on sale. The extra time provided by the cooling off period allows him or her to compare products 276

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Article 5:A-01 Right to withdraw from contracts negotiated away from business premises

Art 5:A-01 7–9

or services and prices. However, in doorstep selling situations, the cooling off period does not only cure a problem of asymmetric information. Since in a doorstep selling situation consumers are more easily influenced by aggressive sales practices, the cooling off period also allows consumers to consider the merit of the contract they concluded without being subject to the pressure exercised by a salesperson. This function of the cooling off period is relevant to both contracts for goods and contracts for services that are concluded in a doorstep selling situation. In distance selling situations, asymmetric information is due to the fact that the contract 7 is concluded by means of distance communication and that the consumer is unable to inspect or test the goods, contrary to what happens for contracts concluded at the seller’s business premises. There is no problem here of pressure exercised by a business. The cooling off period allows the consumer to verify the quality or to test the goods as she or he could have done if the contract had been concluded at the business premises. When contracting for (financial) services at a distance, the means of communication 8 used are not the primary source of informational asymmetry. Concluding the contract at the business premises would generally not give more information on the services offered. With respect to the distance selling of financial services, it is therefore even harder to justify a right of withdrawal based on the situation in which the contract was negotiated. Financial services are intangibles. They are a bundle of contractual rights and obligations. It is perfectly possible to provide all the information needed to be informed on this bundle of rights and obligations even through means of distance communication. A cooling off period does not seem to put the consumer in a much better position anyhow. It may well be that there are advantages in receiving information on financial services in a face to face context, but the cooling off period does not remedy this possible shortcoming. If it is the complexity of the contract that justifies granting the consumer a right of withdrawal, one could argue that the consumer should have this right irrespective of the circumstances in which the contract was concluded. Finally, one could argue that a consumer may not be fully aware that it has concluded a contract through clicking a button, but the provisions of the E-Commerce D., reflected in Art. 4:105 ACQP provide for sufficient protection in this regard. One may therefore want to reconsider whether a right of withdrawal is an efficient means at all for the purpose of enhancing consumer protection with respect to distance selling of services and of financial services in particular. These arguments support the choice to consolidate the current exceptions in the present Article.

B.

Commentary

1.

Meaning and Purpose

Paragraph (1) gives the consumer the right to withdraw from a contract if the consumer 9 expresses his or her offer or consent away from the normal business premises. This right to withdraw is granted because in situations when a contract is concluded away from the business premises, consumers are usually less prepared for (or focused on) contractual negotiations, or less informed about relevant contractual circumstances than they are when Peter Møgelvang-Hansen/Evelyne Terryn/Reiner Schulze

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Art 5:A-01 10–14

Chapter 5: Withdrawal Specific Provisions . Part A: Contracts Negotiated Away from Business Premises

they enter business premises to shop. The right of withdrawal is meant to offer the consumer similar chances to conclude a fair contract as she or he would have had if the contract had been concluded at the business premises. 10 Paragraph (2) exempts from this general rule those contracts (other than distance selling contracts), under which a consumer has to pay less than a certain statutory minimum amount. Where the consumer concludes low value contracts, the necessity to provide protection by means of a right of withdrawal is not as essential as it is in other cases. 11 Paragraphs (3) and (4) of the present Article exempt certain contracts from this general principle. These exemptions are necessary to achieve a fair balance between the interests of businesses and consumers. The consumer will not have a right of withdrawal if such a right would systematically lead to substantial losses for the business, or if such a right is likely to lead to abuses by the consumer or, if the protection afforded by the right of withdrawal is unnecessary for the specific contract.

2.

Context

12 The present Article sets out the cases in which a consumer is entitled to withdraw from a contract. The relevant provisions concerning the exercise of the right of withdrawal are laid down in Art. 5:102 ACQP. The length of withdrawal period (Art. 5:103 ACQP) depends upon whether or not adequate information of the right of withdrawal was provided (Art. 5:104 ACQP). For the effects of withdrawal cf. Art. 5:105 ACQP. 13 The present Article has to be read together with Art. 2:203 ACQP et seq. A contract concluded away from the normal business premises is considered to be concluded in a situation in which the consumer is at a particular disadvantage, in the sense of Art. 2:203 ACQP. The business therefore has to provide the information mentioned in Art. 2:203 ACQP. Failure to provide that information leads to the remedies of Art. 2:208 ACQP. One of these remedies is the prolongation of the period for withdrawal for up to one year from the time the contract is concluded (cf. Art. 2:208(1) ACQP).

3.

Explanation

14 Paragraph (1) gives the consumer the right to withdraw from a contract if he or she expresses the offer or consent away from the normal business premises. It does not have to be demonstrated that the consumer was influenced or put under pressure by the business (Case C-423/97 – Travel Vac), or that the business was aware, or should have been aware, that the consumer expressed its consent outside the normal business premises (Case C299/04 – Crailsheimer). In the present Article, ‘financial services’ means ‘any service of a banking, credit, assurance, personal pension, investment or payment nature’ in accordance with Art. 2(b) of the Financial Services Distance Selling D.

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Article 5:A-01 Right to withdraw from contracts negotiated away from business premises

Art 5:A-01 15–18

Paragraph (2) exempts from this general rule those contracts (other than distance selling 15 contracts), under which a consumer has to pay less than a certain statutory minimum amount. This exemption is based on Art. 3(1) sent. 1 of the Doorstep Selling D. which allows Member States to decide that the Doorstep Selling D. “shall apply only to contracts for which the payment to be made by the consumer exceeds a specified amount.” According to Art. 3(1) sent. 2 of the Doorstep Selling D., the amount fixed by the Member States may not exceed 60 ECU. This option to exclude low value contracts has been exercised by 16 Member States with thresholds ranging from 10 EUR in Poland to 50 EUR in Belgium (cf. ConsLC, p. 182 for a detailed analysis of Member States law). A large study conducted in the United Kingdom, where consumers currently do not enjoy a cooling off period for low value contracts, sustains such an exemption. This study concluded that the exemption can be maintained for several reasons. Firstly, the products concerned in these low value contracts (typically contracts for cosmetics, cleaning materials and other household goods) are widely and easily available through other means and there is often a broad awareness of their prices in shops. Consequently consumers are normally better able to make an informed choice and to shop around if they wish. Secondly, it was pointed out that many suppliers are intent on securing repeated custom through offering convenience and value for money (OFT 2004 Study on doorstep selling, p. 6 http://www.oft.gov.uk). The risk that businesses would exploit the peculiarities of a doorstep selling situation is therefore far less present than for high value contracts, where it was demonstrated in the same study that businesses do often charge excessive prices in doorstep selling situations. It is not considered appropriate to extend this option to distance selling contracts as there is an additional factor that justifies a right of withdrawal for these contracts: the impossibility to inspect the goods and to verify their quality deprives the consumer of the information it needs to make an informed choice. In case of doorstep selling, the low value contracts concerned will typically be contracts for cosmetics, cleaning materials and other household goods (cf. OFT Study, p. 6) which the consumer will be able to inspect on the spot. Paragraph (3) provides some further exemptions from the general principle of para- 16 graph (1): Paragraph (3)(a) and (b) are based on Art. 3(1), 2nd and 3rd indent Distance Selling 17 D. These exemptions were implemented by the large majority of Member States (ConsLC, p. 495) and concern contracts that are not considered to be problematic. The same rationale underlies paragraph (3)(d) that combines Art. 3(2)(b) of the Doorstep Selling D. and Art. 3(2), 1st indent of the Distance Selling D. Paragraph (3)(c) combines Art. 3(2)(a) of the Doorstep Selling D. and Art. 3(1), 4th 18 indent of the Distance Selling D. (‘immovables’). These contracts are excluded as the genuine consent of parties to these contracts is warranted by other instruments of protection in accordance with national legislation, such as the conclusion of the contract before an official, or strict formal requirements.

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Art 5:A-01 19–21

Chapter 5: Withdrawal Specific Provisions . Part A: Contracts Negotiated Away from Business Premises

The counter-exception for tenancy in paragraph (3)(c) which stems from Art. 3(1), 4th indent of the Distance Selling D. comes in here and not under paragraph (4), because it is incoherent to grant the consumer a right of withdrawal for rental contracts concluded in distance selling situations, but not to grant him or her a right of withdrawal for rental contracts concluded in one of the other situations covered by paragraph (1). Finally, the counter-exception to Art. 4(2)(a) of the Doorstep Selling D. in the subparagraph of Art. 3(2)(a) of the Doorstep Selling D. was not incorporated because it is simply of a clarifying nature. 19 Paragraph (3)(e) corresponds to the current definition of distance contract in Art. 2(1) of the Distance Selling D. and Art. 2(a) of the Financial Services Distance Selling D. Contracts in which the business uses means of distance communication just exceptionally to conclude the contract are outside the scope of application of these provisions. In the present Article, ‘means of distance communication’ refers to ‘any means which, without the simultaneous physical presence of the supplier and the consumer, may be used for the conclusion of a contract between those parties’ in accordance with Art. 2(4) sent. 1 Distance Selling D. 20 In paragraph (3)(f), Art. 3(2)(d) and (e) of the Doorstep Selling D. and Art. 3(1), 1st indent Distance Selling D. are replaced by the exceptions of the Financial Services Distance Selling D. This gives the consumer of financial services the same rights of withdrawal whether or not the contract was concluded in a doorstep or in a distance selling situation. In accordance with Art. 6(2)(a) of the Financial Services Distance Selling D., paragraph (3)(f) includes ‘financial services whose price depends on fluctuations in the financial market outside the suppliers control, which may occur during the withdrawal period, such as services related to: – foreign exchange, – money market instruments, – transferable securities, – units in collective investment undertakings, – financial-futures contracts, including equivalent cash-settled instruments, – forward interest-rate agreements (FRAs), – interest-rate, currency and equity swaps, – options to acquire or dispose of any instruments referred to in this point including equivalent cash-settled instruments. This category includes in particular options on currency and on interest rates.’ 21 Paragraph (3)(g) is based on Art. 3(1), 5th indent Distance Selling D. It is an open question whether this provision of the Distance Selling D. only refers to traditional auctions (such as a fine art auction in one of the major auction houses, or a race horse auction) or whether it also applies to internet auctions (such as Ebay “auctions”). In case of traditional auctions it would be entirely impractical if a bidder who participates to the auction via phone could benefit from a right of withdrawal, while bidders who are present at the auction do not have such a right. With regard to internet auctions, in which all bidders participate via means of distance communication, one might argue that there is no such issue of unjustified unequal treatment of present and non-present bidders.

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Article 5:A-01 Right to withdraw from contracts negotiated away from business premises

Art 5:A-01 22, 23

While the acquis does not provide a clear answer to the question of how to understand the term “auction” in Art. 3(1), 5th indent Distance Selling D., the Member States seem to move towards a narrow interpretation of the term and thus limiting it to traditional auctions as described above (ConsLC, p. 497 et seq.). In Belgium, auctions are not exempted from the right of withdrawal. In Germany, auctions are exempted from the right of withdrawal, but the BGH (German Supreme Court) has held in this context that an Ebay ‘auction’ is not to be considered as an ‘auction’ for the purposes of this rule (BGH, Neue Juristische Wochenschrift (NJW) 2005, 53). Consumers using Ebay are thus not excluded from the right of withdrawal. The same result with regard to Ebay auctions was reported in the ConsLC in the following countries: Denmark exempts auctions where “a significant number of bidders are normally present at the place of the auction”; the Finnish Consumer Protection Act does not apply to contracts concluded at an auction, “if participation in the auction is possible also without using a means of distance communication”. In Spain, auctions are generally exempted from the scope of application, but the Law 7/1996 of January 15 on retail trade is, according to its Art. 38(3)(b), applicable to auctions concluded by electronic means; the Swedish law does not apply to contracts concluded at auctions where the bidding could be made by means other than at a distance; in France, Slovakia and Slovenia only public auctions are exempted (ConsLC, p. 497). Paragraph (3)(h) reflects the exception of Art. 6(2)(b) of the Financial Services Dis- 22 tance Selling D. Due to the nature of the contract and in order to avoid speculation by the consumer, it is logical to exclude short-term assurance policies from the right of withdrawal. According to Art. 1(1), 2nd indent of the Doorstep Selling D. the consumer does not en- 23 joy the protection of the directive where the visit by the business takes place at the express request of the consumer. The burden of proof that the consumer has expressly requested a business visit with regard to the contract lies with the business. If the consumer asked for a visit only in order to obtain more information and not with the intention to negotiate a contract the business visit does not fall within the exception. The exception stipulated in Art. 1(1), 2nd indent of the Doorstep Selling D. has not been included into the list of exceptions contained in paragraph (3). A review of Member States’ legislation shows that several countries (Denmark, France, Italy, Latvia and Poland) have decided not to included such an exception when implementing the Doorstep Selling D. and thus have extended the scope of protection to solicited visits (ConsLC, p. 180). There indeed seems to be good arguments to do so. A large study on doorstep selling in the United Kingdom found that consumers are subject to high pressure selling even when they requested the business visit themselves (OFT Study, cf. supra No. 15). The OFT has therefore proposed to abandon the exception. The DTI has accepted extending the protection from unsolicited visits to solicited visits. Legislation to amend the present rules would be brought forward at the earliest occasion (Response to the public consulta-

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Art 5:A-01 24–27

Chapter 5: Withdrawal Specific Provisions . Part A: Contracts Negotiated Away from Business Premises

tion on doorstep selling and cold calling in September 2006, http://www.dti.gov.uk/files/ file33819.pdf). 24 The exception of Art. 3(2)(c) of the Doorstep Selling D. (‘catalogue contracts’) is also not included in paragraph (3). The Distance Selling D. made this exception obsolete. Article 3(3) of the Doorstep Selling D. is not incorporated as it is not a mandatory provision but a clarification addressed to the Member States. 25 Paragraph (4) supplements paragraph (3) with particular exceptions for contracts concluded by the business exclusively by means of distance communication (for ‘means of distance communication’ see above Note 19). 26 Paragraph (4)(a) is based on Art. 3(2), 2nd indent of the Distance Selling D. The scope and rationale of this exemption was set out in C-336/03 – EasyCar. It is aimed at exempting suppliers of services in certain sectors because the requirements of the directive could affect those suppliers disproportionately. In particular, where the request of a service resulted into a booking and that booking is cancelled by the consumer at short notice before the date specified for the provision of that service. The ECJ therefore considered that car hire undertakings are transport services for the purposes of this exception. The exception applies when the time of performance was agreed upon at the time of the conclusion of the contract. 27 Paragraph (4)(b) is based on Art. 6(3), 1st indent of the Distance Selling D. (5) is based on Art. 6(2)(c) of the Financial Services Distance Selling D. Article 6(3), 1st indent of the Distance Selling D. provides that the consumer may not exercise the right of withdrawal in respect of contracts for the provision of services if performance has begun, with the consumer's agreement, before the end of the withdrawal period. Article 6(2)(c) of the Financial Services Distance Selling D. states that the right of withdrawal shall not apply to contracts that have been fully performed by both parties at the consumer's express request before the consumer exercises her or his right of withdrawal. The wording of these exceptions has been aligned and clarified: the right of withdrawal will be lost at the consumer's express and informed request for performance. The Financial Services Distance Selling D. already provided that the request had to be express. There was no such requirement in the Distance Selling D. Since the request needs to be informed, the consumer needs to be aware that performance (for distance selling of services other than financial services; full performance for financial services) during the period for withdrawal at her or his request extinguishes the right of withdrawal. Some Member States (including Finland, Latvia and the United Kingdom) already provide for such requirements in the national provisions implementing the Distance Selling D. (ConsLC, p. 519). In case of services other than financial services, only performance by the business before the end of the period for withdrawal extinguishes the right of withdrawal. On the other 282

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Article 5:A-01 Right to withdraw from contracts negotiated away from business premises

Art 5:A-01 28, 29

hand, in case of financial services, full performance by both parties before the end of the period for withdrawal extinguishes the right of withdrawal. The requirement of an informed request also avoids discussions (with regard to services other than financial services) about what acts constitute performance for the purposes of this rule (any act after the conclusion of the contract, or only performance of the ‘characteristic’ service). A Belgian Court held that booking a flight service by a business provider constituted performance. Consequently, the right of withdrawal was extinguished; provision of the flight service during the period of withdrawal was not required (Judge of the Peace Ghent (Belgium), eerste kanton, 7 April 2003, A. R. 010617 – Airstop). The wording of this rule prevents businesses from claiming that a minor act of performance during the period for withdrawal extinguishes the right of withdrawal if the consumer was not informed of this consequence. The right of withdrawal is in any case preserved if (other) pre-contractual information that was required has been omitted (Art. 2:201 ACQP et seq.). In such a case, Art. 2:208 (1) ACQP extends the withdrawal period. Another option would have been to combine these exceptions into one exception. Under this approach the right of withdrawal could have been excluded for contracts for the supply of services concluded away from normal business premises once performance has begun, with the consumer’s express and informed request, before the end of withdrawal period. It can indeed be argued that the exemptions in Art. 6(3), 1st indent of the Distance Selling D. and Art. 6(2)(c) of the Financial Services Distance Selling D. are currently inconsistent. For services other than financial services, there is no right of withdrawal if performance begins during the period for withdrawal. For financial services, such a right is extinguished only if these services have been fully performed. A generalisation of the exception of the Distance Selling D. would, however, lead to a reduction of the situations in which the consumer enjoys a right of withdrawal in case of distance selling of financial services. Paragraph (4)(c) is based on Art. 6(3), 3rd indent of the Distance Selling D. Allowing 28 the consumer a right of withdrawal for these categories of goods would result in significant losses for businesses. Absent such an exemption, it may well be that businesses decline to sell these categories of goods through means of distance communication. Paragraph (4)(d) is based on Art. 6(3), 4th indent of the Distance Selling D. The ratio- 29 nale for this exemption is the prevention of possible abuse by the consumer. The exemption is, however, broadened as it also applies to the supply of audio, video and computer software by electronic means if the consumer is in a position to download or reproduce the data. The rationale for this exemption is identical: prevention of possible abuse by the consumer. Such an exemption already exists in Spain and Luxembourg cf. Art. 45 (c) of the Law 7/1996 of January 15 on Retail Trade and Art. 5(4)(d) of the Distance Contracts Act of 16 April 2003 respectively; ConsLC, p. 522). The wording of Art. 6 (3), 4th indent of the Distance Selling D. currently does not make clear whether supply by electronic means may be exempted.

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Art 5:A-01 30–37

Chapter 5: Withdrawal Specific Provisions . Part A: Contracts Negotiated Away from Business Premises

30 Paragraph (4)(e) and (f) are based on Art. 6(3), 5th indent and Art. 6(3), 6th indent of the Distance Selling D. Again, they balance the interests of businesses and consumers. Allowing a right of withdrawal for these goods could lead to substantial losses by businesses and possible abuses by consumers in case of gaming and lottery services. 31 The parties can agree to deviate from the exceptions of paragraphs (2) to (4) in favour of the consumer. Parties should be able to introduce more favourable conditions for the consumer in their contracts. This principle is also expressed in Art. 6(3) sent. 1 of the Distance Selling D.

4.

Examples

Example 1 32 A consumer buys curtains through the internet and specifies length and width. The consumer will not have a right of withdrawal (cf. Art. 5:A-01(4)(c)). Example 2 33 A consumer buys a laptop through the internet and specifies the operating system, memory and hard disk capacity required. The laptop is delivered and the consumer then decides to exercise its right of withdrawal. The exemption of Art. 5:A-01(4)(c) for goods made to the consumer’s specifications does not apply if the goods were made out of standard units and can be disassembled with relatively minor costs and efforts (cf. BGH (German Supreme Court), judgment of 19 March 2005, VIII ZR 295/01, Neue Juristische Wochenschrift (NJW) 2003, 1665-1667) Example 3 34 A consumer downloads music against payment. It can copy it on any medium of his or her choice. The consumer will not have a right of withdrawal (cf. Art. 5:A-01(4)(d)(2)). Example 4 35 A consumer buys shares using the internet. The contract is not subject to a right of withdrawal (cf. Art. 5:A-01(3)(f)). Example 5 36 A consumer concludes a contract away from the normal business premises. It decides to exercise the right of withdrawal. The business alleges that no undue pressure was exercised and that no aggressive sales practices were used in the circumstances. The consumer can exercise its right of withdrawal without having to prove that the opposite is true. It suffices that the consumer was in a situation described in Art. 5:A-01 or Art. 5:C-01 ACQP (cf. C-423/97 – Travel Vac). Example 6 37 A consumer is contacted at home by a person acting on behalf of a business. The consumer signs a contract but later on exercises the right of withdrawal. The business claims that the consumer does not have a right of withdrawal as it was not aware that the business’ sales representatives had contacted consumers in a doorstep selling situation. The

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Article 5:A-02 Effects of withdrawal in case of supply of equivalent goods or services.

Art 5:A-01, 38, 39 Art 5:A-02, 1

consumer will nevertheless have a right of withdrawal. When a third party intervenes in the name of (or on behalf of) a business in the negotiation or the conclusion of a contract, the right of withdrawal is not subject to the condition that the business was or should have been aware that the contract was concluded in circumstances such as those as described in Art. 5:A-01 (cf. C-229/04 – Crailsheimer). The legal position of the third party intervening in the conclusion of the contract is irrelevant for the application of the provisions protecting the consumer with respect to contracts concluded away from normal business premises (Commercial Court Leuven (Belgium), 1 June 1993, Droit de la Consommation – Consumentenrecht (DCCR) 1993-94, 527). Example 7 A consumer hires a car through the internet for a specific period. He wants to withdraw 38 from the contract. The consumer does not have a right of withdrawal because these contracts fall under the exception of Art. 5:A-01(4)(a) (contracts for the supply of transport, whereby the business undertakes to supply these services on a specific date, or within a specific period; cf. C-336/03 – EasyCar). Example 8 A business sells horticultural products by mail-order. Its catalogue states that consumers 39 do not have a right of withdrawal. Such a statement is too general as not all horticultural products deteriorate rapidly and are therefore exempted from the right of withdrawal under Art. 5:A-01(4)(c) (cf. Hof van Beroep/Cour d’appel Brussels (Belgium) 21 January 1999, P. Bakker Hillegom/Ets. Gonthier).

Article 5:A-02: Effects of withdrawal in case of supply of equivalent goods or services. If a consumer exercises a right of withdrawal from a contract after a business has made use of a contractual right to supply goods or services of equivalent quality and price (Article 7:A-01 (Goods or services of equivalent quality)), Article 5:105 (Effects of withdrawal) applies with the modification that the business must bear the cost of returning what the consumer has received under the contract.

A. Foundation in the Acquis 1.

Sources

The present Article is based on Art. 7(3) of the Distance Selling D., which is the only 1 Directive which explicitly regulates the allocation of the cost of returning goods after withdrawal when the supplier has provided the consumer with goods or services of equivalent quality. The Doorstep Selling D., for example, makes no provisions on this issue, its Articles 7 and 8 remain general and leave it to the Member States to provide for the effects and costs, always with the possibility of a consumer friendly interpretation of the Directive. Peter Møgelvang-Hansen/Evelyne Terryn/Reiner Schulze

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Art 5:A-02 2, 3

Art. 7(3) Distance Selling D.

2.

Chapter 5: Withdrawal Specific Provisions . Part A: Contracts Negotiated Away from Business Premises

Nevertheless, Member States may lay down that the supplier may provide the consumer with goods or services of equivalent quality and price provided that this possibility was provided for prior to the conclusion of the contract or in the contract. The consumer shall be informed of this possibility in a clear and comprehensible manner. The cost of returning the goods following exercise of the right of withdrawal shall, in this case, be borne by the supplier, and the consumer must be informed of this. In such cases the supply of goods or services may not be deemed to constitute inertia selling within the meaning of Article 9.

Development

2 Article 7(3) of the Distance Selling D. presents an option for the Member States. They can allow the supplier to provide the consumer with goods or services of equivalent quality and price. In this case, the costs of returning the goods in case of withdrawal must be borne by the business. The majority of the Member States has made use of the choice, although in various ways (see H. Schulte-Nölke, C. Twigg-Flesner, M. Ebers (eds.), EC Consumer Law Compendium, Sellier 2008, p. 360). With respect to such an an option for the national legislators, the first question that arises is whether Art. 7(3) of the Distance Selling D. should be reflected in the Acquis Principles at all. This point is fully discussed below at Art. 7:A-01 ACQP. 3 As far as the the allocation of costs is concerned, the Distance Selling D. provides in Art. 6(1) and (2), that where a right of withdrawal has been exercised by the consumer, the only charge that may be made to the consumer is the direct cost of returning the goods. This can be regarded as a general rule, but it does not reflect a detailed set of solutions for all problems in withdrawal situations. One of the situations that is addressed in the Distance Selling D. in Art. 7(3) is that of the withdrawal of the consumer after being provided with goods of an equivalent quality. In this case, a modification of the allocation of costs is envisaged. Therefore, Art. 7(3) of the Distance Selling D. seems to introduce a modification with respect to the effects of withdrawal rather than an exemption from the application of rules on withdrawal. This modification clause must also be distinguished from the provisions on inertia selling as the Distance Selling D. makes clear in Art. 7(3) sent. 4 that in these instances, the supply of goods or services does not constitute inertia selling within the meaning of Art. 9 of the Directive. The Article in its present shape does not state who has to bear the costs of the delivery if the consumer has withdrawn from the contract. The German Bundesgerichtshof (BGH) has recently referred to the ECJ the question whether Art. 6(1) sent. 2 and Art. 6(2) of the Distance Selling D. allow the costs of delivering the goods to be charged to the consumer (pending ECJ case, C-511/08).

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Art 5:A-02 4–6

Article 5:A-02 Effects of withdrawal in case of supply of equivalent goods or services.

B.

Commentary

1.

Meaning and Purpose

The present Article sets out clearly that the costs of returning what the consumer has 4 received under the contract must be borne by the business, if a consumer exercises a right to withdraw from a contract after the business has made use of a contractual right to supply goods or services of equivalent quality and price. This allocation of costs has the function of balancing the interests of the consumer and the business. Whilst the business gets the chance to perform the contract by supplying with goods of an equivalent quality, for example when those demanded are out of stock, the consumer, who runs the risk of receiving goods he does not want, has a right to withdraw from the contract without being exposed to financial disadvantages.

2.

Context

The Article at hand presents an exception to Art. 5:105 ACQP, which regulates the costs 5 of the withdrawing party. Usually each party has to return what it received under the contract at its own expense. Article 5:105 ACQP does however not provide for a detailed solution in cases where the supplier has provided the consumer with goods or services of equivalent quality and price. This imposition of the costs onto the supplier does not constitute an exemption from the area of application of Art. 5:A-01(3) ACQP) but rather modifies the details on costs for returning the goods as set out in Art. 5:105(1) ACQP. Article 7:A-01 ACQP, which constitutes a particular rule concerning the performance of distance contracts, provides for the same modification with respect to the allocation of costs.

3.

Example

A consumer orders via the internet the CD “Xavier Naidoo – live (Re-release 2008)”. 6 Prior to the request the business has informed the consumer, in accordance with Art. 4:104(1) ACQP, of the possibility that the business might supply goods of equivalent quality and price. Since the Re-release that has been ordered is out of stock, the business delivers “Xavier Naidoo – live (1998)”, which is equivalent in quality and price. The consumer can then either accept the delivery or exercise the right of withdrawal. If he withdraws from the contract, the business must bear the costs that the buyer incurs for returning the CD.

Article 5:A-03: Effects of withdrawal from financial services contracts

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Art 5:C-01 1–3

Chapter 5: Withdrawal Specific Provisions . Part C: Timeshare Contracts

Part C: Timeshare Contracts Article 5:C-01: Right to withdraw from timeshare contracts (1) A consumer who acquires a right which allows him or her to use immovable property under a timeshare contract with a business has the right to withdraw from this contract. (2) The business must not demand or accept any advance payment by the consumer during the period in which the latter may exercise the right of withdrawal.

A. Foundation in the Acquis 1.

Sources

1 The present Article is based on the provisions of the Timeshare D., in particular Art. 5 and 6 and Recitals 11 to 14 of the Timeshare D. 1994, and Art. 6 and 9 of the Timeshare D. 2008.

2.

Development

2 Articles 5:101 to 5:106 ACQP set out common rules on the exercise and effects of the right of withdrawal. The Article at hand which reproduces the old Art. 5:202(1) and (3) ACQP (Contract I) determines in what circumstances a person is considered to be in a situation requiring protection. For timeshare contracts, the complex provisions of the contract create a structural imbalance between the parties. The cooling off period gives the purchaser the chance to better realise what are the obligations and rights under the contract are (Recital 11 of the Timeshare D. 1994). Timeshare contracts are, moreover, often concluded abroad and may be governed by foreign laws (Recital 11 of the Timeshare D. 1994). Extra time may therefore be required to consult a local lawyer to understand the content of the contract. In addition, timeshare contracts are sometimes sold through aggressive sales practices. A cooling off period allows the purchaser to assess the merit of the contract without being subject to any external pressure. Finally, personal preferences during a holiday may vary from preferences in everyday life. A cooling off period allows consumers to reconsider their decision in the light of more usual conditions. 3 This draft aims to provide more consistent and coherent rules dealing with the right of withdrawal. Derogations from the general rules set out in Art. 5:101 to 5:106 ACQP and specific rules should be justified. Already 5:202(1) and (3) ACQP of the Contract I volume (now the present Article) did not reproduce some of the peculiarities of the Timeshare D. 1994 concerning the right of withdrawal because a justification for them

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Article 5:C-01 Right to withdraw from timeshare contracts

Art 5:C-01 4–6

was absent. Hence, the ACQP have partly anticipated provisions of the Timeshare D. 2008. The general rules of Art. 5:101 to 5:106 ACQP on the right of withdrawal and of Art. 2:201 to 2:208 ACQP on pre-contractual information duties and the prolongation of the right of withdrawal provide for adequate protection with respect to timeshare contracts as well. For the same reasons of coherence and consistency, the present Article refers to the gen- 4 eral notion of ‘consumer’, as defined in Art. 1:201 ACQP, rather than to the term ‘purchaser’, which is defined by Art. 2, 4th indent of the Timeshare D. 1994 as a natural person acting in transactions covered by the directive for purposes which may be regarded as being outside his or her professional capacity. The Timeshare D. 2008 similarly refers to the notion of ‘consumer’ (Art. 3(a)).

3.

Political Issues

The length of the period of withdrawal has been harmonised within the Acquis Princi- 5 ples. The general rule of Art. 5:103 ACQP now also governs timeshare contracts. Therefore the consumer will have fourteen days instead of ten days as in the Timeshare D. 1994 to withdraw from the contract. The Timeshare D. 2008 similarly sets out a period of fourteen calendar days (Art. 6(1)). One may, however, want to consider a longer period to allow withdrawal from timeshare contracts. A period of fourteen days will not always ensure that consumers can reflect on their decision once at home. In this period the consumer may still be on holiday or abroad. A period of one or several months may be more adequate. In addition, fourteen days may not be sufficient for a consumer to obtain the advice that is needed to make a well-considered decision. Finally, one may want to consider if the period for withdrawal should run from the day of the first inspection of the property, or possibility use the property (similar to distance selling cases, cf. Art. 5:103(1) sent. 2 ACQP). This would better ensure that the consumer is fully aware of the exact scope and object of the timeshare contract. However, the acquis presently does not provide a sufficient basis for such a prolongation of the withdrawal period. The laws of the Member States currently also do not provide such a long withdrawal period (cf. ConsLC, p. 447). Following the acquis, the scope of application of this provision is limited to consumers 6 purchasing from a business. In some Member States the same kind of protection has been extended to contracts whereby timeshare rights are resold by consumers to other consumers through the services of a professional agent (Denmark, Italy and Portugal). In the revision of the acquis, one could consider the opportunity to regulate consumers’ sales of their timeshare rights with the aid of professional agents or resale companies. Enhanced consumer protection in these cases would be justified in the light of the selling methods of these intermediaries, which are often identical to those of timeshare companies (ConsLC, p. 427).

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Art 5:C-01 7–10

Chapter 5: Withdrawal Specific Provisions . Part C: Timeshare Contracts

7 Both Art. 6 of the Timeshare D. 1994 and Art. 9 of the Timeshare D. 2008 prohibit advance payments during the period in which the consumer has a right of withdrawal to enhance the protection established by the directive (Recital 12 of the Timeshare D. 1994). A consumer may indeed be deterred from exercising the right of withdrawal by advance payments, especially if their recovery is uncertain, or surrounded by difficulties. This rule was not extended to the other situations in which the consumer has such a right because it did not seem appropriate to do so. Although such a rule does enhance consumer protection and makes it easier to exercise a right of withdrawal, it also has considerable disadvantages for the business, especially when the business is obliged to deliver goods under the contract, and the period for withdrawal begins to run only after their delivery. This is the case for contracts negotiated away from business premises. The business can not avoid this by postponing delivery until the period for withdrawal has lapsed. The business then runs the risk that the goods delivered will never be paid for. The amounts at stake may be small so that the costs to obtain redress may outweigh them. In Belgium, distance contracts (other than contracts for the provision of financial services) are subject to a prohibition to demand payments during the period for withdrawal, but the rule is criticised (Art. 80(3) Trade Practice Act of 14 July 1991). In practice, businesses do not respect it.

B.

Commentary

1.

Meaning and Purpose

8 Paragraph (1) of the present Article sets out the objective situation in which the consumer has a right of withdrawal. The purpose is to protect a consumer who buys the right to use an immovable property under a timeshare contract. The reasons why a right of withdrawal is appropriate in this situation were explained above. 9 Paragraph (2) intends to enhance the efficiency of the right of withdrawal. It prohibits the demand or acceptance of advance payments during the period for withdrawal for these contracts. The prohibition protects the consumer against the risk of being deterred from exercising the right of withdrawal because it may be uncertain whether these payments can be easily recovered.

2.

Context

10 Timeshare contracts can be negotiated away from business premises. They are not excluded from the provision of Art. 5:A-01 ACQP referring to ‘contracts concluded for the construction and sale of immovable property or relating to other immovable property rights, excluding tenancy contracts’ (cf. Art. 5:A-01(3)(c) ACQP). In C-423/97 – Travel Vac the ECJ decided that contracts having a timeshare element may be covered by the Doorstep Selling D. if its conditions of application are otherwise fulfilled. The exception in Art. 3(2)(a) of the Doorstep Selling D. is similar to Art. 5:A-01 (3)(c) ACQP. The ECJ held that a timeshare contract may not be covered by the excep-

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Article 5:C-01 Right to withdraw from timeshare contracts

Art 5:C-01 11, 12

tion for contracts relating to immovable property rights if the contract not only grants the right to use a timeshare apartment, but also provides separate services of a value higher than that of the right to use the property. In Travel Vac the ECJ did not have to decide which rules would take precedence if they were both applicable. At the material time, the Timeshare D. 1994 had not yet been transposed into the relevant national law. The advocate general merely stated that ‘Should both directives apply, at most a decision would need to be made as to which of the two applies to the given facts (para. 24)’. If such a situation occurred, it is logical that the present Article should take precedence over the conflicting rules of Art. 5:A-01 ACQP because the protection of the consumer is more extensive with respect to timeshare contracts. The withdrawal period starts in accordance with the general Art. 5:103 ACQP. There- 11 fore the date of the conclusion of the contract and of the information of the right of withdrawal are decisive. Nevertheless, the provisions of Art. 2:201 ACQP et seq. on pre-contractual information duties must also be taken into account. These prevent the period for withdrawal from starting before the information required by Art. 2:203 ACQP has been given. The period for withdrawal will accordingly be prolonged up to one year since the time of the conclusion of the contract (cf. Art. 2:208 ACQP) In the Timeshare D. 1994 there is a complicated rule prolonging the period for withdrawal for up to three months and ten calendar days if certain information has not been provided (Art. 5(1) 2nd and 3rd indent of the Timeshare D. 1994). It is explained below how the present text introduces a similar, but more consistent protection of the consumer (cf. No. 13 et seq).

3.

Explanation

The wording of paragraph (1) of the present Article (“a right which allows him or her to 12 use immovable property under a timeshare contract”) is deliberately chosen to cover a wide variety of situations. Thus this provision applies irrespective of the particular contractual construction chosen by the parties, be it the transfer of a real property right or any other right relating to the use of the timeshare property (cf. Art. 2, 1st indent of the Timeshare D. 1994). Furthermore, the provision also applies to binding preliminary contracts. According to paragraph (1) the consumer who acquires a right to use immovable property under a timeshare contract has a right of withdrawal from the contract. This provision does not specify the period for withdrawal. The general period for withdrawal of fourteen days (Art. 5:103(1) ACQP) therefore applies. This period starts after the conclusion of the contract and after the consumer has received information of the right of withdrawal in textual form on a durable medium in accordance with Art. 5:104 ACQP.

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Art 5:C-01 13, 14

Chapter 5: Withdrawal Specific Provisions . Part C: Timeshare Contracts

There is no reason to derogate from the general rule provided in Art. 5:103(1) sent. 1 ACQP for timeshare contracts, though Art. 5(1) 1st indent of the Timeshare D. 1994 provides differently. The latter article provides that the period of withdrawal starts from the signing of the contract or the signing of a binding preliminary contract. Many Member States have implemented the directive by making instead reference to the moment of the conclusion of the contract (the Czech Republic, Denmark, Italy, Latvia, Lithuania, Portugal, Slovakia, Slovenia and the United Kingdom, ConsLC, p. 448). Similarly, the Timeshare D. 2008 makes reference to the conclusion of the contract (Art. 6(2)). The peculiar rule of the Timeshare D. 1994 is justified by the circumstance that the directive provides for certain information to be included in the contract. Art. 2:201 ACQP et seq. on pre-contractual information duties (cf. especially Art. 2:203 and 2:208(1) ACQP) prevent the withdrawal period from running before the moment in which the information required has been given. These general rules make it unnecessary to establish a specific starting point for the period of withdrawal with respect to timeshare contracts. Specific information obligations may need to be adopted within the Acquis Principles for timeshare contracts. Article 2:203(2) ACQP will then give precedence to these more specific information requirements. If such requirements are adopted, failure to comply with them should trigger the remedy of Art. 2:208(1) ACQP: in this case the period for withdrawal does not start and can be prolonged to up to one year from the time when the contract was concluded. 13 Paragraph (2) of the present Article prohibits to demand or to accept any advance payment by the consumer while the period for withdrawal is running. This prohibition enhances the effectiveness of the right of withdrawal. It is debated whether the same prohibition on advance payments enacted by the Timeshare D. 1994 should apply only during the initial ten day period for withdrawal, or also during the prolonged period for withdrawal (cf. Périget/Marquet, La directive communautaire sur la jouissance à temps partagé, Revue de droit immobilier (RDImm) 1995, 71, No. 18; cf. also Meinertzhagen/ Limpens, L’acquisition d’un droit d’utilisation d’immeubles à temps partagé (loi du 11.04.1999), Journal des tribunaux (JT) 1999, 802). Since the period of withdrawal is prolonged because the business failed to provide certain information it is preferable to hold that such a prohibition should accordingly be extended. The prohibition established by Article 5:C-01(2) should also be interpreted accordingly.

4.

Examples

Example 1 14 A consumer concludes a timeshare contract by phone. The consumer has a right of withdrawal and no advance payments can be asked for or accepted by the business during the withdrawal period (cf. Art. 5:C-01(2)).

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Article 5:C-02 Effects of withdrawal from timeshare contracts

Art 5:C-01, 15–18 Art 5:C-02

Example 2 A consumer signs a timeshare contract. The price is only due when the period for with- 15 drawal is over. The deposit by the consumer of a sum as a guarantee for the payment of the deferred price is also prohibited under Art. 5:C-01(2) (cf. Audiencia Provincial Las Palmas (Spain) 22 November 2003, 682/2003 Benedicto and Margarita v Palm Oasis Maspalomas S. L.). Example 3 A consumer signs a timeshare contract but does not receive the information required. 16 This prolongs the period for withdrawal (cf. Art. 2:208(1) ACQP). The prohibition to demand or accept advance payments (cf. Art. 5:C-01(2)) also applies during the prolonged withdrawal period. (cf. Audiencia Provincial Cantabria (Spain) 24 May 2004, 196/ 2004 Sergio and Carmela v Free Enterprise S. L.) Example 4 The prohibition to demand or accept payments (cf. Art. 5:C-01(2)) is also infringed 17 when a consumer is required to pay advance money in trust to a lawyer during the withdrawal period (cf. Fo˝városi Ítélo˝tábla (Court of Appeal, Hungary), 1 December 2004, 2. Kf.27.379/2003/3, Holiday Club Hungary Kft, Proinvest 2001 Kft vs. Wirtschaftswettbewerbsamt (GVH)). Example 5 The prohibition to demand or accept payments (cf. Art. 5:C-01(2)) is also infringed 18 when the business accepts a cheque during the withdrawal period, even if it did not explicitly request it and even if it was not cashed during the withdrawal period (cf. Cour de Cassation (French Supreme Court), 1re chamber, 22 November 1994, 1995, somm., 311, obs. Pizzio, Revue trimestrielle de droit civil (RTDCiv.) 1999, 384, obs. Mestre, application of the similar prohibition under French law on doorstep selling).

Article 5:C-02: Effects of withdrawal from timeshare contracts Where a consumer exercises the right of withdrawal under Article 5:C-01 (Right to withdraw from timeshare contracts), Article 5:105 (Effects of withdrawal) applies with the modification that the contract may require the consumer to reimburse those expenses which: (a) have been incurred as a result of the conclusion of and withdrawal from the contract, and (b) correspond to legal formalities which must be completed before the end of the period referred to in Article 5:103 (Withdrawal period) paragraph (1), and (c) are reasonable and appropriate, and (d) are expressly mentioned in the contract, and (e) are in conformity with any applicable rules on such expenses. The consumer is not obliged to reimburse any expenses when exercising the right of withdrawal under Article 2:208 (Remedies for breach of information duties) paragraph (1).

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Art 5:C-02 1–5

Chapter 5: Withdrawal Specific Provisions . Part C: Timeshare Contracts

A. Foundation in the Acquis 1.

Sources

1 This Article is based on Art. 5(3) and (4) of the Timeshare D. 1994. So far, Art. 8(2) of the Timeshare D. 2008 has not been taken into account.

2.

Development

2 Article 5:105 ACQP sets out common rules on the effects of the right of withdrawal. The present Article specifies the costs the consumer has to bear as a result of the exercise of his right of withdrawal. However, a future version of the ACQP will have to consider the Timeshare D. 2008 which does not contain a comparable provision but states in its Art. 8(2) that the “consumer shall neither bear any costs nor be liable for any value corresponding to the service which may have been performed before withdrawal.”

3.

Political Issues

3 A prohibition on advance payments might render difficult for businesses to recover those expenses that the consumer has to reimburse in accordance with the present Article. This is especially true if the timeshare contract was concluded abroad during the consumer’s holidays and the consumer withdraws after returning to the home country. On the other hand, if advance payments are allowed, their recovery in case of withdrawal may turn out to be impossible for the consumer. As this could deter consumers from exercising the right of withdrawal, it is appropriate to prohibit advance payments pending the period for withdrawal. 4 The acquis currently does not provide a sanction for the infringement of the prohibition on advance payments. Such a sanction should be included in the acquis Principles to make such a prohibition effective. Violation of this rule could be sanctioned by the impossibility to recover the costs mentioned in the Article at hand. The Timeshare D. 1994 stipulates this sanction if the contract does not provide for the information required (cf. Art. 5(4) of the Timeshare D. 1994). Fines may be another possibility. Another option could be an extension of the period of withdrawal until the advance payment has been returned.

B.

Commentary

1.

Meaning and Purpose

5 The Article at hand limits the costs of legal formalities that the consumer may be required to defray in case of withdrawal. This Article balances the need not to unduly hamper the conclusion of timeshare contracts with the need to ensure that the costs related to

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Article 5:C-02 Effects of withdrawal from timeshare contracts

Art 5:C-02 6–10

legal formalities imposed on the consumer do not deter her or his exercise of the right of withdrawal.

2.

Context

See Comments on Art. 5:C-01 ACQP.

3.

6

Explanation

The present Article rephrases Art. 5(3) and (4) of the Timeshare D. 1994. The expenses 7 that the consumer may be required to defray include the costs of notarisation and attestation of the contract and the duties and taxes charged for it. Such expenses must be expressly mentioned in the contract. Consequently, the same formal requirements that apply to timeshare contracts in general also apply to the information about expenses. The requirements laid down in sentence 1 (a) to (e) are therefore cumulative and not alternative. The present text abandons the complicated rules introduced by Art. 5(1) 2nd and 3rd 8 indent of the Timeshare D. 1994 that prolong the period of withdrawal in cases in which the required information was omitted. The general rules on pre-contractual information duties and the corresponding remedy for their violation provided in Art. 2:201 ACQP et seq. (prolongation of the period for withdrawal), offer a satisfactory and consistent solution on the point. Special rules for timeshare contracts are therefore once more unjustified. Moreover, the consumer is better protected by these general rules insofar they prolong the period for withdrawal to up to one year. According to the Timeshare D. 1994 the period for withdrawal is prolonged at most for three months and ten days. Article 5(4) of the Timeshare D. 1994 provides that the purchaser may not be required to 9 defray certain expenses when the right of withdrawal is exercised during the prolonged period for withdrawal. Sentence 2 of the present Article reaches the same outcome.

4.

Example

A consumer concludes a timeshare contract but then withdraws from it. The other party 10 is entitled to the costs of notarisation and attestation of the contract, as well as to the pertinent duties and taxes, provided that the expenses are reasonable and appropriate (sent. 1(c)) if they are expressly mentioned in the contract (sent. 1(d)) and conform to any applicable rules on such expenses (sent. 1(e)).

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Chapter 6: Non-Negotiated Terms Section 1: Scope of Application

Article 6:101: Subject matter (1) The following provisions apply to contract terms which have not been individually negotiated, including standard terms. (2) A term supplied by one party (the user) is not individually negotiated if the other party has not been able to influence its content because it has been drafted in advance, in particular as part of a pre-formulated standard contract. In contracts between a business and a consumer, if terms have been drafted by a third person, the business is considered to be the user, unless the consumer introduced those terms to the contract. (3) A “standard term” is a term which has been formulated in advance for several transactions involving different parties and which has not been individually negotiated by the parties. (4) If it is disputed whether a term supplied as part of standard terms has been individually negotiated, the user bears the burden of proving that it has been individually negotiated.

A. Foundation in the Acquis 1.

Sources

The use of standard terms, of adhesion contracts or of similar contractual techniques is a 1 phenomenon known to all European legal systems. The acquis provides for several instruments for a judicial control of their use, the most important of which is the Unfair Terms D. As to the objective scope of applicability the relevant acquis rule can be found in Art. 3(1) and (2) of the Unfair Terms D. The wording of this provision is: “1. A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer. 2. A term shall always be regarded as not individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term, particularly in the context of a pre-formulated standard contract. The fact that certain aspects of a term or one specific term have been individually negotiated shall not exclude the application of this article to the rest of a contract if an overall

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Art 6:101 2– 4

Chapter 6: Non-Negotiated Terms Section 1: Scope of Application

assessment of the contract indicates that it is nevertheless a pre-formulated standard contract. Where any seller or supplier claims that a standard term has been individually negotiated, the burden of proof in this respect shall be incumbent on him.” 2 Other instruments, which, however, only cover a very limited scope of application, provide for a judicial control of contractual clauses without limitation to non-negotiated terms, e.g. Art. 3(3) of the Late Payment D. or Art. 7(1) of the Consumer Sales D. It may also be noted that the Principles of European Contract Law (PECL) refer to terms not individually negotiated as well as the contradictory category of terms which have been individually negotiated (Art. 2:104, 2:105, 4:110, 5:103, 5:104 PECL). They refer to general conditions in Art. 2:209 PECL. In particular, Art. 2:209(3) PECL defines: “General conditions of contract are terms which have been formulated in advance for an indefinite number of contracts of a certain nature, and which have not been individually negotiated between the parties.” 3 There are also some provisions in the acquis, relating to the unfairness of clauses in B2Bsituations (cf. Art. 3(3) of the Late Payment D; Art. 10(3) of the E-Commerce D.; Recital 33, sent. 3 and (with regard to micro enterprises) Recital 22, Art. 30(2), Art. 51(3) of the Payment Services D.; maybe also Art. 29 of the Collective Investment D. and Art. 19(7) of the Markets in Financial Instruments D.).

2.

Development

4 Whereas Art. 3 of the Unfair Terms D. comprises a rule on the scope of application (“term which has not been individually negotiated”) and a standard of judicial control, the proposed rule prefers to separate both aspects from each other. Therefore, Art. 6:101 only deals with the scope application, whereas Art. 6:301 ACQP sets the standard for monitoring the content of terms. Art. 6:301 ACQP follows the concept of Art. 3 of the directive: “The following provisions apply to terms not individually negotiated. Terms are not individually negotiated if they have been pre-formulated and could, therefore, not have been influenced by the other party. The user bears the burden of proof for an individual negotiation”. The word “always” in Art. 3(2) of the directive has been dropped because it was considered to be unclear to some extent, as it may be read as a limitation as well as a minimum standard. According to the wording chosen by the draft, it should not be doubtful in this context that a drafting in advance may be a sufficient reason for the fact that the other party cannot influence the terms but that other reasons may also prevent the consumer from influencing pre-drafted terms. Both cases should be covered. In addition to “terms not individually negotiated”, the directive mentions “standard terms” and “standard contracts”. The directive does not define the latter two categories; 298

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Article 6:101 Subject matter

Art 6:101 5–8

it makes clear, however, that both are included by “terms not individually negotiated” and uses both categories to exemplify “terms not individually negotiated”. It should also be clear that a standard contract is a contract comprising standard contract terms. The draft follows the directive in this respect. The above mentioned provisions relevant for B2B contracts are too isolated to give suf- 5 ficient support for a general and unmodified extension of the Unfair Terms D. to B2B or C2C situations. However, they support the position that contracts other than B2C cannot be completely excluded from any fairness test.

3.

Political Issues

a)

Application to Contracts other than B2C

The scope of this provision is open for an application to all P2P contracts, thus including 6 B2B contracts. This does not necessarily mean that all provisions of this draft apply to contracts other than B2C. Instead, the political question of whether such other contracts are covered is decided for each provision separately: Rules which are directed at B2C transactions can only be found in Art. 6:101(2), 6:201(4), 6:304 and 6:305 ACQP. A special B2B rule as regards to monitoring the content of terms is laid down in Art. 6:301(2) ACQP, whereas all other rules of this chapter apply to all kind of contracts. b)

No extension to terms individually negotiated

Art. 3 of the Unfair Terms D. excludes contractual terms which have been individually 7 negotiated by the consumer. In transposing the directive, 15 member states have adopted this exclusion: Austria, Cyprus, Estonia, Greece, Germany, Hungary, Ireland, Italy, Lithuania, Netherlands, Poland, Portugal, Slovakia, Spain and the United Kingdom (cf. ConsLC, p. 226). The remaining 10 member states, by not having transposed this exclusion, allow their courts /authorities to monitor individually negotiated terms. This is the case in the Nordic Countries (Denmark, Finland, Sweden) and also in France, Luxembourg, Belgium (Trade Practices Act), Czech Republic, Latvia, Malta and Slovenia. The Belgian Liberal Professions Act (LPA) opts for the middle way. The unfair contract terms, mentioned in the Annex 1 of the directive are sanctioned with relative nullity even when individually negotiated (Art. 7(4) LPA). The principle in Art. 3 of the Unfair Terms D. (Art. 7(2) LPA) applies to other contractual terms (cf. ConsLC, p. 226). During the preparation of this draft, it has, again, been discussed whether the applicabil- 8 ity of the provisions on standard terms should be extended to terms individually negotiated. An extension of the Unfair Terms Directive’s scope of application to terms individually negotiated has often been contemplated (e.g. European Commission, The ‘Unfair Terms’ Directive, Evaluation and future perspectives, Brussels Conference 1-3 July 1999 (conference papers), p. 93; also Report from the Commission on the Implementation of Council Directive 93/13/ EEC of 5 April 1993 on Unfair Terms in Consumer Contracts, Thomas Pfeiffer/Martin Ebers

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Art 6:101 9, 10

Chapter 6: Non-Negotiated Terms Section 1: Scope of Application

27 April 2000, COM(2000) 248 final, 14). Yet, Art. 3 of the Unfair Terms D. has remained unchanged. Therefore, the reasons for a deviation from the acquis have not been considered to be sufficient. The parties’ right to freely agree on individual contract clauses forms an essential part of their freedom of contract. The problem of distinguishing negotiated from non negotiated terms can be handled by the courts. Experience supports the conclusion that gaps in consumer protection can be and will be prevented by the courts.

B.

Commentary

1.

Meaning and Purpose

9 In a free society with a market economy, parties should be free to decide for themselves which contract terms are most suitable for their needs. Conversely, a party may have no other choice than to accept the terms provided for by the other party which are suitable only for his or her needs, where the user is in a position to deny any meaningful negotiation of the contract, or where the contract is not worth the effort of real negotiations about the details of certain terms. The philosophy of the present Article is that judicial intervention into the parties’ freedom to decide autonomously about the contents of their contracts needs a justification. In particular, judicial control of the content of contract terms is justified in cases where, due to the circumstances, no real and meaningful freedom to decide existed, or at least did not exist for one side. Seen against this background, it is the purpose of the Article at hand to distinguish contract terms which have been accepted although no meaningful negotiations took place or could take place (so that there may be a need for judicial control) from those contract terms which have been freely negotiated. The fact that a term was drafted in advance and that, consequently, the other side could not influence the content of this term, is meant to describe these situations. Thus, the key terms of the rule are: “individually negotiated” in paragraph (1), and “not been able to influence its content” in paragraph (2). The Article neither refers directly to the criterion of “absence of a free decision for the other side” nor does it define its scope of application by referring only to the pure outward appearance of the conclusion of the contract. With this concept, which is based on the directive, the philosophy of the Acquis Principles can be seen as a compromise between a more substance oriented and a more formal approach in order to serve both the substantive goals behind it and the practical needs of contract law.

2.

Context

10 The Article provides for a definition of “terms not individually negotiated”, which is relevant for all provisions of this chapter. It also defines “standard contract terms” which

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Article 6:101 Subject matter

Art 6:101 11–14

is used by Art. 6:204 ACQP. The scope of application of the provisions in Chapter 6 follows the model of the Unfair Terms D. (cf. Recital 10 of the Unfair Terms D. and Art. 1:101(3) ACQP). The mandatory nature of the provisions with regard to B2C contracts is stipulated in Art. 1:203(1) ACQP. Seen against the background of general contract law, the provisions on terms not individually negotiated provide for special, supplementary rules on the conclusion and interpretation of contracts as well as for the validity of contract terms – applicable as far as no individual negotiation took place. A user acting in accordance with the provisions of this chapter usually also has fulfilled the requirements of Art. 2:203 and Art. 4:105 ACQP, which apply in addition to the chapter at hand.

3.

Explanation

a)

Contract term

This chapter relates to terms of a contract and not to the contract as a whole. Therefore, 11 the question whether a contract term has not been individually negotiated has to be assessed for each contract term separately. Due to the structure of the Acquis Principles, the provisions apply to contract terms. That does not mean that standard terms in other instruments (power of attorney, receipt etc.) should not be covered if their function is similar to a contract term. b)

Negotiation

Terms which have been negotiated are outside the scope of this chapter. A negotiation 12 requires more than a simple conversation about the term. Rather, the negotiation must be real and meaningful. A negotiation is real and meaningful if it offers a chance to influence a contract term. A standard term stating that the other party confirms that individual negotiations took place is not sufficient to qualify the content of contract as negotiated. c)

Individual negotiation

The negotiation must have taken place between the individual parties. Furthermore, 13 each contract term is considered separately. A single negotiation between the same parties will, however, be sufficient to cover several uses of the same term if the relevant legal circumstances are similar. d)

Drafted in advance, supplied by the “user”

A clause is drafted in advance, if its content is fixed by the user prior to the negotiations. 14 The moment “prior to the negotiations” refers to the negotiations concerning the issue governed by the clause; it does not necessarily refer to the whole process of negotiations. Thomas Pfeiffer/Martin Ebers

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Art 6:101 15, 16

Chapter 6: Non-Negotiated Terms Section 1: Scope of Application

Terms not individually negotiated can normally be attributed to one of the parties to a contract. Usually, at least one party takes the initiative and either drafts the contract terms itself and presents them to the other party, or – where a third party does the drafting – at least takes the initiative and introduces them into the contract. Therefore paragraph (1) defines this party as the “user”. However, for B2C-contracts, Art. 3(2) of the Unfair Terms D. uses a broader concept, since it generally refers to a “term which has been drafted in advance and the consumer has therefore not been able to influence the substance of the term”. Under the directive it does not matter whether the businessperson introduced the clause into the contract. Rather, in order to protect consumers, terms introduced by third parties (such as notaries) are subject to control under the directive. Therefore, paragraph (2) clarifies for B2C transactions, that those terms are considered to have been used by the business. e)

Unable to influence

15 This criterion is crucial for the question of whether real and meaningful negotiations took place. It requires an assessment of the substantial quality of the negotiations which can be formalised only in part. A party to a contract is able to exercise influence on a clause, if the negotiations offer a real opportunity to change the term. Usually, it is an indication for the existence of such a real opportunity if a clause has been substantially changed during the course of the negotiations. Furthermore this criterion includes an element of causation: The inability of the other side to influence the term must be a consequence of the fact that the term has been drafted in advance. This criterion of causation does not require that the drafting in advance is the only reason for the other side’s inability to influence a term. f)

Burden of proof

16 The burden of proof is on the party claiming that there have been individual negotiations. Usually this will be the user, claiming that a right or a defence based on a certain term applies. Furthermore, this provision only addresses the matter of the burden of proof, i.e. determining which party has to present evidence and to bear the consequence of a remaining lack of factual certainty about individual negotiations. The standard of proof (e.g. preponderance of the evidence or judicial certainty) must be determined pursuant to the applicable procedural law.

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Article 6:101 Subject matter

4.

Examples

a)

Contract Term

Art 6:101 17–23

Example 1 A supplier requires potential customers to submit an “application form” which technical- 17 ly constitutes an offer. According to a clause in this form, the customer is bound by his offer for three months. The clause falls under Art. 6:101 although, technically, a term of an offer is no contract term. Example 2 A supplier uses a standard receipt form. Although, in most cases, a receipt does not con- 18 stitute a contract, the text of the receipt may be subject to judicial control, e.g. concerning its transparency. b)

Negotiation

Example 1 The user offers to explain a certain term or certain terms to the other side. This is not 19 sufficient for a negotiation. Example 2 After having read the user’s terms, the other side makes a counter-proposal for a certain 20 term. The parties engage in a discussion about a compromise acceptable to both parties. The term is negotiated. b)

Individual negotiation

Example 1 A contract is negotiated between a consumer association and a business association. If a 21 business uses this term, the provisions of this chapter apply, unless there is an individual negotiation. The courts may consider the collective bargaining when assessing the unfairness of the term pursuant to Art. 6:301 ACQP. Example 2 A party sells goods to the other party on the basis of a continuing business relationship. 22 They always use the same standard contract. It will generally be sufficient if a clause has been negotiated once. c)

Drafted in advance, supplied by the user

Example 1 After the parties have negotiated the price of a product, the supplier states that he always 23 insists on a certain “no liability clause” and that he is not willing to accept any further liability. The clause is drafted in advance.

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Art 6:101 24–31

Chapter 6: Non-Negotiated Terms Section 1: Scope of Application

Example 2 24 The parties negotiate that the supplier shall not be liable for any damages except for cases of gross negligence. The supplier agrees to provide a draft which does not deviate from the negotiations and is then accepted by the other side without further negotiations. The term is not drafted in advance. Example 3 25 An assurance company offers 5-year and 10-year contracts. The clause is drafted in advance because the possible choices are defined by the user. The situation is different, if the assurance company leaves it to the customer to decide about the duration of the contract. Example 4 26 An assurance company uses a standard contract from. The costumer may fill in the duration of the contract according to his or her preferences; the assurance company is willing to accept any duration. The duration is individually negotiated. Example 5 27 Like Example 4. However, the assurance company fixes for a minimum duration of three months and a maximum of ten years. The minimum and the maximum are not individually negotiated. The duration within these limits is individually negotiated. Example 6 28 A business sells real estate to a consumer. The contract is arranged by a broker who has been authorised by both parties. The broker suggests using the standard contract terms pre-formulated by his association. According to paragraph (2) the terms are considered to have been supplied by the business. d)

Unable to influence

Example 1 29 The user makes a serious offer for real and meaningful negotiations. In its answer, the other party indicates that it has no interest in negotiating certain terms. The lack of influence is not a consequence of the formulation in advance. Example 2 30 In a business contract, the parties agree that one side writes the first draft. The parties negotiate most but not all terms of the contract. It is up to the courts to decide whether, according to the circumstances, the other side who has not written the text could have influenced the terms which have not been discussed. Example 3 31 One side states that a certain term is essential for its estimation of prices. The other side accepts. Usually, and especially in B2C situations, this case will be covered by Art. 6:101 ACQP unless it is clear that this acceptance is the result of a free choice by the other side.

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Section 2: Inclusion and interpretation of terms Article 6:201: Acquaintance with terms not individually negotiated (1) Contract terms which have not been individually negotiated bind a party who was unaware of them only if the user took reasonable steps to draw the other party’s attention to them before or when the contract was concluded. (2) Terms are not brought appropriately to the other party’s attention by a mere reference to them in a contract document, even if that party signs the document. (3) If a contract is to be concluded by electronic means, contract terms are not binding on the other party unless the user makes them available to the other party in textual form. (4) Consumers are not bound to terms to which they had no real opportunity to become acquainted before the conclusion of the contract.

A. Foundation in the Acquis 1.

Sources

Annex 1(i) of the Unfair Terms D. refers to terms “irrevocably binding the consumer to 1 terms with which he had no real opportunity of becoming acquainted before the conclusion of the contract.” In addition, Art. 10(3) of the E-Commerce D. requires that the contract terms and general conditions provided to the recipient must be made available in a way that allows him or her to store and reproduce them. According to Art. 4(2)(b) Package Travel D., the organizer and/or the retailer of a package travel has to ensure that all the terms of the contract are set out in writing or in a comprehensible and accessible way and must be communicated before the conclusion of the contract. Art. 5(1) of the Financial Services Distance Selling D. provides that the business shall communicate to the consumer all the contractual terms and conditions on paper or on another durable medium available and accessible to the consumer in good time before the consumer is bound by any distance contract or offer. Almost similar requirements are laid down for framework contracts on payment services in Articles 41(1) and 44 of the Payment Services D. (for single payment service contracts cf. Art. 36 of this D.). According to ECJ case law interpreting Art. 17 of the Brussels Convention (Art. 23 of 2 the Brussels I Reg.), these provisions (being applicable also to B2B contracts) require “real consent on the part of the persons concerned so as to protect the weaker party to the contract by avoiding jurisdiction clauses, incorporated in a contract by one party, going unnoticed” (cf. e.g. ECJ C-159/97 – Trasporti Castelletti Spedizioni Internazionali SpA / Hugo Trumpy SpA, para. 13).

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Art 6:201 3–6

Chapter 6: Non-Negotiated Terms Section 2: Inclusion and interpretation of terms

3 Legal practice concerning the CISG supports the viewpoint that, under the CISG, standard terms need to be communicated to the other party in order to be included into the contract (Austria: OGH (Austrian Supreme Court), 6 Feb 1996, 10 Ob 518/95; Belgium: District Court Nivelles, 19 September 1995 (Gantry v. Research Consulting Marketing) http://cisgw3.law.pace.edu/cases/950919b1.html, 19. January 2007; France: Cour d’Appel Paris 13 December 1995 ISEA Industrie v. Lu; http://cisgw3.law.pace.edu/ cases/951213f1.html, 19. January 2007; USA: Standard Bent Glass Corp. v. Glassrobots Oy, U. S. Court of Appeal 3rd Cir. (2003), http://cisgw3.law.pace.edu/cases/030620u1. html, 19. January 2007). On the other hand, Dutch case law seems to deal with this problem as matter of gap filling (Art. 7(2) CISG) according to national law (cf. Rechtbank Arnhem, 17 March 2004 (Sluiter Ellwood II et al. v. Blumenerdenwerk Stender GmbH), http://cisgw3.law. pace.edu/cases/040317n1.html, 19. Jan. 2007).

2.

Development

4 Although Annex 1(i) of the Unfair Terms D. does not address problems of inclusion of terms into the contract, its content clearly indicates that fairness requires a real opportunity for the consumer of becoming acquainted with these terms before the conclusion of the contract. Despite the fact that the rule in paragraph (4) cannot be based directly on an identical acquis rule, it can be derived from the acquis and the underlying fairness principle is clearly and expressly included in Annex 1(i) of the Unfair Terms D. 5 In the area of the e-commerce Art. 10(3) of the E-Commerce D. imposes a duty to deliver the terms of contract to the recipient in a certain way. However, the directive does not make clear the sanction for the violation of this duty. The function of this duty is to make a recipient acquainted with the terms and to allow this person to store the terms, to be able to provide proof for the content of the legal relationship in case of a legal dispute. These aims may be achieved if the violation of the duties based on Art. 10(3) of the directive results in the non-inclusion of the terms into the contract. It does not exclude other sanctions belonging to the area of the supervision over the respect of fairness in commercial practices. For such reasons Art. 6:201(3) and (4) ACQP determine a condition for the effective incorporation of terms into a contract. 6 For the development of paragraphs (1) and (2), the above mentioned ECJ and CISG case law have served as a basis. Moreover, the principles embedded there, can be seen against the background of Art. 5:103 PECL: Terms not individually negotiated (1) Contract terms which have not been individually negotiated may be invoked against a party who did not know of them only if the party invoking them took reasonable steps to bring them to the other party’s attention before or when the contract was concluded.

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Article 6:201 Acquaintance with terms not individually negotiated

Art 6:201 7–9

(2) Terms are not brought appropriately to a party’s attention by a mere reference to them in a contract document, even if that party signs the document. The rules in paragraphs (1) and (2) are derived from this line of reasoning.

3.

Political Issues

Stating a rule concerning the inclusion of non-negotiated terms into a contract clearly 7 goes beyond the acquis and may thus raise a serious political issue which was discussed controversially in the Acquis Group. However, the Communication from the Commission to the European Parliament and the Council “European Contract Law and the revision of the acquis: the way forward” of 11 October 2004, COM (2004) 651 final, Annex 1, expressly envisages rules on the formation of contracts. The policy issue involved is, therefore, only the question of whether these rules should contain provisions relating to the inclusion of non-negotiated terms. Some Acquis Group members argued against an adoption of rules applicable to B2B contracts. According to their viewpoint, anybody involved in a business should be aware of trade practices and relevant standard terms. Exceptions should always be allowed, but it should be the burden of the party claiming lacking knowledge to argue that it did not really know of the standard terms. These members also feared an interference with trade practices. According to a majority of members, an affirmative answer seems preferable in order not to fall back behind PECL and CISG. In both instruments, the minimum requirement for an inclusion of non-negotiated terms is a reasonable communication of these terms to the other party (cf. No. 3 supra). Therefore, the draft accepts this as the minimum requirement for all contracts in paragraphs (1) and (2). Of course, one may argue that, in B2B cases, the other party could ask the user for a sample of the standard terms if it is interested into having them. On the other hand, being obliged to communicate the terms is no undue burden for the user and makes transactions more transparent (if the other side is not already aware of the terms, cf. infra No. 14), especially in international cases. Stricter rules have to apply for B2C contracts, since in the area of consumer law the Un- 8 fair Terms D. Annex 1(i) has to serve as a basic rule. Moreover, Art. 4(2)(b) of the Package Travel D., Art. 5(1) of the Financial Services Distance Selling D. as well as Articles 41(1) and 44 of the Payment Services D. confirm the view that the consumer must have a real opportunity to become acquainted to the terms before the conclusion of the contract. Therefore, paragraph (4) goes further than paragraphs (1) and (2). Paragraph (3) is not limited to B2C contracts but applies to all contracts. This is in line 9 with Art. 4:105(1) ACQP which is also not limited to B2C contracts.

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Art 6:201 10–13

B.

Commentary

1.

Meaning and Purpose

Chapter 6: Non-Negotiated Terms Section 2: Inclusion and interpretation of terms

10 The rules on non-negotiated terms clearly distinguish between the inclusion of such terms into the contract and their substantive validity. Terms may be included into a contract and may nevertheless be invalid according to Art. 6:306 ACQP. If, on the other hand, the terms are not included, the question of substantive validity does not arise. 11 Based on the rules on offer and acceptance, it could be sufficient for an inclusion of nonnegotiated terms that the parties merely refer to these terms in their contract document or in the offer, e.g. if the offer refers to the standard terms of the offeror and the other side accepts this reference without asking to see the terms. Thus, without the provision at hand, the other party could be bound by terms without having had the opportunity to take notice of their content. The draft follows the rationale stated in the above mentioned ECJ case law concerning choice of forum clauses. 12 According to the general rules in paragraphs (1) and (2), the user only has to take reasonable steps to draw the other side’s attention to the terms. It is then the other side’s responsibility to take actual notice of the terms. In particular if the other side is a business, it can expected that the latter takes care that it can become acquainted with the terms as far as necessary once the terms have been drawn to its attention. According to paragraph (4), the situation is different if the relationship involves a business and a consumer. In accordance with the concept of the “informed and confident consumer”, the user has to take care that the circumstances of the conclusion of the contract are such that the consumer has a real opportunity to become acquainted with the terms before the conclusion of the contract. With respect to e-commerce, according to paragraph (3) terms need to be available to the other party in textual form (Art. 1:305 ACQP). This rule is intended to ensure that recipients receive the terms in a way which allows them to prove the content of the contract in any case. For this reason, the recipient must get them in a form that allows to store them. Contracts concluded by electronic means need a special rule, because they are easily concluded: hence the need of stronger instruments of protection, assuring that the recipient can obtain knowledge of the terms of the contract before its formation.

2.

Context

13 The provision is not phrased as a comprehensive rule of inclusion. Instead, it is conceived in order to supplement the rules governing the formation of contracts. It is applicable in addition to these general rules. Thus, consent of both parties, as defined by general contract law, is necessary to include non-negotiated terms into a contract in all cases. Consequently, the provisions on offer and on acceptance apply in addition to the one at hand.

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Article 6:201 Acquaintance with terms not individually negotiated

Art 6:201 14

Specific duties on a business to inform a consumer about the terms of the contract are laid down in Art. 2:203 ACQP, Art. 2:204(2) ACQP and in Art. 4:105(1) ACQP. Article 4:105(1) ACQP imposes a duty on the business to provide pre-contractual information, containing a reference to any contract terms used, which must be available in textual form (Art. 1:305 ACQP). Both rules complement each other. Article 4:105 ACQP provides a basis for the supervisory authorities to check whether a business fulfils its duty to respect good commercial practices and they may react by using necessary injunctions. In contrast, Art. 6:201(3) ACQP makes clear that contract terms are not binding on the other party unless the user makes them available to the other party in textual form.

3.

Explanation

Paragraph (1) applies only if the other side is unaware of the terms. It does not apply if the 14 other side knows the terms and that the user refers to them. This may be the case if the other side knows the terms from previous contracts or if the terms are generally known in a certain industry or by the customers of a certain industry (and the other side is such a customer). If the other side is unaware of the terms, the user has to take reasonable steps to draw the other party’s attention to them. This requirement is met if the user has communicated the terms to the other side and has taken steps which, under normal circumstances, are sufficient to let the other side know that there are non-negotiated terms. Usually, it will be sufficient: – if the terms are part of the document signed by the parties, – if the terms are reprinted on the backside of an offer with the offer referring to them, – if they are attached to an offer or a contract with the offer or contract referring to them, or – if they are communicated to the other party if the contract or the declarations forming the contract refer to them so that it is sufficiently clear that the terms should be included. The terms must be brought to the party’s attention “before or when” the contract is concluded. This requirement is met if the terms are attached to the offer or to the contract form used. If the terms are attached to the acceptance, this constitutes a modified acceptance. General contract law determines how this matter is to be dealt with (e.g. as a new offer being accepted by the acceptance of the goods or services). Paragraph (3) concerns the inclusion of standard terms in contracts concluded by electronic means. According to the definition in Art. 1:308(3) ACQP, these are contracts concluded by means relating to technology that employs electrical, digital, magnetic, wireless, optical, electromagnetic, or similar means. The terms are made available if the recipient is able to read them before the conclusion of the contract with the use of standard technical equipment. The terms need to be provided in a textual form. Textual form is defined under Art. 1:305 ACQP and means a text which is expressed in alphabetical or Thomas Pfeiffer/Martin Ebers

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Art 6:201 15, 16

Chapter 6: Non-Negotiated Terms Section 2: Inclusion and interpretation of terms

other intelligible characters by means of any support that permits reading, recording of the information contained therein and its reproduction in tangible form (see the comments to Art. 1:305 ACQP). 15 Paragraph (2) is a clarification to paragraph (1). It makes clear that a mere reference to certain terms is not sufficient to draw the other side’s attention to these terms. Whilst a mere reference to certain terms may be sufficient to draw the other side’s attention to the fact that those terms exist, such a reference cannot draw any attention to the terms themselves. 16 Paragraph (4) goes one step further. The user has to take care that the consumer will usually take actual notice of the terms and has a real opportunity to read them. A real opportunity to read is both necessary and sufficient. The provision does not require the consumer to actually read the terms. The requirement of a real opportunity relates to all aspects relevant to this opportunity, especially to the availability and readability of the terms. In most cases, it will be necessary to hand over a readable print version of the terms prior to the conclusion of the contract and to give the consumer enough time to carefully read the terms. In cases where the contract is concluded through an active webpage, it is necessary that the terms can be read, downloaded and reproduced in textual form. Moreover, the conclusion of contract via a webpage must be organised according to procedures that prevent the orders being placed without having given prior attention to the non negotiated terms. The other party, even (under certain circumstances) a consumer, may waive the right to have the terms communicated. A tacit waiver is possible, e.g. if a party orders service or supply by telephone and insists on immediate delivery, this party must take into account that the supplier would usually use non-negotiated terms. According to the rationale of paragraphs (1) to (4), a waiver included in non-negotiated terms of the party using the terms is not sufficient. A waiver should also be possible for a consumer based on a freely and individually expressed consent not influenced by any undue factors (e.g. the seller or supplier urging the consumer to waive this right). Since these considerations form a direct consequence of the rationale of this provision, it seems unnecessary to state a rule concerning such a waiver, and therefore it is preferable not do so. It should be added that the possibility of a waiver does not contradict Art. 1:203 ACQP, if this principle is applied sensibly by the courts. If the consumer insists on an immediate conclusion of the contract without having studied the non-negotiated terms, it would be contrary to good faith (Art. 2:101 ACQP) to claim that the terms have not been included. Art. 3(1) 2nd indent and Art. 3(2) 2nd indent of the Distance Selling D., Art. 3(3) and Art. 5 of the Financial Services Distance Selling D. and Art. 13 of the Assurance Mediation D. are applications of the general principle that a deviation from general consumer law standards may apply, if the specific situation of the negotiations requires it to do so.

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Article 6:201 Acquaintance with terms not individually negotiated

4.

Art 6:201 17–23

Examples

Example 1 In the construction industry of a Member State, most contracts refer to certain standard 17 terms (known as the “Construction Standard Terms”). A construction company C wishes to use these terms in a subcontract with another domestic construction company S. It is sufficient to refer to the “Construction Standard Terms” in the contract between C and S; C does not have to communicate these terms to S. Example 2 Like Example 1; but C wishes to use the Construction Standard Terms in a contract with 18 a foreign company F which has no experience in this Member State’s market. C has to take reasonable steps pursuant to paragraph (1). Example 3 The parties sign a contract drafted by A. In bold letters above the signature line, the con- 19 tract refers to A’s standard terms. B signs the contract without having received the terms previously. Despite its bold print, the reference in the contract is a mere reference. The terms are not included. Example 4 In B2C cases, the user offers standard contracts. The line above the signature line refers 20 to the print of the standard terms which are printed in a readable manner on the backside of the form. The requirements of paragraph (4) are met. Example 5 A credit card company uses an “application form” which states that the company will 21 send the applicable standard terms to its (private) customers as soon as the application is accepted. The requirements of paragraph (4) are not met because the application is technically an offer; the consumer has no opportunity to become acquainted with the terms prior to the conclusion of the contract. Example 6 An online shop offers mobile phones to private customers. The active website shows a 22 hyperlink to the standard terms prior to the conclusion of the contract. It accepts orders only if the consumer confirms that he has read the standard terms. Customer B confirms that he has read them but actually has not read the terms. The terms are included, not because B has incorrectly confirmed to have read them but because he had a real opportunity to do so. Example 7 In a department store, the standard terms are posted at the wall right beside the cashier so 23 that it is impossible to overlook them and consumers have a good opportunity to read them. In this case, the requirements of paragraph (4) are met.

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Art 6:201, 24 Art 6:202, 1–3

Chapter 6: Non-Negotiated Terms Section 2: Inclusion and interpretation of terms

Example 8 24 The terms are fixed on the cashier desk. They are readable for the consumer only when he is standing immediately next to the cashier and not while he is waiting in line. Once the consumer has reached the cashier, there is not enough time to read the terms. The requirements of paragraph (4) are not met.

Article 6:202: Preference to negotiated terms Terms which have been individually negotiated take preference over those which have not.

A. Foundation in the Acquis 1.

Sources

1 There is no explicit provision in the acquis. However, Art. 3 of the Unfair Terms D. distinguishes between non-negotiated and negotiated terms.

2.

Development

2 Although there is no express basis for this provision in the acquis, the present Article (which is identical to Art. 5:104 PECL) could be accepted as an acquis rule. It is significant that Art. 3 of the Unfair Terms D. distinguishes between negotiated and non-negotiated terms and the fact that the latter (and not the former) are subject to judicial control, demonstrates that, according to the acquis, negotiated terms have a significantly stronger basis than non-negotiated terms in the intentions and decisions of the parties. Thus the mere existence of this distinction is sufficient to derive the principle of preference for negotiated terms. Moreover, the rule is convincing in its substance.

B.

Commentary

1.

Meaning and Purpose

3 If the parties to a contract have negotiated some but not all terms of a contract, it may happen that the negotiated terms deal with questions which are also dealt with by the non-negotiated terms. Usually, if two different contract terms address the same question, it is a matter of interpretation according to the general rules of interpretation whether one of these terms can prevail. If no term can prevail, it is again a matter of interpretation and general contract law whether the terms are void (have no legal effect according to another similar concept), and whether the contract can exist without the terms.

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Article 6:202 Preference to negotiated terms

Art 6:202 4–7

In the case of a conflict between a negotiated and a non-negotiated term, the situation differs from the previous one. The negotiated term is considered to better reflect the parties’ real intention than the non-negotiated term since it is a result of actual negotiations between the parties. Consequently, the contradiction between the terms does not result in nullity (or a similar concept) of the contract as a whole or of both terms. Instead, the negotiated terms take preference over the non-negotiated terms.

2.

Context

The Article is a rule of interpretation for a special case. It takes preference over the gen- 4 eral rules of interpretation provided for by general contract law.

3.

Explanation

The provision addresses conflicts between negotiated and non-negotiated terms. It is ap- 5 plicable if a negotiated and a non-negotiated term address the same question. The provision is applicable regardless of the form of the negotiated term. A negotiated term prevails even if there is only oral agreement to this term provided however, that according to the circumstances, the oral agreement is binding.

4.

Examples

Example 1 In its standard terms for procurement contracts, the user requires its suppliers to deliver in 6 30 days after the signature of the contract. The contract is signed on 1st March. In a term individually negotiated by the parties, they have agreed that the goods shall be delivered on 15th April. According to Art. 6:202 ACQP, the latter term prevails over the standard term. Example 2 The facts are the same as in Example 1. The standard terms though include a merger 7 clause stating that the written document contains the entire agreement of the parties but the parties have agreed (only) orally that 15th April shall be the date of delivery. The result is the same as in Example 1.

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Art 6:203 1–5

Chapter 6: Non-Negotiated Terms Section 2: Inclusion and interpretation of terms

Article 6:203: Interpretation of terms (1) Where the meaning of a term is unclear, that term is to be interpreted against the party who supplied it. (2) Paragraph (1) does not apply to collective proceedings for injunctions against the use of particular terms.

A. Foundation in the Acquis 1.

Sources

1 The provision is based on Art. 5, sent. 2 and sent. 3 of the Unfair Terms D., applicable to written terms in consumer contracts. In addition, Article 5:103 PECL states a general contra proferentem rule.

2.

Development

2 Whilst Art. 5, sent. 1 of the Unfair Terms D. refers to written terms, paragraph (1) applies to all terms. It seems likely that Art. 5 of the Unfair Terms D. assumes that nonnegotiated terms will only or mostly be in writing whereas oral terms were envisaged only in the context of negotiations. Member state experience, however, demonstrates that non-negotiated oral terms actually exist (cf. e.g. BGH (German Supreme Court), Neue Juristische Wochenschrift (NJW) 1988, 410-411). Since it is even more difficult to memorise oral terms, it seems more coherent to apply paragraph (1) to all terms instead of only applying it to written terms, cf. also Art. 6:302 No. 2. 3 “Always” in the Unfair Terms D. Art. 5, sent. 1 seems superfluous. It is nonetheless clear that paragraph (1) always applies, if a term is unclear.

B.

Commentary

1.

Meaning and Purpose

4 If terms are not negotiated, the user is in a position to phrase their wording in such a way that no doubt about their contents arises. Thus, the user bears the responsibility for the wording whereas the other party needs to rely on what the user has stated. Consequently, unclear terms must be interpreted against the user. 5 The distinction in paragraph (2) between actions involving an individual consumer and collective proceedings “may be accounted for by the different aims pursued by those actions.” In the former case, an interpretation favourable to the individual consumer concerned benefits him or her immediately. By contrast, in the latter case, in order to obtain, by way of prevention, the most favourable result for consumers as a whole, it is not ne-

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Article 6:203 Interpretation of terms

Art 6:203 6–9

cessary, where there is doubt, to interpret the term in a manner favourable to them. “Accordingly, an objective interpretation makes it possible to prohibit more frequently the use of an unintelligible or ambiguous term, which results in wider consumer protection” (cf. ECJ C-70/03 – Commission v. Spain, para. 16).

2.

Context

In accordance with Art. 5:104 PECL, the provision applies to B2B as well as to B2C con- 6 tracts. The rule is based on a general principle of interpretation which is similarly applicable to all contracts. According to Art. 6:302 ACQP terms must be phrased in a plain, intelligible language. If 7 they are obscure or ambiguous, they may be regarded as unfair, even those relating to the definition of the main subject matter of the contract or to the adequacy of the price and remuneration, on the one hand, as against the services or goods supplied in exchange, on the other. The present Article also raises the question whether this provision applies if some of the 8 possible interpretations do not pass the fairness test pursuant to Art. 6:301 and 6:302 ACQP. Based on a functional approach, one may argue that an answer could be given based on the rule that an interpretation “against” the user is required. If one of several possible interpretations of a term must be regarded as unfair, the present Article requires favouring this interpretation because it results into the strongest effect “against” the user. Paradoxically, in such a case, a construction in favour of the user renders a result against the user. According to the ECJ in Commission v. Spain the Court has referred to a more narrow understanding of “against” by arguing that a construction favourable for the consumer, as opposed to an objective interpretation, may prevent the courts from holding that a term is unfair. Consequently, based on the present acquis, the present Article takes preferences over Art. 6:301 ACQP in individual proceedings: Firstly, a term must be interpreted according to the Article at hand. Secondly, the result of this interpretation is subject to the fairness test in Art. 6:301 ACQP et seq. However, it can be left to the courts whether the functional approach should apply.

3.

Explanation

The provision at hand is applicable to unclear clauses. That does not mean that it is ap- 9 plicable in all cases where the wording would allow different interpretations of a contract term. It is limited to cases where there is serious doubt about the interpretation after general methods of interpretation taking into account all relevant circumstances have been applied.

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Art 6:203, 10–12 Art 6:204, 1

4.

Chapter 6: Non-Negotiated Terms Section 2: Inclusion and interpretation of terms

Examples

Example 1 10 In a contract term, the user gives “the following guarantees in cases of a defect of the delivered goods”. Based on the wording of this term, it may be questionable whether these guarantees apply instead of the rights provided for by statutory law or in addition to those remedies. According to another contract term the buyer may, in case of a defect, address all claims based on this contract or based on statutory law to the complaints department of the user. Therefore, a comprehensive interpretation of the contract makes clear that the buyer may invoke both contractual and statutory rights. Article 6:203 ACQP does not apply. Example 2 11 Like Example 1 but in the light of other provisions of the contract and further circumstances, it remains unclear whether a guarantee, stated in a standard term, is given in addition to statutory rights or instead of these rights. According to Art. 6:203 ACQP, the interpretation more favourable for the consumer prevails. The rights arising from the contractual guarantee exist in addition to statutory rights. Example 3 12 In collective proceedings, a consumer association claims that the same provision is unfair. Due to paragraph (2), the term can be interpreted according to objective standards only. Due to its lack of clarity, it is deemed to be unfair.

Article 6:204: Conflicting standard terms

1

(1) If the parties have reached agreement except that the offer and acceptance refer to conflicting standard terms, a contract is nonetheless formed. The standard terms form part of the contract to the extent that they are common in substance. (2) However, no contract is formed if one party: (a) has indicated in advance, explicitly, and not by way of standard terms, an intention not to be bound by a contract on the basis of paragraph (1); or (b) without undue delay, informs the other party of such an intention.

Provisional Comment 1 There is no basis for this provision in the acquis. The Unfair Terms D. does not address this problem since it is limited to B2C contracts, and consumers usually do not use standard terms.

1

316

Grey rule from Art. II. – 4:209 DCFR.

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Article 6:204 Conflicting standard terms

Art 6:204 2–5

In a comparative perspective, we can find four possible solutions for the “battle of forms” 2 problem, i.e. the no contract theory, the first shot theory, the last shot theory, and the common substance theory, also known as “knock out rule” (this is of course a simplification and only meant to present the problem). The provision at hand is based on Art. 2:209 PECL with the modification that, in accordance with Art. 6:101 ACQP, the expression “standard terms” is used. PECL follows the common substance theory except for situations without consent. However, even if there is consent, it quite correctly limits this concept to certain cases. The problem of a difference between offer and acceptance is dealt with by general contract law. The present Article provides for a special rule in case that such a difference arises from the use of standard terms by both sides. “Standard term” is defined in Art. 6:101(3) ACQP. In the absence of a basis in the acquis and in the light of international disagreement, 3 including this provision raises serious policy issues. One could argue that since (a) there is no basis for this rule in the acquis and (b) the provision deals with matters of interpretation of the parties’ declarations which should be handled by the courts, the draft should not provide any rule. Yet until today, the problems of the “battle of forms” have not found an internationally agreed solution and remain a source of uncertainty in international contract law, and therefore an obstacle within the single market. Although problems of interpretation generally are indeed a matter that should be dealt with by courts, an exception seems advisable in this case. However, the broad variety of solutions in various national laws indicates that all of the 4 different approaches have their merits in certain situations. It may very well be that the “first shot” forms the basis upon which all other communications between the parties are based. Alternatively silence of the other party after the last shot may, based on further facts, express sufficient consent. It is therefore important to underline that the draft does not at all exclude such an interpretation of the parties’ declarations. As the wording of this provision demonstrates, it only addresses the case of a simple exchange of offer and acceptance mentioned in paragraph (1). Thus, it is up to each court to determine how the declarations of the parties have been interpreted in more complex cases. The same analysis is submitted for the identical provision in PECL by Lando/Beale [eds.], Principles of European Contract Law, Parts I and II, The Hague (2000), Art. 2:209 PECL, comment B. Example 1 Both seller and buyer refer to their standard terms in their offer and acceptance. The 5 terms differ in all parts. All letters from the buyer have printed in their bottom line: “We only buy on the basis of our standard terms and do not accept standard terms of the seller.” The contract is concluded. The buyer cannot invoke Art. 6:204(2)(a) ACQP since the clause “We only buy ...” is itself a standard term.

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Art 6:204 6

Chapter 6: Non-Negotiated Terms Section 2: Inclusion and interpretation of terms

Example 2 6 In a certain industry, the use of standard terms recommended by the association of companies in this industry is common. Both parties, in their offer and acceptance, refer to these standard terms, yet both with some additions. The contract is valid and the standard terms are included in the contract, provided there is consent between the parties that the contract is formed. The additions are not included.

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Section 3: Validity of terms Article 6:301: Unfairness of terms (1) A contract term which has not been individually negotiated is considered unfair if it disadvantages the other party, contrary to the requirement of good faith, by creating a significant imbalance in the rights and obligations of the parties under the contract. Without prejudice to provisions on collective proceedings, when assessing the unfairness of a contractual term, regard is to be given to the nature of the goods or services to be provided under the contract, to all circumstances prevailing during the conclusion of the contract, to all other terms of the contract, and to all terms of any other contract on which the contract depends. (2) A term in a contract between businesses which has not been individually negotiated is considered unfair only if using that term would grossly deviate from good commercial practice.

A. Foundation in the Acquis 1.

Sources

The general provision in the acquis for judicial control of non-negotiated terms is Art. 3 1 of the Unfair Terms D. Aspects relevant for an assessment of the unfairness of terms are stated in Art. 4 of the directive. Art. 3(3) of the Late Payment D. states criteria for judicial control of certain terms in commercial contracts (“grossly unfair” with regard to “good commercial practice”). It should also be noted that the Misleading Advertising D. and the Unfair Commercial Practices D. intend to prohibit unfair commercial practices.

2.

Development

As far as paragraph (2) is concerned, one might raise the question whether judicial con- 2 trol of non-negotiated terms of B2B contracts as provided for by Art. 3(3) of the Late Payment D., is an exception or an emerging general principle. As stated in comment No. 1 et seq. to Art. 6:101 ACQP, one might also consider other provisions in the acquis, although with a limited scope, requiring judicial control of terms in B2B contracts. Furthermore, Member State practice as to judicial control of terms of non-negotiated contract terms is rather different (cf. infra, No. 6 et seq.). Article 6:301(2) ACQP tries to reflect this complex situation by formulating a compromise: Non-negotiated terms in B2B contracts are subject to judicial control but this control is exercised pursuant to a considerably different standard. A term must grossly deviate from good commercial practice in order to be not binding.

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Art 6:301 3–7

Chapter 6: Non-Negotiated Terms Section 3: Validity of terms

3 The extension of the scope of this provision to B2B contracts implies that the mere existence of not individually negotiated terms is a sufficient reason for the assumption that the user was able to restrict the other side’s contractual freedom so that judicial control is justified. If this is the case, this control cannot be limited to B2B and B2C contracts. Consequently, paragraph (1) has been conceived as a P2P rule and paragraph (2) as a restriction of this rule for B2B cases where parties can be expected to take better care of their own interests and where the need for hard and fast rules is stronger. The text of paragraph (1) comprises the “contrary to good faith” criterion as well as the “significant imbalance” criterion. Thinking about the hypothetical question whether there are any contractual terms either having in effect an imbalance which is significant yet not contrary to good faith or vice-versa term that are contrary to good faith without causing a significant imbalance, one may doubt that the complicated structure of the rule is really necessary. Furthermore, it has been argued that the “significant imbalance” criterion is inadequate because it requires the courts to compare the rights and duties of both sides, which often is impossible or insignificant for the fairness of a term. 4 Member States have transposed Art. 3 of the Unfair Terms D. differently. The requirement of “good faith” is only explicitly mentioned in thirteen member states in total, namely in Cyprus, Czech Republic, Germany, Hungary, Ireland, Italy, Latvia, Malta, poland, Portugal, Slovenia, Spain and United Kingdom. The requirement of “significant imbalance” is mentioned explicitly in the general clauses of nineteen member states: Belgium, Cyprus, Denmark, Estonia, Greece, France, Hungary, Ireland, Italy, Lithuania, Luxembourg, Malta, Poland, Portugal, Slovakia, Slovenia, Greece, Spain, United Kingdom. However seven of these countries do not mention (explicitly) the additional criterion of “good faith”: Belgium, Denmark, France, Greece, Lithuania, Luxembourg and Slovakia (cf. ConsLC, p. 232). 5 The acquis does not give preference to one criterion. Since there are legal systems which refer to the general concept of good faith and others which do not, the acquis, in Art. 3 of the Unfair Terms D., follows a compromise by referring to both criteria. In the long run, this might prove to be superfluous. In addition, it may be considered the simpler (and therefore preferable) solution to refer only to the good faith criterion (or a similar concept e.g. “unfairness”). In the context of these principles, it seems preferable to just restate the acquis.

3.

Political Issues

6 The extension of judicial control beyond B2C contracts is in itself a political issue which raised a controversial discussion in the Acquis Group, similar to the dispute about the provisions on the inclusion of terms (cf. Art. 6:201 comment No. 7). A majority of the Acquis Group members favoured a rule covering also B2B contracts. The following reasoning may serve as an explanation. 7 In a number of member states a review of P2P contracts, thus including B2B contracts, is possible at different levels. In the Nordic States (Denmark, Finland, Sweden), due

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Article 6:301 Unfairness of terms

Art 6:301 8

to the general clause of Sec. 36 of the Contracts Act, a content review of unfair terms (even if they are individually negotiated) has always been possible in all kinds of contractual relationships, thus also in B2B contracts. However, according to Sec. 36 of the Contracts Act, in determining what is unfair, regard shall not only be paid to the content of the contract and to the circumstances prevailing at and after the conclusion of the contract, but also to the positions of the parties. This means that in B2B contracts, very strict requirements must be overcome to render a clause unfair. In Austria, Estonia, Germany, Hungary, Lithuania, Netherlands, Portugal and Slovenia there are general clauses which provide for a content review of standard terms, which do not merely apply to B2C contracts, but also to B2B contracts (cf. ConsLC, p. 221 et seq.). In the United Kingdom a review of standard contract terms for P2P contracts, thus including B2B contracts, is possible, since UCTA 1977 also applies to contracts between businesses and certain “private” contracts for the sale of goods where neither of the two parties is a business. However, UCTA applies only to exclusion and limitation of liability clauses and indemnity clauses. In contrast, there are no special general clauses providing for a content review of pre-formulated terms in Belgium, Cyprus, Czech Republic, France, Greece, Ireland, Italy, Latvia, Luxembourg, Malta, Poland, Slovakia and Spain (cf. ConsLC, p. 222). It is nevertheless worth noting, that in some of these Member States a content review is to some extent possible, e.g. by reviewing the content of a clause via rules on incorporation or (as e.g. in France, Greece, Latvia, Luxembourg, Poland) by protecting businesspersons concluding atypical contracts as “consumers”, “non-professional” or “final addressees”. Finally it should be noted, that many member states (e.g. Belgium and Spain) apply general concepts, which can be used to correct an extremely disproportionate imbalance in the main performance duties, also in B2B contracts, such as on the basis of the laesio enormis or the benchmark of “public policy/good morals” (cf. ConsLC, p. 222). Even in France, the Cour de Cassation has sporadically allowed a review of clauses between two businesses (via the doctrine of cause, CC Art. 1131), although the French provisions on content review are in principle limited to consumer contracts (Cass. civ. 22 October 1996 Dalloz 1997, 121 Société Banchereau v. Société Chronopost). In later decisions, however, the Cour de Cassation did place limitations on the extent of the principles developed in Chronopost, cf. Chambre mixte 22 April 2005, pourvoi n8 0218326 and 03-14112; Chambre commerciale 21 February 2006, pourvoi n8 04-20139. The present Article tries to reflect this complex situation by extending the review to all 8 kind of contracts in paragraph (1) but formulating a compromise for B2B contracts in paragraph (2) (cf. supra, No. 2).

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Art 6:301 9–12

B.

Commentary

1.

Meaning and Purpose

Chapter 6: Non-Negotiated Terms Section 3: Validity of terms

9 The provision states the standard of judicial control for contract terms falling under the scope of this chapter. The general standard is stated in paragraph (1), paragraph (2) formulates the less restrictive standard of control for B2B contracts.

2.

Context

10 The Article is the core provision for a judicial control of unfair non negotiated terms. Articles 6:302, 6:304 and 6:305 ACQP state cases of unfairness or help to determine the unfairness according to the present Article. The Article only deals with judicial control of the substance or content of contract terms. This chapter strictly distinguishes this “content control” from the inclusion test provided for by Art. 6:201 ACQP et seq. In individual proceedings, the present Article applies only if a term has passed the inclusion test. Article 6:303 ACQP limits the scope of the unfairness test. 11 In a more general perspective, this provision can be interpreted as a derivative of the general principle of good faith. It is thus related to other provisions referring to good faith (Art. 2:101, 2:103 and 7:102 ACQP). The Article does not exclude an application of these other provisions. It may be that a term is generally in accordance with the requirements of good faith but invoking this term in a certain exceptional and unforeseeable situation is contrary to good faith. However, unfair results, even if limited to certain situations, constitute a strong argument that the term as such is contrary to the good faith requirement in the present Article, especially if a changed wording of a term can easily exclude unfair effects of the term. Moreover, according to the present rule, the courts will also look at the circumstances at the time of the conclusion of the contract in order to determine the unfairness of the term.

3.

Explanation

12 The provision refers to the criteria known from Art. 3 of the Unfair Terms D. In order to determine the unfairness, the courts will in particular consider whether a term provides for any unduly burdensome rights or any extension, expansion, prolongation etc. of rights in favour of the user or whether it unduly excludes, limits, or narrows any rights of the other side. Consequently, the terms of the contract have to be seen against the background of the provisions of the applicable contract law. Furthermore, legitimate and reasonable expectations of the parties and common usages need to be considered. Overall, in order to assess a term, the aspects enumerated in paragraph (1), sent. 2 have to be considered.

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Article 6:301 Unfairness of terms

Art 6:301 13–16

Articles 6:302, 6:304 and 6:305 ACQP give indicative or binding examples for the stan- 13 dard required by the present Article. The former provisions do not, however, limit the scope of Art. 6:301 ACQP. As Art. 6:304 and 6:305 ACQP demonstrate, a provision can be unfair as such (cf. ECJ C-240/98 – Océano). Consequently, the present Article usually requires an abstract assessment of the unfairness of a term itself according to its content. This analysis is in line with most of the criteria stated in paragraph (1), sent. 2 since these criteria are themselves abstract (nature of goods and services, other terms of the contract). As far as the provision refers to the specific circumstances at the conclusion of contracts, this may, in some cases, justify modifying the result of the initial abstract assessment. Subject of control is each single term. Consequently each term has to be considered separately; an “overall acceptability” of the contract as a whole is irrelevant. Consequently, the user is not allowed to justify an unfair term by including other terms which are favourable for the other side unless there is a close connection between the subject matter of both terms so that the favourable term constitutes an effective compensation. In particular, a low price cannot justify unfair terms unless this arrangement is the result of an individual negotiation. The reference to other terms in paragraph (1), sent. 2 only means that the effect of one term may be influenced by other terms. In B2B contracts, a different standard applies. A term, which would be contrary to good 14 faith if used against a consumer or private person, falls under paragraph (2) only if – under the standard of good commercial practice – it is grossly unfair.

4.

Examples

Example 1 In a repair contract, a term states that the other side has to give notice of any unsuccessful 15 repair without any delay by registered mail in order not to give up any contractual rights. Provided that such a term constitutes an unfair formality and that it is contrary to good faith, it cannot be compensated by a term stating that the user accepts strict liability for his service personnel. Example 2 According to a non-negotiated term, a set-off against the claim of the supplier for pay- 16 ment is excluded. Whilst such a clause would be contrary to good faith in B2C cases (Art. 6:305(1)(b) ACQP), a set-off may be excluded in B2B contracts in order to prevent a buyer from invoking an unfounded set-off as means to cause a delay in court proceedings. The buyer may file its own suit to enforce the right on which the set-off is based, which is no undue burden in B2B cases.

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Art 6:302 1–3

Chapter 6: Non-Negotiated Terms Section 3: Validity of terms

Article 6:302: Transparency of terms Not individually negotiated terms must be drafted and communicated in plain, intelligible language.

A. Foundation in the Acquis 1.

Sources

1 Article 5 sent. 1 of the Unfair Terms D. requires that written terms are stated in a plain and intelligible language. Transparency of terms is also an issue in sectorial instruments such as the Payment Services D. (cf. Art. 1(2) and Recitals 18, 25 and 26 with regard to the general principle of transparency of terms and to several further provisions as an implementation of this principle).

2.

Development

2 Article 5 sent. 1 of the Unfair Terms D. refers only to written terms. However, this limitation is in contradiction to the recitals of the directive: apart from the fact that Recital 20 does not contain any such limitation, it is expressly emphasised in Recital 11, that consumers bound by an oral contract should be granted the same level of protection as consumers bound by a written contract. Therefore, this Article applies to all terms. It seems likely that Art. 5 of the Unfair Terms D. assumes that non-negotiated terms will only or mostly be in writing whereas oral terms were envisaged only in the context of negotiations. Member State experience, however, demonstrates that non-negotiated oral terms actually exist (cf. BGH (German Supreme Court), Neue Juristische Wochenschrift (NJW) 1988, 410-411). Since it is even more difficult to memorise oral terms, it seems more coherent to apply this provision to all terms instead of only applying it to written terms. 3 Art. 5 of the Unfair Terms D., does not state the consequences of obscure and unclear language explicitly. However, the ECJ has ruled that a term is considered to be unfair if it does not meet the plain and intelligible language requirement. Therefore, the plain and intelligible language rule has been transferred into Section 3; cf. ECJ C-144/99 – Commission v. Netherlands. This is not expressly stated by the court itself. In para. 20, however, the Court expressly refers, in an affirming sense, to para. 26-30 of the Opinion of Advocate General Tizzano. Para. 27 of this opinion states: “First, it should be recalled that Article 4(2) of the Directive expressly provides that, if terms are obscure or ambiguous, even those relating to the definition of the main subject matter of the contract or to the adequacy of the price and remuneration, on the one hand, as against the services or goods supplied in exchange, on the other, may be regarded as unfair. This means, clearly and unambiguously, that the consumer may rely on such terms for the purposes of securing the protection guaranteed him under Article 6 (1) of the Directive, that is to say, for a ruling that he is not bound by those terms.” If “even”

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Article 6:302 Transparency of terms

Art 6:302 4–7

the terms covered by Article 4(2) may be regarded unfair, it is justified to state, a maiore ad minus, that other obscure or ambiguous terms may also be regarded unfair.

B.

Commentary

1.

Meaning and Purpose

In the case of non-negotiated terms, the user assumes responsibility for their quality. As a 4 consequence, the user has to conceive the terms in a way that is sufficiently transparent so that the other side can be familiar with the content of the contract before conclusion and can use the terms as a reliable source of information before and during the time of performance. It is the purpose of the present Article that the other side can figure out his contractual rights and duties from the contract itself.

2.

Context

Article 2:206 ACQP states that information given by a business must be clear and pre- 5 cise, and in plain intelligible language. Whereas this provision applies to information pre-contractually or otherwise owed by a business, the present Article applies to the contract and its terms themselves. Moreover, Art. 6:203 ACQP states the contra proferentem rule for ambiguous clauses. The relation between both provisions is explained in comment No. 7 to Art. 6:203 ACQP.

3.

Explanation

Contract terms have to be transparent, in order to pass the fairness test under Art. 6:301 6 ACQP. The requirements of the present Article are met if the other side can see from the contract and its terms what their contractual rights and duties are. Consequently, the wording must be clear and intelligible. The same applies to the textual organisation, which must guarantee that the relevant clauses can be recognised and identified without any unnecessary difficulty. Any information given by the terms has to be correct and complete so that no term is misleading. The standard for transparency may differ between B2B and B2C contracts.

4.

Examples

Example 1 The standard terms of a landlord state that, in winter time, the tenant may require “heat- 7 ing of the most-used rooms”. According to this term, it is unclear which rooms have to be heated. Assuming this situation cannot be resolved by interpretation, the term is not

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Art 6:302, 8 Art 6:303, 1–3

Chapter 6: Non-Negotiated Terms Section 3: Validity of terms

transparent. In consequence heating has to be provided either in all rooms or in those rooms to be heated under general rules. Example 2 8 In its terms for reservations, a hotel company limits refunds for cancellation according to “the recommendations of the national tourist and hotel association”. The term is unclear since the other side is not able to know its rights from the contract itself. The situation is different, if the other side is a travel agency which can be expected to know the “recommendations”.

Article 6:303: Scope of the unfairness test (1) Contract terms which are based on statutory provisions or on international conventions to which the Member States are parties, or to which the European Union is a party, particularly in the transport area, are not subject to an unfairness test. (2) For contract terms which are drafted in plain and intelligible language, the unfairness test extends neither to the definition of the main subject matter of the contract, nor to the adequacy of the price to be paid.

A. Foundation in the Acquis 1.

Sources

1 Paragraph (1) reflects Art. 1(2) of the Unfair Terms D., paragraph (2) reflects Art. 4(2) of the Unfair Terms D.

2.

Development

2 Since the directive only relates to unfairness, it is adequate to conceive paragraph (1) as a limit only to the fairness test but not to other provisions of this draft.

3.

Political Issues

3 Whereas it is clear that the quality of the goods or services forming the subject matter of the contract and the adequacy of the price cannot be subject to judicial control of unfair terms, it was discussed whether there is need for a more precise definition of the subject matter. The present Article does not offer such a definition. However, the following commentary tries to provide for it as far as possible.

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Article 6:303 Scope of the unfairness test

B.

Commentary

1.

Meaning and Purpose

Art 6:303 4–7

If a term is identical to a statutory provision or a provision in an international conven- 4 tion which is applicable to a contractual relationship, it does not make sense to control the term. If such a term were held invalid, the (identical) statutory provision or provision from a convention would apply. The directive gives no power to the courts to control provisions of applicable law. As to paragraph (2), the terms defining the subject matter and stating the price must be 5 excluded from the unfairness test for two reasons: Firstly, a judicial control of the quality of the goods or services as well as a control of the adequacy of the price is incompatible with the needs of a market economy. Usually, the choice of the parties to enter into an exchange of goods and services for a certain price will be made individually so that there is neither room nor need for judicial control. Secondly, such a control would require legal criteria for the adequate price or for the quality of goods and services which do not exist. If e.g. a certain price could be considered to be not binding pursuant to Art. 6:306 ACQP, the courts – when trying to uphold the remaining contract – would have to determine a new price according to the applicable law. For such an effort, sufficient legal or statutory criteria are not available. The situation is different, however, if the requirement of transparency is not met. In the case of terms not sufficiently transparent, an informed market decision has not been made so that it is adequate to apply judicial control. Furthermore, there is an interest to eliminate terms lacking transparency in collective proceedings.

2.

Context

The Article limits the scope of application of the fairness test pursuant to Art. 6:301, 6 6:304 and 6:305 ACQP. The criterion of transparency is taken from Art. 6:302 ACQP. If a term is subject to control under Art. 6:303(2) ACQP, it will also fail to pass the transparency test under Art. 6:302 ACQP.

3.

Explanation

Paragraph (1) applies to terms which reflect an identical provision in a statutory or in- 7 ternational instrument provided, however, that this provision would be applicable if the contract term did not exist. If this is the case, the clause is not subject to the fairness test under Art. 6:301 ACQP. In the case of international conventions, it is, therefore, not necessary for all Member States to be a party. It is sufficient that the convention is applicable to the case because one or more Member States are a party. The provision applies to international conventions only, and not to private instruments. It is not necessary for the statute or provision to be of a mandatory nature. Paragraph (1) only requires statutory or conventional “background law” which is identical to the contract terms so that the

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Art 6:303 8–12

Chapter 6: Non-Negotiated Terms Section 3: Validity of terms

term is merely a restatement of an (otherwise applicable) provision or statute. Common law, customary law and case law have the same effect as statutes or conventions. 8 Paragraph (2) refers to the definition of main subject matter of the contract or the adequacy of the price. The exception for subject matter of the contract means terms which identify and describe the subject matter of the contract, i.e. (in most cases) the goods or services to be delivered. The “main subject matter of the contract” refers to the characteristic performance of the contract (cf. Art. 4(2) of the Rome I Reg.). Since the present Article is based on the theory that the main subject matter is individually negotiated, where the other side has made an individual choice that a certain object is accepted, the provision applies only as far as this individual choice is not altered or modified by the terms of the contract. Therefore paragraph (2) requires a distinction between the definition of the subject matter and terms which alter a subject matter already defined by the parties. Whereas the former falls under paragraph (2), the latter does not. Paragraph (2) moreover, does not apply to the terms dealing with legal effects of a definition, like e.g. terms limiting the effect of a contractual warranty. The same principles apply to terms determining the price.

4.

Examples

Example 1 9 An airline claims that its terms are based on recommendations of the International Air Travel Association which are partly based on the Warsaw and Montreal Conventions. As far as the terms are identical to these conventions, the exception is applicable. This does not apply to other terms because a mere reflection of recommendations of a private association is not sufficient. Example 2 10 In its terms a seller of furniture states that the colour of the furniture actually delivered may slightly differ from the colour seen in the seller’s shop or catalogue. The term does not define the colour (and thereby the delivered goods as the subject matter of the contract) but allows the seller to deviate from this definition. The term is subject to control. Example 3 11 In its terms, a bank says that securities are sold at their actual price at the stock exchange with an additional commission of 1%. The term is not subject to a review of its content under Art. 6:301 ACQP; however, if the clause is found intransparent, it can be reviewed under Art. 6:302 ACQP according to Art. 6:303(2) ACQP. Example 4 12 In its terms, a manufacturer states that the price will be determined according to its newest price-list after the conclusion of the contract. The term is subject to control because it gives the manufacturer the right to change the price unilaterally.

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Article 6:304 List of unfair terms

Art 6:304 1–3

Article 6:304: List of unfair terms The following is a non-exhaustive list of terms which are unfair in contracts between a business and a consumer if they have not been individually negotiated: – terms conferring exclusive jurisdiction for all disputes arising under the contract on the court for the place where the business is domiciled.

A. Foundation in the Acquis 1.

Sources

In C-240/98 – Océano Grupo, the ECJ has ruled that such terms are unfair under Art. 3 of 1 the Unfair Terms D.

2.

Development

Whereas the Unfair Terms D. does not comprise a “black list” of terms which are always 2 unfair, the ECJ judgment in Océano Grupo with its broad language indicates that a term conferring exclusive jurisdiction for all disputes arising under the contract on the court for the place where the business is domiciled will be considered unfair. As a consequence, it seems possible today to start establishing a “black list” for which there was no sufficient basis at the time of the enactment of the Unfair Terms D. In this respect, it had to be considered that later decisions of the ECJ (Case C-237/02 – Freiburger Kommunalbauten and C-168/05 – Elisa María Mostaza Claro v. Centro Móvil Milenium SL) have held that it is for national courts rather than the ECJ to determine whether certain contractual terms in consumer contracts are unfair. This line of reasoning, however, has to do with the ECJ’s limited competence which only covers an interpretation of EC law whereas the application of EC law is reserved for national courts. These later cases do, therefore, by no means exclude that, as a result of the application of the Unfair Terms D., a certain term is always unfair so that there is still a sufficient basis for establishing a black list, yet limited to a single point “list”. This list is meant to be extended if and as soon as there is a sufficient basis for doing so.

3.

Political Issues

Member States have transposed the Annex of the Unfair Terms D. differently. In Aus- 3 tria, Belgium, Czech Republic, Estonia, Greece, Latvia, Lithuania, Luxembourg, Malta, Slovenia and Spain the clauses in the Annex are always regarded as unfair (black list). Germany, Hungary, Italy, Netherlands, Portugal in contrast have opted for a combination of both black and grey lists. In Cyprus, France, Ireland, Poland, Slovakia and United Kingdom on the other hand there are only non-binding grey lists. In Denmark, Finland and Sweden, no part of the Annex is explicitly

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Art 6:304 4–7

Chapter 6: Non-Negotiated Terms Section 3: Validity of terms

transposed; however, this legislative technique was accepted by the ECJ in C-478/99 – Commission of the European Communities v. Kingdom of Sweden (cf. ConsLC, p. 233 et seq.). Given the differences in Member States’ law, establishing a black list could be seen as an undue interference. As a consequence, Art. 6:304 ACQP is limited to a single point “list” and goes by no means further than the existing EC private law as construed in the case law of the ECJ. Consequently, the provision takes the position that further extensions should be made by the legislature.

B.

Commentary

1.

Meaning and Purpose

4 The provision renders terms in B2C contracts providing for an exclusive forum in the businesses’ domicile unfair.

2.

Context

5 The provision does not exclude that other jurisdictional terms, e.g. terms giving jurisdiction to another remote forum, fall under Art. 6:301 ACQP and Art. 6:305(1)(p) ACQP. The same may apply to arbitration clauses (cf. ECJ C-168/05 – Elisa María Mostaza Claro v. Centro Móvil Milenium SL). 6 In international cases, Art. 15-17 of the Brussels I Reg. may apply. According to Art. 17, a business may enter into a jurisdictional agreement with a consumer (1) after the dispute has arisen; (2) if it allows the consumer to bring proceedings to courts other than those indicated in Art. 15 or 16 of the Brussels I Reg.; (3) or if it is entered into by the consumer and the other party within the contract, both of whom at the time of conclusion of the contract are domiciled or habitually resident in the same Member State, and which confers jurisdiction on the courts of that Member State, provided that such an agreement is not contrary to the law of that Member State. The present Article does not prohibit and is not meant to prohibit such agreements.

3.

Explanation

7 The Article does not address the procedural admissibility of jurisdiction clauses. It only deals with the question of their contractual validity. It applies to jurisdiction clauses which are included in a contract as well as to separate agreements. It does not distinguish between clauses addressing international jurisdiction and clauses addressing local jurisdiction or venue. If the clause provides for the jurisdiction at the domicile of the business, it is regarded as unfair.

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Article 6:305 Indicative list of unfair terms

Art 6:304, 8, 9 Art 6:305

In cases where both parties have the same domicile, the business may refer to a statutory jurisdiction at the domicile of the consumer, if available pursuant to the applicable procedural rules.

4.

Examples

Example 1 In its standard terms for consumer contracts, a business states: “All disputes arising from 8 or in the context of this contract are subject to the exclusive jurisdiction of the courts of our domicile”. The term is invalid. Example 2 In contracts used for consumers domiciled in the same Member State X as the business, a 9 term states: “All disputes arising from or in the context of this contract are subject to the exclusive jurisdiction of the courts of X.” The term does not give preference to the courts at the domicile of the business; it only assures that the courts of State X still have jurisdiction if the consumer leaves the country after the conclusion of the contract. The term is valid.

Article 6:305: Indicative list of unfair terms (1) The following is an indicative and non-exhaustive list of terms which may be regarded as unfair in contracts between a business and a consumer if they have not been individually negotiated. This list comprises terms which would: (a) exclude or limit the liability of a business for death or personal injury caused to a consumer through an act or omission of that business; (b) inappropriately exclude or limit the remedies, including any right to set-off, available to the consumer against the business or a third party for non-performance by the business; (c) make a contract binding on a consumer which is subject to a condition whose realization depends solely on the intention of the business; (d) permit a business to keep money paid by a consumer if the latter decides not to conclude or perform the contract, without providing for the consumer to receive compensation of an equivalent amount from the business in the reverse situation; (e) require a consumer who fails to fulfil his or her obligations to pay a disproportionately high amount of damages; (f) entitle a business to withdraw from, or terminate the contract on a discretionary basis without giving the same right to the consumer, or terms which entitle a business to keep money paid for services not yet supplied in the case that the business withdraws from, or terminates the contract;

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Art 6:305

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(g) enable a business to terminate a contract of indeterminate duration without reasonable notice, except where there are serious grounds for doing so; this does not affect terms in financial services contracts where there is a valid reason, provided that the supplier is required to inform the other contracting party or parties thereof immediately; (h) automatically extend a contract of fixed duration unless the consumer indicates otherwise, in cases where such terms provide for an unreasonably early deadline; (i) enable a business to alter the terms of the contract unilaterally without a valid reason which is specified in the contract; this does not affect terms under which a supplier of financial services reserves the right to change without notice the rate of interest to be paid by, or to, the consumer, or the amount of other charges for financial services where there is a valid reason, provided that the supplier is required to inform the consumer at the earliest opportunity and that the consumer is free to terminate the contract with immediate effect; neither does it affect terms under which a business reserves the right to alter unilaterally the conditions of a contract of indeterminate duration, provided that the business is required to inform the consumer with reasonable notice, and that the consumer is free to terminate the contract; (j) enable a business to alter unilaterally without a valid reason any characteristics of the goods or services to be provided; (k) provide that the price of goods is to be determined at the time of delivery, or which allow a business to increase the price without giving the consumer the right to withdraw from the contract if the increased price is too high in relation to the price agreed at the conclusion of the contract; this does not affect price-indexation clauses, where lawful, provided that the method by which prices vary is explicitly described; (l) give a business the right to determine whether the goods or services supplied are in conformity with the contract, or which give the business the exclusive right to interpret any term of the contract; (m) limit the obligation of a business to respect commitments undertaken by its agents, or which make its commitments subject to compliance with a particular formality; (n) oblige a consumer to fulfil all his or her obligations where the business fails to fulfil its own; (o) allow a business to transfer its rights and obligations under the contract without the consumer’s consent, if this could reduce the guarantees available to the consumer; (p) exclude or impede a consumer’s right to take legal action or to exercise any other remedy, in particular by referring the consumer to arbitration proceedings which are not covered by legal provisions, by unduly restricting the evidence available to the consumer, or by shifting a burden of proof onto the consumer. (2) Subparagraphs (g), (i) and (k) do not apply to: (a) transactions in transferable securities, financial instruments and other products or services where the price is linked to fluctuations in a stock exchange quotation or index or a financial market rate beyond the control of the business; (b) contracts for the sale of foreign currency, traveller’s cheques or international money orders denominated in foreign currency.

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Article 6:305 Indicative list of unfair terms

Art 6:305 1–5

A. Foundation in the Acquis 1.

Sources

The provision is taken from the Annex to the Unfair Terms D. With regard to paragraph 1 (1)(p), the right to have access to effective proceedings is reaffirmed also by the Mediation D.

2.

Development

The acquis does not provide any basis for an amendment of this list. Therefore, the pro- 2 vision is a restatement of the Annex with two exceptions: (a) Annex 1 lit. (i) has been dropped from the indicative list, since this provision is sufficiently reflected in Art. 6:201 ACQP. (b) Some of the exceptions in Annex 2 to the directive have been shifted to the terms to which they refer.

B.

Commentary

1.

Meaning and Purpose

This Article provides for an indicative list. Its purpose is to give examples for terms which 3 may be unfair under Art. 6:301 ACQP. The question of unfairness itself has to be determined according to the latter provision. However, “indicative” also means, that – whereas no court is automatically bound to pronounce the unfairness of a term covered by one of the examples in the list – the list states a significant argument for considering a term to be unfair.

2.

Context

The Article indicates the unfairness of a term; Art. 6:301, 6:302 and Art. 6:304 ACQP 4 decide about it.

3.

Explanation

The list addresses examples for terms which would typically constitute a serious legal dis- 5 advantage for a consumer. This includes terms that exclude the business’s liability in cases of personal injury inflicted by the business or a limitation or inclusion of important contractual remedies in cases of non-performance or terms that give complete control to the business over the “if” and “how” of the performance. Sometimes, the Annex to the Unfair Terms D. is referred to as a “grey list” giving discretion to the courts as opposed to a “black list” rendering certain terms automatically unfair. In this context, two different kinds of “grey” can be distinguished:

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Art 6:305 6–11

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6 Firstly, some of the subparagraphs in Art. 6:305 ACQP comprise provisions which, for themselves, require judicial discretion like, e.g., “reasonable”, “unreasonable”, “valid reason”, “disproportionate” or “inappropriate”. Insofar, the provision itself is “grey”. In such a case, judicial discretion can only exist in a “weaker sense” (for this term see Dworkin, Taking Rights Seriously, Cambridge/Mass. (1978), p. 31), which means that judges must not follow their personal subjective standards but have to develop a reliable objective case law in order to give meaning to these provisions. 7 Secondly, the list as such is “grey” (and it is a kind of “grey”, different from the one mentioned before), which means that standards of the list are not automatically binding, and that national legislatures or national courts may e.g. hold that, under certain circumstances or due to the specifics of national law, a term falling under the list is not unfair. Since the Member States are free (within the limits of binding EC law) to conceive their private law system according to their own preferences, the effect of an identical term may be different within the context of different legal systems. In this respect, the implementation of the list may be different in the context of different national legal systems and the Member States. However, the situation maybe different again if the present Article (or a similar provision) would be included in the forthcoming CFR.

4.

Examples

Example 1 8 According to its standard terms, X limits its liability to cases of intention and gross negligence. The term applies to all kinds of damages so that cases of death or personal injury are included. The term falls under subparagraph (a) since X excludes its liability for death and personal injury in cases of simple negligence. Example 2 9 A seller’s standard terms state: a set-off against our claims is excluded, unless it is based on a counterclaim recognised by a final court decision. The question whether this term is covered by Art. 6:305(1)(b) ACQP depends on an interpretation of the word “inappropriately” in this provision. The courts have to develop a reliable case law for the interpretation of this term. In this context, courts should consider that there are other cases where the existence of a counterclaim is obvious, e.g. if the seller does not dispute the counterclaim or if the seller’s defences against the counterclaim are obviously unfounded. Therefore, such a term should be considered to be contrary to Art. 6:305(1)(b) ACQP. Example 3 10 The standard terms of a bus transportation company state that scheduled rides are subject to cancellation without prior notice. The terms are meant to apply even if a passenger has a ticket with a reservation for a certain ride. Art. 6:305(1)(c) ACQP applies because the right to cancel is not limited to certain cases such as force majeure, impossibility etc. Example 4 11 An electrician provides electrical installations for private homes. In order to be compensated for the effort of initially calculating the costs, his terms state in a sufficiently trans-

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Article 6:306 Effects of unfair terms

Art 6:305, 12 Art 6:306, 1, 2

parent manner that he requires a down-payment for the costs of calculation which will not berefounded if no contract is concluded. If asked to calculate the costs for a certain project, he informs potential customers about this term but denies any negotiations about this issue. Technically, the term falls under Art. 6:305(1)(d) ACQP since the electrician can keep money paid by the consumer without giving the consumer the equivalent right in the reverse situation. However, under these circumstances it is clear for a consumer that a prior calculation of costs by the electrician is not available for free. Although, the term technically constitutes a non-negotiated term, the situation is similar to a free consent. The consumer is sufficiently informed about the costs of the calculation and agrees to these terms in way which is similar to a separate contract. Provided that this is the case, the term may be considered acceptable although it falls under Art. 6:305(1)(d) ACQP. Example 5 The terms of a package travel company state that tourists may be excluded from the 12 package tour if one of the providers (e.g. hotel or transportation) asks the package travel company to do so. The term does not fall under Art. 6:305(1)(g) ACQP since a package travel tour does not constitute a contract of indeterminate duration; nor is the term covered by any other subparagraph of Art. 6:305 ACQP. However, Art. 6:305(1) (g) ACQP may be seen as a statement of the principle that a termination of contracts requires a sufficient reason, adequate under the circumstances. The mere wish of one of the providers is not sufficient to this purpose: so that the term should be held unfair under Art. 6:301 ACQP.

Article 6:306: Effects of unfair terms (1) Unfair terms are not binding on a party who did not supply them. (2) If the contract can be maintained without the unfair terms, it remains otherwise binding on the parties.

A. Foundation in the Acquis 1.

Sources

This Article is based on Art. 6(1) of the Unfair Terms D. Moreover, in C-240/98 – Océa- 1 no and in C-168/05 – Elisa María Mostaza Claro v. Centro Móvil Milenium SL the ECJ ruled that national courts must have the power to declare a clause invalid on their own motion regardless of the procedural context.

2.

Development

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Art 6:306 3–6

Chapter 6: Non-Negotiated Terms Section 3: Validity of terms

(Art. 249(3) of the EC-Treaty). Thus, paragraph (1) raises the issue of how to define the legal effects of unfairness. Paragraph (1) suggests a solution which is the one closest to the acquis. It states that unfair terms are not binding for the other side.

B.

Commentary

1.

Meaning and Purpose

3 The provision deals with the legal effects of unfairness on contracts. It is therefore relevant for individual contracts. Paragraph (1) deals with the effect of an unfairness on the term itself. It follows a unilateral solution, according to which the other party is not bound to an unfair term whereas the user is bound. This means that it is for the other side to decide whether the term, regardless of its unfairness, should be applied or not. However, the other side, especially a consumer, has no obligation to invoke the non-binding effect in a legal proceeding. As stated by the ECJ in C-240/98 – Océano Grupo, C-473/00 – Cofidis and C-168/05 – Mostaza Claro, a consumer has to be protected, even if he fails to raise the unfair nature of the term, either because he is unaware of his rights or because he is deterred from enforcing them. Therefore, if the other side does not take an explicit decision whether he or she wishes to be bound to the term or not, courts have to decide on their own motion about the consequences of unfairness. 4 Paragraph (2) deals with the effects of paragraph (1) on the remaining contract. The contract is binding for both sides if it can be maintained without the unfair term. It is the purpose of this provision simply to strike out the unfair term so that the other side is not deprived of the advantages of a contract and to maintain the remaining contract as far as this is possible. Consequently, it is no defence against a binding effect of the remaining contract that the remaining contract is less advantageous for the user. It is up to the user to supply adequate terms in order to avoid this effect.

2.

Context

5 According to general contract law, the contract may be completely void if a part of the contract is void or not binding. Such general contract law rules do not apply in the case of unfair terms. Furthermore, the present Article only addresses the effects of unfairness. The determination of the fairness of a term is made pursuant to Art. 6:301 to 6:305 ACQP.

3.

Explanation

6 If a term is unfair, it is not binding for the other party, i.e. the party who did not supply them.

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Article 6:306 Effects of unfair terms

Art 6:306 7–10

Not binding means that no legal effects can be based on such a term: neither any rights against the other side nor any exclusion or limitation of rights or defences of the other side. The provision, therefore, can operate without any further definitions of “not binding”. However, it is open for more detailed or specific concepts, like e.g. (unilateral) invalidity, provided for by applicable national contract law. Not binding “on a party who did not supply them” means that the term has no legal effect against this party whereas it may (but not must; cf. supra No. 3) be invoked against the user of the term. A contract can be maintained without the term if the remaining contract without the 7 term has a content which is legally possible. This may be the case because the term addresses a question which does not need a contractual answer because the question is not essential or because there is a statutory background provision to fill the gap. It is not necessary that both parties would have concluded the contract without the term. The nonbinding effect is thus as a rule limited to the unfair term. In the case C-302/04 – Ynos Kft v. János Varga, the ECJ was asked whether the hypothetical consideration of whether the business /user would have concluded the contract without the corresponding term, is to be taken into account in Hungarian law, but as the facts occurred prior to Hungary’s accession to the European Union, the ECJ stated it lacked jurisdiction, without giving an opinion. However, it seems to be fairly clear from the directive that the contract holds, and the user has to live with the fact that the particular clause is no longer available. A contract cannot be maintained without the disputed term if this term is essential for the contract, e.g. because it defines the subject matter or the price. Typically, there are no statutory background provisions defining the subject matter or the price so that the contract cannot be maintained without these essential terms.

4.

Examples

Example 1 In its sales terms, a seller excludes all rights of the buyer in cases of a defect except for the 8 right to avoid the contract. The term is not binding, also in B2B contracts, since it excludes all rights to damages even in cases of gross negligence. A buyer requires immediate avoidance of the contract. The seller invokes the unfairness of the term, so that the buyer, pursuant to the applicable sales law, has to accept a repair or replacement of the goods by the seller. According to Art. 6:306 ACQP, the seller is barred from invoking the unfairness of its own terms. Example 2 On the same circumstances as in Example 1 but the defect was caused by a negligence of 9 the seller. As a consequence of the defect, the buyer could not resell the goods to a third party. The buyer may claim damages in the amount of his lost profits from the seller. The unfair term is not binding for the buyer. Example 3 According to the standard terms of a party, the price is calculated on the basis of certain 10 elements which are intransparently spread among several different contract terms. The Thomas Pfeiffer/Martin Ebers

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Art 6:306 11

Chapter 6: Non-Negotiated Terms Section 3: Validity of terms

term is not binding unless the other side whishes to be bound to the term in question. The contract cannot be maintained without a fixed price and is, therefore, not binding as a whole. Example 4 11 A party buys goods from a seller. The standard terms of the seller include a general and unlimited right for the seller to change the price stated in the contract. The term is not binding. The contract, however, can be maintained without the unfair term. The seller may not claim that it is more burdensome to be bound at the initial price and that the contract would not have been concluded without the invalid term: there may be exception when doctrines of general contract law, like e.g. hardship, apply.

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Chapter 7: Performance of Obligations General Provisions Section 1: General duties

Article 7:101: Duty to perform (1) The debtor must perform its obligations in accordance with good faith. (2) A business must perform its obligations with the special skill and care that may reasonably be expected to be used with regard, in particular, to the legitimate expectations of consumers.

A. Foundation in the Acquis The commented Article has a complex structure. It governs three basic issues. Firstly 1 whether there is a general obligation to perform, secondly whether there is an obligation to respect the requirements of good faith in the performance of the obligation and finally whether there is a duty to respect legitimate expectations of the other party. Since all these issues determine the content of the obligation, including them in one article is justified. However, the analysis of the acquis contained in the commented Article will be dealt with separately in respect of the three duties.

I.

Duty to perform the obligation of the debtor

1.

Sources

The duty to perform the obligation is expressed in various places in Community law. 2 Art. 2(1) of the Consumer Sales D. imposes on the seller a duty to deliver to the consumer, goods which are in conformity with the contract of sale. Similarly, Art. 6(1) and 7 (1) of the Cross Border Credit Transfers D. require the originator’s institution to execute the order within the agreed time limit and in the full amount requested (subject to contractual modifications). Art. 49(1) of the Payment Services D. (which is replacing the Cross Border Credit Transfer D.) expresses that payments shall be made in the currency agreed between the parties. Art. 21(1) of the Markets in Financial Instruments D. provides for a duty to comply with the specific instructions of the client. A duty for the holder of an electronic payment instrument to use it in accordance with the terms governing its issuance is imposed by Recommendation 97/489 concerning transactions by electronic payment instruments. A duty to perform an obligation according to its content is also Aubert de Vincelles/Machnikowski/Pisulin´ski/Rochfeld/Szpunar/Zoll

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Art 7:101 3–5

Chapter 7: Performance of Obligations General Provisions . Section 1: General duties

an underlying principle in the formulation of the prohibited clause in Sec. 1(k) of the Annex to the Unfair Terms D. 3 As far as the case law of the ECJ is concerned, the principle of pacta servanda sunt relates predominantly to institutional law. The best-known illustration of this principle is the obligation incumbent upon all the Member States to fulfil the obligations arising from the Treaties. On many occasions the ECJ has interpreted Art. 10 of the EC-Treaty as obliging Member States to take all appropriate measures, whether general or particular, to ensure fulfilment of the obligations arising out of the EC-Treaty. A substantial part of the ECJ’s case law covers actions initiated by the Commission against Member States, where it declared that the Member State concerned did not fulfil an obligation under the Treaties (ex. Art. 226 of the EC-Treaty). For obvious reasons, this case law can only serve as a very abstract confirmation of the principle pacta servanda sunt. One should avoid drawing any specific conclusions applicable in the sphere of private law from this case law. It should be mentioned, however, that in the judgment of 12 July 1972 (16/61 – Acciaierie Ferriere e Fonderie di Modena v High Authority of the European Coal and Steel Community) the ECJ expressly confirmed the principle with regard to relationships of private law. While interpreting Art. 60(2)(b) of the ECSC-Treaty, the Court ruled that the “quotation (referred to in the said article) must specify, in accordance with a correct alignment on known and verifiable factors, the conditions which will apply upon the conclusion of a contract and make impossible any subsequent amendment of such a contract especially by way of a hidden price reduction at the time of performance”. 2.

Development

4 All the mentioned provisions of the acquis can be generalised into a single general provision stating a duty to perform the obligation. It is an expression of the classical formula pacta servanda sunt. The validity of this formula is sometimes challenged in relation to Community law, particularly with respect to many opportunities for a consumer to withdraw from a contract. The Acquis Principles are based on the assumption that such rights of the consumer comply with the principle of pacta servanda sunt by providing the possibility to make the contract fully binding after the lapse of the withdrawal period. All the quoted provisions of the acquis allow the creditor to assume that the debtor must perform the obligation in compliance with its established content. The mentioned provisions of the acquis do not touch the question of specific performance of the obligation. Stating a duty to perform the obligation does not create any determination about which remedies are available to the creditor in case of non-performance. 3.

Political Issues

5 It could be discussed whether the combination of the duty to perform and the duty to perform in good faith should be combined in one article. Alternatively, one might separate both duties. As a consequence, there would be an independent statement: that a 340

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Article 7:101 Duty to perform

Art 7:101 6, 7

debtor must perform its obligations. As a result, the wording of the rule would stress the debtor’s duty. Although in the current version of the Acquis Principles the duty to perform is combined with the requirement of good faith, it should not create an impression that this rule is only about a good faith requirement. It is also about the duty to perform. It is a political question whether or not to follow certain modern concepts questioning the binding power of the contract (or at least weakening such power) and to look for support of such concepts in certain protective mechanisms (such as a consumer’s right to withdraw). The draft underlines the political decision by stressing the traditional value of the principle pacta servanda sunt.

II.

Duty to perform the obligation in accordance with good faith

1.

Sources

The acquis uses the notion of good faith quite frequently in different contexts and not 6 only in relation to B2C transactions. The most explicit formulation of the requirement of good faith can be found in the Commercial Agents D.: Art. 3(1) states that the commercial agent must act dutifully and in good faith. The Unfair Commercial Practices D. defines professional diligence as a standard of special skill and care which a trader may reasonably be expected to exercise towards consumers, commensurate with honest market practice and/or the general principle of good faith in the trader’s field of activity. In the Distance Selling D. and in the Financial Services Distance Selling D. one can also find references to the requirement of good faith in relation to the performance of informational duties. Good faith is also a criterion for the fairness test applicable to contract terms in the Unfair Terms D. (Art. 3(1)). 2.

Development

There are very different legal traditions in Europe in relation to the use of the general 7 good faith requirement. Looking at Community law from the perspective of a particular legal system may lead to differing answers to the question of whether it is feasible to generalise the good faith principle. However, the quoted sources of the Community law prove that the acquis adopts a model of contract law which is based more on a co-operative legal ethic than on a strict individualistic legal ethic. As the Article is located in the general part of the Acquis Principles it is applicable to all kinds of contracts. Consequently, the drafting of such a rule requires that the provision at issue should allow some flexibility in the process of evaluation for the content of obligation. The Unfair Commercial Practices D. uses a rather significant alternative, that of honest commercial practices and/or general principle of good faith. It shows how the position of the good faith principle is understood in Community law. One should not understand these two general clauses as contradicting each other. Rather, the requirement of good faith should be understood as an equivalent to the standard of “honest commercial practices”.

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Art 7:101 8–10

3.

Chapter 7: Performance of Obligations General Provisions . Section 1: General duties

Political Issues

8 It is an open question whether the presentation of the rules chosen here is the best way to reflect the current status of EC law. An alternative solution would be to state a single and rather broad principle instead of referring to the requirement of good faith in various particular contexts. In addition, one might ask how far this requirement should be understood to extend. The current draft of the Acquis Principles uses the principle of good faith in a narrow sense, as mentioned under No. 2 above – it should be understood as “honest commercial practice” or “reasonable behaviour” rather than an ideological tool to bend contract law in accordance to changing political situations. Finally, there is a general question of whether the concept of good faith is sufficiently based in the acquis and should be used broadly. As set out above (cf. supra No. 2), this question can be answered in the positive, at least for a good faith principle represented in the narrow sense mentioned above.

III.

A duty to respect the legitimate expectations of the creditor

1.

Sources

9 The Consumer Sales D. in Recital 8 provides for the obligation to consider the consumer’s expectations when evaluating the conformity of goods with the contract. This same idea is expressed in Art. 2(2)(d) of this Directive. Art. 3(1) of the Commercial Agents D. requires one to look after the principal’s interests and Art. 2(h) of the Unfair Commercial Practices D. defines the standard of diligence by referring to the reasonable expectations of consumers. The necessity to take into account the legitimate interests of the other party is mentioned by Recital 16 of the Unfair Terms D. Such duties are also expressly named in Art. 21(1) and Recital 33 of the Markets in Financial Instruments D. 10 The principle of protection of legitimate expectations plays an important role in European administrative procedure. On several occasions the ECJ has ruled that European institutions – in the performance of administrative duties – should respect the expectations of individuals likely to be affected by their decisions. This principle can be understood on a procedural level as meaning that in revoking prior and more favourable decisions, the institutions must take into account comments of affected persons (cf. judgment of the CFI of 6 December 1994 T – 450/93 – Lisrestal v Commission of the European Communities). The same principle is also apparent on the substantive level. This means inter alia that lawful administrative decisions that are favourable to their addressees cannot, in the absence of a statutory provision, be revoked (cf. judgment of the ECJ of 12 July 1957 in the joint cases 7/56 and 3-7/57 – Algera v Common Assembly of the European Coal and Steel Community). Similarly, it also means that individuals may, to some extent, rely on informal administrative representations (cf. judgment of the ECJ of 16 June 1966 in 54/ 65 – Compagnie des forges de Châtillon v High Authority of the European Coal and Steel Community).

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Article 7:101 Duty to perform

Art 7:101 11–14

On the basis of the above case law, one can draw the general conclusion that acts and decisions of one party, must take into account the legitimate expectations of the other party to the legal relationship (whether it is an addressee of an administrative decision or a creditor). 2.

Development

As can be seen, apart from the principle of good faith, the acquis contains a number of 11 other clauses which could be treated as a specification of the principle good faith in a particular context. As mentioned, the idea of the co-operative legal ethic of Community contract law is expressed by the requirement to respect the legitimate interests of the other party. The quoted examples show that Community law recognises a duty to respect the interest of the other party. Although this duty is particularly relevant to consumer law, it cannot be confined exclusively to consumer contracts. The Commercial Agents D. and Markets in Financial Instruments D. do not belong to the body of consumer law. 3.

Political Issues

It is always an open question whether a general good faith clause should be specified in 12 various places by more concrete general clauses. The clause of legitimate expectation is one such example. It is always beneficial for the clarity and certainty of law to use such specific references, if appropriate. The duty to respect the legitimate expectation of the creditor is also a sort of political statement, stressing co-operative legal ethic as an underlying value of the acquis.

B.

Commentary

1.

Meaning and Purpose

Paragraph (1) of the present Article expresses a general duty to perform the obligation 13 and refers to the criterion of good faith as a flexible instrument shaping the content of the obligation. In paragraph (2) there is the first example of the concretion of the good faith requirement, which involves taking into account the legitimate expectations of the other party. The draft also contains other provisions specifying the good faith requirement, such as a duty to co-operate and a duty of loyalty.

2.

Context

The Article concerns all kinds of obligations, irrespective of their source. Hence, it may 14 apply not only in regard to contractual obligations, but also to obligations arising directly from the law, such as the duties governed under rules on non-performance or pre-contractual duties. In addition, this article also governs duties arising as an effect of contract termination. Aubert de Vincelles/Machnikowski/Pisulin´ski/Rochfeld/Szpunar/Zoll

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Art 7:101 15–17

3.

Chapter 7: Performance of Obligations General Provisions . Section 1: General duties

Explanation

15 The present Article is drafted in such a way as not to be confined only to obligations arising under the contract. The provisions of the Acquis Principles on performance and non-performance are drafted to be applicable for all kinds of obligations. It is not necessary therefore, to categorise the source of obligations. These provisions also apply to precontractual duties, as well as to the duties which arise after withdrawal from the contract or after its termination. Performance is understood herein as behaviour of the debtor which complies with the content of the obligation. This provision does not deal with the question of enforcement of performance. This issue is governed by the provisions on remedies. The inclusion of good faith into the content of paragraph (1) strengthens the duty to perform by introducing additional obligations. It may even modify the obligations that were expressly agreed to by the parties. Together with all specific duties (e.g. a duty of loyalty, a duty of cooperation) which are based on the idea of good faith, this requirement should ensure that the behaviour of the parties serves to achieve the goals of the obligation and does not allow for the debtor’s defence to be only based on a purely formalistic approach. 16 Paragraph (2) refers to the standard of reasonable expectations of a creditor, as a measure of evaluation for the conformity of the performance with the obligation. This standard applies not only in consumer contracts, but in all cases of personal contractual agreements. However, the provision mentions consumer transactions in order to stress that, in such situations, it is possible to go beyond the pure wording of the contract in order to secure the satisfaction of legitimate consumer interests. In other types of transactions, mostly in B2B transactions, the legitimate expectation of the other party should be taken into account, but the requirement of a stable and predictable legal solution should constitute an equally important factor. The legitimate expectations can result from statements of the debtor (or – in specific circumstances – of other persons) or from statements of the creditor prior to the formation of the contract which have not been corrected by the debtor. The reliance on legitimate expectations could also be justified by the nature of the delivered goods or services.

4.

Examples

Example 1 17 The debtor is obliged to deliver certain goods to a warehouse of the creditor, which has been specified in the contract. The creditor has two warehouses in the city where delivery takes place. After the conclusion of the contract the warehouse specified as a place of performance is destroyed by a fire. The debtor has to deliver to the second warehouse (possibly against an additional compensation caused by this change). Such a duty would

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Article 7:101 Duty to perform

Art 7:101 18–21

be justified by the requirement of good faith under Art. 7:101(1) in order to ensure that the interests of the creditor are satisfied. Example 2 A has parked his car at commercial, but unguarded parking lot. An employee of the own- 18 er of the parking garage observes another car, driven by B, hitting the car of A. The employee notices B’s registration plate, but does not do anything else in order to allow A to claim damages from B. In particular, nothing is done to prevent B from slipping away. In this situation, A can claim damages against the parking garage owner. The principle of good faith requires that at a person who uses a commercial parking lot, even if unguarded, is assisted in cases where the peaceful use of the parking spot has been disturbed, and also that a minimum level of security in the provision of the parking spaces is provided. This situation could also be covered by Art. 7:101(2). Example 3 The client of a bank has received money from the bank cashier. The bank cashier put the 19 money on the table. Suddenly, the money is stolen by a third person, who abruptly entered the premises and successfully ran away. The client did not have the money in his or her possession at any stage. The client is entitled to claim damages in this case because the bank violated the legitimate expectations of the client to be served in a secure environment. Example 4 Merchant A, importing certain goods from a third country, gets information that his or 20 her shipment, ordered by his or her contractual party, merchant B, cannot be delivered on time because of temporary export restrictions from the exporting s country. A is obliged to inform B about the possibility of delay. This duty arises from the principle of good faith. B should have the opportunity to take necessary steps in order to limit the detrimental effects of a possible breach of contract. Example 5 A commercial advertisement appearing in TV emphasizes certain features of the product. 21 For professional A, who is a dealer of such products, it is obvious that the advantages of the product are overestimated. For an average consumer this is not evident. If A buys these products from the producer, he cannot expect these features to exist. However, the advertised features could be legitimately expected by the average consumer.

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Art 7:102 1, 2

Chapter 7: Performance of Obligations General Provisions . Section 1: General duties

Article 7:102: Good faith in the exercise of rights The creditor must exercise its rights to performance and remedies for non-performance in accordance with good faith.

A. Foundation in the Acquis 1.

Sources

1 According to Art. 3(1) of the Unfair Terms D., “A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer”. Article 4(1) of the Commercial Agents D. provides that “In his relations with his commercial agent a principal must act dutifully and in good faith.” 2 The notion of good faith is also present in the ECJ case law. Already in the judgment of the Court of 15 July 1960, joined cases 43/59, 45/59 and 48/59 – Eva von Lachmüller, Bernard Peuvrier, Roger Ehrhardt v Commission of the European Economic Community the ECJ stated that the conduct of an authority, both in administrative and in contractual matters, is at all times subject to the observance of the principle of good faith. Interesting examples of the principle of good faith as limiting the exercise of rights come from the case law dealing with the recovery of aid granted either from the Community’s or from a Member State’s resources. However, it ought to be mentioned that in the judgment of 20 March 1997, C-24/95 – Land Rheinland-Pfalz v Alcan Deutschland GmbH the ECJ dismissed the argument of the beneficiary, which was based on a violation of good faith. In this case, the beneficiary considered that he bore no responsibility for the illegality of the aid (that had already been consumed) and, therefore, he could not be ordered to return the aid. The ECJ stated that Community law requires the competent authority to revoke a decision granting unlawful aid, in accordance with a final decision of the Commission declaring the aid incompatible with the Common market and ordering recovery, even if the competent authority is responsible for the illegality of the aid decision to such a degree that revocation appears to be a breach of good faith towards the recipient. The ECJ emphasised that the beneficiary could not have had a legitimate expectation that the aid was lawful because the procedure laid down in the former Art. 88 of the EC-Treaty had not been followed. The ECJ argued that there were no legitimate expectations to be protected in this particular case. It could be concluded that the ECJ recognises that if there are such legitimate expectations, good faith limits the exercise of rights. Such a conclusion is supported by the judgment of 19 September 2002 in which the ECJ stated that “Community law does not preclude the application of the principles of protection of legitimate expectations and legal certainty in order to prevent recovery of aid

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Article 7:102 Good faith in the exercise of rights

Art 7:102 3, 4

partially financed by the Community, which has been wrongly paid, provided that the interest of the Community is also taken into consideration. The application of the principle of the protection of legitimate expectations assumes that the good faith of the beneficiary of the aid in question is established” (Case C-336/00 – Republik Österreich v Martin Huber, para. 59). The fact that the principle of good faith may be seen as setting limits on the exercise of rights also results from the case law in which the Court – in exceptional circumstances – excludes the possibility of relying on a provision of Community law in order to challenge a legal relationship established in good faith (cf. judgment of 15 March 2005, Case C209/03 – The Queen v London Borough of Ealing and Secretary of State for Education and Skills, para. 66 and 67).

2.

Development

First of all, it must be noted that the acquis uses the requirement of good faith in two 3 different functions, although these are not always clearly distinguished from each other. Good faith can determine the content of the obligation or the limits of rights. The provisions and judgments cited above use this phrase in relation to its second meaning. Article 3(1) of the Unfair Terms D. uses the concept of good faith in order to limit the power of the stronger party in imposing contract terms on the consumer. It is not strictly a problem of the limits of subjective rights. The underlying idea, however, is the same: good faith has the function of limiting the power of one party. It does not distinguish whether this power results from the wording of a legal provision or from the factual relationship. Therefore, the commented article allows us to conclude that the acquis – using the requirement of good faith – limits the power of one party to exercise its rights. The similar concept of limiting power by good faith can be found in Art. 4(1) of the Commercial Agents D. According to this provision a principal must act dutifully and in good faith. It covers both positions of the principal in its relationship to the commercial agent – as the creditor and as the debtor. The latter is covered by Art. 7:101 ACQP. As far as Art. 4(1) of the Commercial Agents D. concerns the principal as a creditor, it provides a support for a more general conclusion that not only a debtor, but also a creditor is bound by the requirement of good faith in exercising its rights. In addition, in the judgments cited above, the ECJ has recognised the idea that good faith sets limits on exercising rights.

3.

Political Issues

The political questions here are the same as those in the case of Art. 7:101 ACQP. It is 4 part of the general question of placing the good faith requirement within the system of contracts. One can argue whether this rule should be combined with Art. 7:101 ACQP to form one provision. This is a question of presentation rather than a political issue. Article 7:101 ACQP governs duties of the debtor, Art. 7:102 of the creditor. The nature of the Aubert de Vincelles/Machnikowski/Pisulin´ski/Rochfeld/Szpunar/Zoll

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Art 7:102 5–8

Chapter 7: Performance of Obligations General Provisions . Section 1: General duties

creditor’s duties is not the same as the duties of the debtor. They only have a supportive function in order to efficiently reach the aims of the obligation. Therefore the separation of these duties and their distribution over two articles is justified.

B.

Commentary

1.

Meaning and Purpose

5 The commented provision deals with the limits of the use of rights and expresses the concept of good faith as a restriction on parties exercising their own rights.

2.

Context

6 The present Article is not the only provision here concerning good faith. As it has been explained above, this Article determines the limits of rights, while Art. 7:101 ACQP deals with the problem of determining the content of the obligation. Article 7:102 could also serve as a rule determining the limits of rights arising from different sources. It may be understood as a general rule preventing the abus de droit.

3.

Explanation

7 The commented rule sets limits on the exercise of rights. The principle of good faith sets boundaries on a creditor’s product. The exercise of rights which violates the requirements of good faith is not protected by law. This provision deals with the situation in which the right in question exists, but due to a particular context, the exercise of this right violates good faith and therefore cannot be enforced. The commented rule has a subsidiary function. It also requires taking the legitimate interests of the debtor into account. In many particular cases such balance is already achieved by specific provisions. Usually it would not allow an application of Art. 7:102.

4.

Examples

Example 1 8 A entered into a contract for a package trip. Pursuant to this contract, the trip organiser was authorised to alter the price in the event that the cost of transportation increased. Because of an additional airport fee the organiser had increased the price of the package trip by 10 EUR which was less than 1% of the original price. The consumer was informed about this change 35 days before departure. Following this, the consumer withdrew from the contract. In this situation, the withdrawal is ineffective – not because of the application of the commented Art. 7:102 but rather due to the reason that Art. 4(5) of the Package Travel D. allows a party to withdraw from the contract only if the alteration of the essential terms of the contract is significant. This example shows that the good faith

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Article 7:103 Duty of loyalty

Art 7:103 1, 2

principle stated here must not be used to overrule other more specific provisions that are contained in EC law and may become part of a future part of the Acquis Principles on specific contracts which is currently being developed. In the case presented here, there is a clear and comprehensive regulation as to whether a consumer is entitled to get out of a package travel contract in case of a price increase after the contract has been concluded. Such specific regulation would prevail as a rule and exclude the application of the general principle of good faith, which could only serve as a corrective in extreme and unacceptable conditions.

Article 7:103: Duty of loyalty If an obligation by its nature requires the debtor to manage the creditor’s affairs, the debtor must give due regard to the creditor’s interests related to those affairs.

A. Foundation in the Acquis 1.

Sources

Under Art. 3 of the Commercial Agents D. a commercial agent, in performing his activ- 1 ities, must look after his principal’s interests and act dutifully and in good faith. In particular he must make proper efforts to negotiate and, where appropriate, conclude the transactions he is instructed to carry out, relaying to his principal all necessary information available to him and complying with reasonable instructions given by his principal. Article 19(1) of the Markets in Financial Instruments D. obliges Member States to require that, when providing investment services and/or, where appropriate, ancillary services to clients, an investment firm must act honestly, fairly and professionally in accordance with the best interests of its clients. Articles 21(3) and 21(4) of the same Directive express the obligation of the investment firm to execute orders on terms most favourable to the client. It is also possible to find certain provisions in other directives or regulations which con- 2 tain an obligation for a party to take care of the other party’s interests. This is the case of the Regulation 261/2004 on Compensation and Assistance to Passengers in the Event of Denied Boarding and of Cancellation or Long Delay of Flights (Recital 17, 19 and Art. 9, 11). This Regulation obliges the operating air carrier to take special care in specified situations related to its clients. The particular needs of disabled persons and children have to be taken into particular consideration. Such special duties are developed further in the recent Regulation 1107/2006, concerning the rights of disabled persons and persons with reduced mobility when travelling by air. Recital 4 of this Regulation states that in order to give clients having these physical limitations opportunities for air travel comparable to those of other citizens, assistance to meet their particular needs should be provided at the Aubert de Vincelles/Machnikowski/Pisulin´ski/Rochfeld/Szpunar/Zoll

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Art 7:103 3, 4

Chapter 7: Performance of Obligations General Provisions . Section 1: General duties

airport as well as on board the aircraft, by employing the necessary staff and equipment. In the interests of social inclusion, the persons concerned should receive this assistance without any additional charge. Art. 8(3) of the Cross Border Credit Transfer D. also imposes a duty on the originator’s institution and other involved institutions to endeavour to refund the amount of the transfer as quickly as possible in case of non-execution of the cross-border credit transfer due to error or omission in the originator’s instruction. The Payment Services D. (which replaces the Cross Border Credit Transfer D.) states in Art. 75(1) last sentence that in the case of a non-executed or defectively executed payment transaction where the payment order is initiated by the payer, his payment service provider shall regardless of liability under this paragraph, on request, make immediate efforts to trace the payment transaction and notify the payer of the outcome. However the this duty is less beneficial to the service user than it was under the Cross Border Credit Transfer D., the idea of the new formulation remains similar – the payment service provider is obliged to provide assistance to its client. In addition, the Package Travel D. may support the formulation of such rule. Art. 6 of this Directive imposes on the organiser, retailer, and local representatives a duty to find appropriate solutions in cases of any complaints.

2.

Development

3 All these sources introduce the idea of altruism in specific kinds of contractual relationships. It might arise in both B2B and B2C transactions, and therefore, there is no need to limit the personal scope of application of the commented rule. For the aforementioned reasons, it seems justified to propose a flexible and general rule on the duty of loyalty.

3.

Political Issues

4 It could be questioned whether such a principle should be placed within the rules on general contract law or whether it should be left only to the specific contracts. It is more a matter of technique, since the scope of application is limited to the specified types of contracts. There are, however, very different types of contracts involving the special feature of the entrustment of the creditor’s affairs to the debtor. This is a significant part of the acquis where “contractual altruism” is required. This is an important exception to the general rule of Art. 7:101(2) ACQP, based on “contractual co-operation” and for these reasons, this rule should be placed in the general part.

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Article 7:103 Duty of loyalty

B.

Commentary

1.

Meaning and Purpose

Art 7:103 5–8

The general duty of the debtor to take into account the legitimate interests of the other 5 party expresses a general idea of the co-operation of Community contract law. More is required than simply taking into account the legitimate interests of the other party. The rule requires an altruistic standard of care by the debtor’s side.

2.

Context

The commented rule sets a special standard of care concerning the interests of the other 6 party. It is a higher standard than the one covered by Art. 7:101 ACQP (and especially by paragraph (2) therein).

3.

Explanation

The principle of loyalty must be limited to specific situations, as the requirement of al- 7 truism cannot be generally extended to all contractual relationships. That is the reason why there is the reference to the “nature” of the obligation in the proposed text. This reference means that various criteria should be taken into account, such as: the contractual agreement: Does it reflect a special kind of reliance between parties or a special common interest? some objective factors which reflect this special reliance on a common interest, such as the duration of the contract (long-term contracts). The characteristic (and decisive) feature of these relationships should be the entrustment of the creditor’s own affairs to the debtor. This characteristic could feature in very different types of relationships, such as those for package travel, commercial agency, more complex transportation contracts, contracts concerning the administration and governance of the interests of the other party (or other persons) etc., services related to protection and security, and contracts related to health services, to name a few. Such requirements could be established not only because of the nature of the contract itself, but could also be justified by any special needs of the person, such as disability or advanced age, where additional care may be required to secure the normal participation of these persons in society.

4.

Examples

Example 1 While on a package holiday, a client’s child becomes sick and needs medical help. The 8 organiser of the trip has a duty to ensure the necessary assistance of its local representatives in obtaining the necessary medical services.

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Art 7:103, 9 Art 7:104, 1

Chapter 7: Performance of Obligations General Provisions . Section 1: General duties

Example 2 9 A commercial agent has acquired certain information regarding the factual insolvency of a person who was supposed to conclude a contract with the agent’s principal the next day. In this situation, the agent has a duty to warn the principal about these facts, even though it will lead to the principal’s refusal to conclude the contract and, consequently, to the loss of the agent’s commission.

Article 7:104: Duty to co-operate The debtor and the creditor must co-operate with each other to the extent that this can reasonably be expected for the performance of an obligation.

A. Foundation in the Acquis 1.

Sources

1 According to Art. 3(1) of the Commercial Agents D. “in performing his activities, a commercial agent must look after his principal’s interests and act dutifully and in good faith”. Art. 4(1) of the same directive requires that “in his relations with his commercial agent a principal must act dutifully and in good faith”. Extensive provisions of the Markets in Financial Instruments D. (Art. 19 and Art. 21) contain detailed rules of business conduct when providing investment services to clients based on the general principle of co-operation. There are also other provisions that relate to more specific duties of co-operation, in particular, the duty to provide information. The Commercial Agents D. (Art. 3(2)(b) and Art. 4(2)) provides an obligation for the co-operation in giving information necessary to the performance of the obligation. In the Package Travel D. (Art. 5(2) and 5(4)) one can find the obligation to co-operate by giving information about non performance. Certain other provisions could be considered as well. These deal specifically with information in the pre-contractual period. They can be found in several directives and recommendations, such as the Distance Selling D. (Art. 4(2)); the Financial Services Distance Selling D. (Art. 3(2)); and the Recommendation concerning Transactions by Electronic Payment Instruments (97/489) (Art. 4). Community law makes reference to additional principles of contractual fairness in other provisions, which can also be understood as part of the principle of good faith in general.

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Article 7:104 Duty to co-operate

Art 7:104 2, 3

Similarly to the principle of good faith and the duty of loyalty, the foundations of the 2 obligation to co-operate come from the ECJ case law relating to Art. 10 of the EC-Treaty. In the judgment of 11 June 1991 in case C-251/89 – Nikolaos Athanasopoulos and others v Bundesanstalt für Arbeit, the ECJ extended this obligation to co-operation between institutions of other Member States by saying “in accordance with Art. 5 (now Art. 10) of the Treaty, the Commission and the Member State in which the person claiming a benefit supplement is residing are bound by a duty to co-operate in good faith with the institutions of the other Member States which are responsible for ensuring the performance of the obligations arising out of Regulation No 1408/71 (on social security)” (para. 57). Similar ECJ reasoning can be found in the judgment of 22 October 2002, in case C-94/00 – Roquette Frères SA v Directeur général de la concurrence, de la consommation et de la répression des fraudes, and Commission of the European Communities. In para. 30-32, the ECJ stated: “For the purposes of giving a helpful answer to the referring court, it is necessary to take into account the requirements flowing from the duty to co-operate in good faith as enshrined in Art. 5 of the EC-Treaty” (now Art. 10 of the EC-Treaty). As is apparent from the case law of the ECJ, an obligation to cooperate in good faith is incumbent both on judicial authorities of the Member States acting within the scope of their jurisdiction (cf. in particular, case 14/83 – Von Colson and Kamann, para. 26, and case 80/86 – Kolpinghuis Nijmegen, para. 12) and on Community institutions, which have a reciprocal obligation to grant such co-operation to the Member States (cf. in particular, 230/81 – Luxembourg v Parliament, para. 38, and the order of 13 July 1990 in C-2/88 – IMM Zwartveld and Others, para. 17). In that regard, it should be noted that where, as in the present case, Community authorities and national authorities are called upon to assist in the attainment of the objectives of the Treaty, by the coordinated exercise of their respective powers, such cooperation is particularly crucial. The ECJ has developed the duty of co-operation in particular areas of Community law, such as competition law (cf. the judgment of 21 September 1989 in joint cases 46/87 and 227/88 – Hoechst AG v Commission of the European Communities, para. 27) or the conclusion of so-called international mixed agreements, in which Community institutions must co-operate with the Member States, since they all act as one party to such an agreement (cf. opinion 1/94 of 15 November 1994, Competence of the Community to conclude international agreements concerning services and the protection of intellectual property – Article 228 (6) of the EC Treaty, para. 106-110).

2.

Development

The task of proposing a general principle from the above mentioned provisions faces 3 some difficulties. The first difficulty is the scope of the acquis rule. Two approaches are possible. The narrow one is limited to B2C relationships. The proposed principle would be as follows: “In transactions between a business and a consumer, a business must act in accordance with the requirement of good faith, taking into account the reasonable expectations of

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Art 7:104 4–6

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the consumer”. The wide approach contains no limitation concerning the features of the parties. It has been chosen according to the existing directives (e.g. Package Travel D. or Commercial Agents D.), which concern all parties, and do not deal specifically with consumers. The second difficulty also concerns the scope of the principle, but in another way. Specifically, must the co-operation duty be applied to the whole performance, as a general rule, or to only some parts of the performance or to some specific situations? For example, should the duty of co-operation by giving information (on the creditor, to the benefit of the debtor, in the Package Travel D. for example, when a non-performance arises) be generalised to the entire performance? Should it be limited to this specific situation because there are special reasons for this duty (e.g. the debtor, in package travel cases is not, generally, in the place where the obligation is to be performed and, therefore, may not be aware of a possible non-performance)? A choice was made for the wider principle, without any limitations concerning the features of the parties or the kind of performance involved. The only limitation is to limit the scope of the duty of co-operation to situations in which it can be “reasonably expected” by the other party.

3.

Political Issues

4 The main political issue is the question of the generalisation of the rule, which has been discussed under No. 2 above.

B.

Commentary

1.

Meaning and Purpose

5 The performance of many obligations is impossible or difficult without co-operation between the parties. The rule underlines a duty to co-operate in order to facilitate the performance of such obligations. It serves also as a means to restrict the negative effects of non-performance, if proper co-operation by the other party (including the aggrieved party) might reduce or minimise such negative effects.

2.

Context

6 This principle is an example of the application of a more general principle of good faith. This principle finds other formulations in pre-contractual obligations (cf. Art. 2:101 ACQP “In pre-contractual dealings, parties must act in accordance with good faith.”). It differs from the duty of loyalty. To co-operate means, for the parties involved, making performance possible by loyal and faithful behaviour. Loyalty means taking care of the other party’s interests (cf. Art. 7:103 ACQP).

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Article 7:104 Duty to co-operate

3.

Art 7:104 7–9

Explanation

The consequences of the duty of co-operation could be the obligation of supplying infor- 7 mation, passing on documentation and providing other means of contributing to the proper performance of the contract. For example, co-operation by supplying information is necessary when certain information is unknown to the other party or /and is more easily accessible to one of the parties than the other. A similar idea is evident in the special duty to co-operate in supplying information to prevent non-performance. The duty to co-operate is justified by special circumstances, such as where the debtor cannot assess nonperformance by itself because of geographical distance (Art. 5(4) of the Package Travel D.). The extent of the co-operation is limited by the criterion of “reasonable expectations”. 8 The underlying idea expressed by this criterion can be seen as similar to the criterion of legitimate expectations applicable for B2C relations in the pre-contractual phase (Art. 2:102 ACQP) and regarding performance (Art. 7:101(2) ACQP). “Reasonable expectations” is an objective criterion: a debtor performs its obligation in order to meet the reasonable expectations of the creditor. More precisely, what is reasonable depends on the nature and the purpose of the contract, on the facts and circumstances of the case, on the usages, customs and practices followed both between the parties, as well as by professionals in the affected markets and any expertise held by the parties. The duty to co-operate is also proposed in Art. 1:202 PECL (“Each party owes to the other a duty to co-operate in order to give full effect to the contract”).

4.

Example

While on a package holiday, A (the creditor) does not receive the vegetarian menu as 9 was agreed in the contract. In this situation, he should inform the holiday organiser (the debtor) or its representatives of this failure in the performance of the contract. The reason for this duty being laid on the creditor is that he may be aware of circumstances unknown to the debtor that influence or increase the liability of the latter (Art. 5(4) of the Package Travel D.).

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Art 7:105 1

Chapter 7: Performance of Obligations General Provisions . Section 1: General duties

Article 7:105: Language of communications Unless provided otherwise, parties can expect to communicate with each other in the language used for conclusion of the contract.

A. Foundation in the Acquis 1.

Sources

1 The great majority of the acquis on communication in a specific language is related to pre-contractual information. Such language provisions often apply either when a specific distribution technique is applied (e.g. distance selling), or where specific types of contracts are involved (e.g. timeshare, payment services). For instance, under Art. 3(3)(g) of the Financial Services Distance Selling D., prior to the conclusion of the contract the consumer must be informed about the languages in which the contractual terms and the prior information are supplied, and furthermore he or she must be told in which languages the business, with the agreement of the consumer, undertakes to communicate during the duration of this distance contract. This obligation corresponds to the information obligations of the Consumer Credit D. 2008, where Nr. 5 of the Standard European Consumer Credit Information Form, displayed in Annex II of the Directive, requires the business to give the consumer the following information: “Information and contractual terms will be supplied in [specific language]. With your consent, we intend to communicate in [specific language/languages] during the duration of the credit agreement.” The same wording is required, according to Nr. 6 of Annex III of this Directive, for overdrafts. Annex III of the Life Assurance D. requires that information which is to be communicated to the policy holder before the contract is concluded, or during the contract, must be provided in an official language of the Member State at the place of the commitment which is covered by the assurance. Such information may, however, be in another language if the policy holder so requests and the law of the Member State so permits, or if the policy holder can choose the applicable law. Art. 10 of the E-Commerce D. requires the service provider to inform the recipient of the service, prior to the order being placed, on the languages offered for the conclusion of the contract. The Timeshare D. 1994 provides in Art. 4 that the contract is to be drawn up in a certain official language according to the choice of the consumer, which can be, depending on the circumstances, the language of the place where the consumer is resident or the language of the Member State of which the consumer is a national. The Timeshare D. 2008

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Article 7:105 Language of communications

Art 7:105 2, 3

has more elaborate language provisions. It obliges in Art. 4(3) the Member States to ensure that the pre-contractual information is drawn up in a language of the Member State in which the consumer is resident or a national, at the choice of the consumer. Moreover, this directive requires in Art. 5 that the contract is drawn up in a language of the Member State in which the consumer is resident or a national, at the choice of the consumer. In all these provisions it is clarified that they apply only to official languages of the EU. Under both the Timeshare D. 1994 and the Timeshare D. 2008, the consumer is entitled to a certified translation of the contract in a language of the Member State in which the immovable property is situated, if this language is an official language of the EU. All the Standard Information Forms in Annexes I to IV to the Timeshare D. 2008 require the indication of the language(s) available for communication with the trader in relation to the contract, for instance in relation to management decisions, increase of costs and the handling of queries and complaints. Art. 36 and Art. 41 of the Payment Services D. require that the pre-contractual information is given in an official language of the Member State where the payment service is offered or in any other language agreed between the parties. With regard to framework contracts, Art. 42 of the Payment Services D. also requires payment service providers to inform payment service users on the language or languages in which the framework contract will be concluded and communication during this contractual relationship undertaken. The black list in the Annex to the Unfair Commercial Practices D. declares in its Nr. 8 a commercial practise as being misleading if a business provides after-sales services “to consumers with whom the trader has communicated prior to a transaction in a language which is not an official language of the Member State where the trader is located and then making such service available only in another language without clearly disclosing this to the consumer before the consumer is committed to the transaction”. At several places, the acquis clarifies that the provisions on the use of a specific language 2 are without prejudice to provisions of national legislation governing the choice of language (cf. Recital 31 of the Financial Services Distance Selling D.; Recitals 52, 60 and Art. 5(3) of the Services D., Recital 10 and Art. 4 of the Timeshare D. 1994). Also Art. 6 of the Consumer Sales D., which deals with guarantees, allows the Member States, within their own territory, to provide that the guarantee is drafted in a certain official language. Other provisions concern the information on the languages in which codes of conduct 3 are available (e.g. Art. 22(3)(d) of the Services D.). Finally, the acquis contains many provisions which generally require information to be given or contract terms to be drafted in plain intelligible language (cf. Art 4(3) and Art. 5 of the Unfair Terms D.). One might interpret this general duty in the sense that in certain cases only a specific language is intelligible. However, the main meaning of these general provisions is just that wording and style (perhaps also the size of the letters) must be chosen in a way that reading and understanding is not unnecessarily difficult.

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Art 7:105 4–6

2.

Chapter 7: Performance of Obligations General Provisions . Section 1: General duties

Development

4 Only the Life Assurance D. provides in its Annex III for a direct regulation of the language to be used by a business for communication between contract parties. This language must be either an official language of the Member State of the place of the commitment which is covered by the assurance, or another language if the policy holder so requests and the law of the Member State so permits. However, it is questionable whether this very specific rule is apt for generalisation. The above analysis of the acquis has identified many provisions which oblige a business to indicate prior to the conclusion of a contract the language(s) available for communication between the business and a consumer in relation to the contract after its conclusion. If such information has been given, it is clear that both parties can expect to communicate in the indicated languages. The rule suggested in the present Article therefore mainly deals with cases where no such information has been given. The question to answer was: in which language a contract party can legitimately expect to communicate and to receive communications, if there is no applicable rule, agreement or information on this issue? The principal purpose of the existing pre-contractual information duties on language in the Acquis is to avoid a negative surprise of clients, in particular consumers, that they cannot use any more the language they used prior to and during the conclusion of the contract. On this basis, it seemed plausible to cautiously develop a general rule which states that in such case the language to be used after the conclusion of the contract is the language used for the conclusion of the contract. The same rule applies under the CISG (see Schlechtriem/Schwenzer-Schmidt-Kessel, CISG, Art. 8 no. 41).

3.

Political Issues

5 Similar to the acquis, the proposed rule consciously does not interfere with national language protection laws which may regulate the use of a certain language between contract parties. Unlike several other EC law provisions, the rule does not limit the choice of languages to the official languages of the EC, because it is primarily up to the contracting parties to determine the language to be used for conclusion and execution of a contract. 6 It is an open question whether the Article at hand should be applicable for all contract parties or only in favour of consumers when contracting with a business. The existing acquis mainly regulates choice of language issues only for B2C relations (except, e.g., for payment services). However, this limitation may be due to the fact that the relevant acquis mainly consists of consumer directives which – nonetheless – contain rules which have the same legitimacy for all contractual relationships. With regard to the Article at hand, the Acquis Group could not see a good reason why the suggested rule should not be equally appropriate for contract parties who are not consumers.

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Article 7:105 Language of communications

B.

Commentary

1.

Meaning and Purpose

Art 7:105 7, 8

This Article first of all recognises that the parties to a contract are free to agree on a 7 language to be used for communications or exchanging information. Secondly, the Article creates a rule which can be used to determine the language to be used by the parties for communications after a contract has been concluded, if there is no specific provision elsewhere.

2.

Context

This Article deals with the language to be used by the parties after a contract has been 8 concluded. It therefore relates to the provisions in the ACQP on language in the pre-contractual stage. Generally, there is no rule on a specific language to be used prior to the conclusion of a contract in the ACQP. However, there are several pre-contractual information duties on language issues, which are built on the existing acquis. For instance, Art. 2:202(2) sent. 2 ACQP provides that the information duties for businesses marketing to consumers are not fulfilled unless all the information to be given is provided in the same language. Moreover, paragraph (2)(c) of the same Article establishes a duty to inform a consumer about the language to be used for communications between the parties after the conclusion of the contract, if this language differs from the language of the commercial communication. Article 4:C-01(2) ACQP requires the contract to be formulated at least in an official language of the European Union which is either an official language at the place of residence of the consumer, or of the state of which the consumer is a national, at the consumer’s choice, if the consumer is national or resident of a Member State. Paragraph (3) of the same Article entitles the consumer to a certified translation of the contract into an official language of the European Union which is the official language or one of the official languages of the Member State in which the immovable property is situated. The pre-contractual information duties in the area of Payment Services contain in Art. 2:G-01(2) ACQP and in Art. 2:G-02(1)(e)(iii) and (2) ACQP several rules prescribing that, unless otherwise provided, a language must be used which is an official language at the place where the payment service is offered. Finally, the general rule in Art. 2:204 ACQP expresses that a duty to provide information is not fulfilled unless the information is clear and precise, and expressed in plain and intelligible language. The requirement of intelligible language may also have the effect that a specific language must be used.

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Art 7:105 9–12

3.

Chapter 7: Performance of Obligations General Provisions . Section 1: General duties

Explanation

9 The Article applies only where the language to be used for communications cannot be determined from the terms agreed by the parties (expressly or tacitly) or from any other rule of law (that is, other than the current rule) or from usages or practices. Usually the language to be used for the communications between the parties will be fixed at least by tacit agreement. 10 Where the Article does apply, the language to be used for communications is the language “used for conclusion of the contract”. This wide formulation was chosen to cover both the information and negotiations prior to the conclusion and the language in which a contract is drafted. After the conclusion the parties are thus requested to communicate in the language which they have used before. In this sense, the present Article provides a “stick to the language”-rule. 11 In case the contract was negotiated and drafted in several (equally authoritative) languages, the present Article does not regulate which of these languages are appropriate for communications between the parties. If a specific language cannot be determined, one would consider all of the languages used as equally appropriate. If, however, the parties never used a common language, but always expressed themselves in different languages, as a rule, each party may continue to use its own respective language after the conclusion.

4.

Example

12 German business A wants to buy tulips from the Netherlands and requests the terms of sale from Dutch business B. While A has written in German, B sends terms which are drafted in English. A sends his offer to buy 10,000 tulips in German, B again accepts in English. Since offer and acceptance are expressed in different languages the contract has not been concluded in a common language. Both parties should be allowed to keep on communicating in the particular language which each party has used for the conclusion of the contract.

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Section 2: Modalities of Performance Article 7:201: Time of performance

1

(1) If the contract does not fix the time of performance, the debtor must perform without undue delay. (2) Unless the parties have agreed otherwise, a business must execute the obligations incurred under contracts concluded at a distance no later than 30 days after the contract was concluded. (3) If a business must reimburse money received from a consumer, such reimbursement must be carried out as soon as possible and in any case no later than 30 days after the reimbursement obligation arose. (4) If the order of performance of reciprocal obligations cannot be otherwise determined from the terms regulating the obligations then, to the extent that the obligations can be performed simultaneously, the parties are bound to perform simultaneously unless the circumstances indicate otherwise.

A. Foundation in the Acquis 1.

Sources

There are very few provisions in the acquis that relate to the time of performance of the 1 obligation. The following are examples of provisions that directly answer the question of when the obligation must be fulfilled: 1) According to Art. 3(3) of the Consumer Sales D., concerning a consumer’s rights to repair or replacement of goods, “any repair or replacement shall be completed within a reasonable time and without any significant inconvenience to the consumer, taking account of the nature of the goods and the purpose for which the consumer required the goods.” 2) Art. 7(1) of the Distance Selling D. stipulates that “Unless the parties have agreed otherwise, the supplier must execute the order within a maximum of 30 days from the day following that on which the consumer forwarded his order to the supplier.” As stated in Recital 15 of this directive it is “necessary to prescribe a time limit for performance of the contract if this is not specified at the time of ordering” 3) Art. 7(1) of the Financial Services Distance Selling D. has a similar meaning, although its scope of application is very narrow. It states that the consumer who has withdrawn from a contract may be required to pay for the service actually provided by the supplier in accordance with that contract and this payment must be made “without any undue delay”. 1

Partially grey rule from Art. III. – 2:104 DCFR.

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Art 7:201 2, 3

Chapter 7: Performance of Obligations General Provisions . Section 2: Modalities of Performance

4) There is also a recent decision of the ECJ in case C-306/06, 01051 Telecom GmbH v Deutsche Telekom AG. In this decision ECJ rules that that Art. 3(1)(c)(ii) of the Late Payment D. is to be interpreted as meaning that it requires, in order that a payment by bank transfer may avoid or put an end to the application of interest for late payment, that the sum due be credited to the account of the creditor within the period for payment. 2 There are also certain provisions concerning the time of performance of the special obligation – the duty to return money or goods received under the contract that was afterwards brought to an end by withdrawal or because of the unfeasibility of performance: 1) Art. 6(2) of the aforementioned Distance Selling D., referring to the supplier’s duty to reimburse received sums when the consumer withdrew from the distance contract, states that “such reimbursement must be carried out as soon as possible and in any case within 30 days.” 2) According to Art. 7(2) of the same Directive, in the event of the unavailability of the goods or services, the consumer “must be able to obtain a refund of any sums he has paid as soon as possible and in any case within 30 days”. 3) Under Art. 7(4) and 7(5) of the aforementioned Financial Services Distance Selling D., after the contract has been brought to an end by means of withdrawal, both parties shall return to each other any sums or property they have received in accordance with the contract “without any undue delay and no later than within 30 calendar days.” The beginning of this period depends on which party is entitled to the return of the money. In case of the consumer’s right, the period begins from the day on which the supplier receives the notification of withdrawal. As far as a consumer’s duty is concerned, the period begins from the day on which the consumer dispatches the notification of withdrawal.

2.

Development

3 Most of the sources cited above express the same basic idea, although they use different words (“within a reasonable time”, “without any undue delay”, “as soon as possible”). The basic idea is that even if the time of performance is not fixed in the contract, the debtor must perform within a certain time limit. This limit depends on the particular circumstances. However, the standard of the debtor’s care which always applies is that the debtor has to perform as soon as possible and is not allowed to delay performance without proper justification. This standard is omnipresent in the provisions presented above and is therefore suitable to be generalised as a rule of performance. The best way to express this rule is to say that “the debtor must perform without undue delay” (paragraph (1)). Art. 7(1) of the Distance Selling D. is a specific rule on B2C distance contracts and is definitely a consumer protection rule. Therefore it does not provide a basis for a general rule of contract law. However, within consumer law it is an important regulation and its relatively wide scope of application (especially when taking into consideration Recital 15 allows us to formulate a more general consumer protection rule as expressed in paragraph (2). Nevertheless some of the exemptions listed in Art. 3 of the Directive have to be taken into account when applying this rule. 362

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Article 7:201 Time of performance

Art 7:201 4–6

The three articles cited above concerning a consumer’s right to a refund of sums paid 4 before the contract was brought to an end (Art. 6(2) and Art. 7(2) of the Distance Selling D. and Art. 7(4) of the Financial Services Distance Selling D.) are coherent and demonstrate the aim of European lawmakers to create a uniform standard of consumer protection on that matter. This is the reason why time limits estimated by these provisions (without undue delay but under no circumstances later than 30 days) may be transferred to a more general level. The single provision related to a similar duty of the consumer (Art. 7(4) of the Financial Services Distance Selling D.) does not provide sufficient grounds for such a corresponding generalisation. This is why the rule formulated in paragraph (3) is only applied when the consumer is entitled to reimbursement. The acquis does not contain distinct provisions governing the order of performance of 5 reciprocal obligations. Some specific provisions concerning contractual obligations suggest that European lawmakers had no intention to abandon the commonly accepted rule that reciprocal obligations normally are to be performed at the same time, unless the contract or the circumstances require otherwise (cf. Sec. 1(o) of the Annex to the Unfair Terms D. and Art. 3(1)(c) of the Late Payment D.). A similar rule to the one presented above (paragraph (4)) is contained in PECL (Art. 7:104 PECL). Another regulation within the acquis that may concern the time of performance, and 6 must therefore be mentioned here, is Art. 3(1) to Art. 3(4) of the Late Payment D. These provisions, however, were found to be too unclear to serve as a basis for a general rule governing the time of performance. The cause of this impression is the fact that Art. 3(1) of that Directive merely obliges Member States to ensure that the interest in case of late payment becomes payable at a certain moment (in most cases 30 days after the date of receipt by the debtor of the invoice or the date of receipt of the goods or services) but says nothing as to when payment has to be made. It seems then that this article establishes the right to interest in case of late payments but does not in and of itself fix the time of performance of any other monetary obligation. The same is to be said about Art. 3(2) and 3 (3) of this Directive. The former allows Member States to fix the period after which interest becomes payable to a maximum of 60 days on the condition that they impose some sort of limitation on the parties’ exceeding this period. The latter obliges Member States to provide that an agreement “on the date of payment or on the consequences of late payment” which is contrary to the provisions of paragraph (1) and (2), shall not be enforceable or shall give rise to a claim for damages if it is grossly unfair to the creditor. Although it might be questionable, there are grounds to maintain that the cited provisions do not govern the time of performance. The decision on the time of payment is still an element of the parties’ contractual freedom. The article in question influences this decision only indirectly in the way that it imposes on a debtor the duty to pay interest if the period fixed in the contract exceeds 60 days. This explains why the contents of the Late Payment D. were not found to be useful sources for a rule on time of performance. Interest on delayed payments is governed by the rules on non-performance (see Art. 8:404 ACQP).

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Art 7:201 7–9

3.

Chapter 7: Performance of Obligations General Provisions . Section 2: Modalities of Performance

Political Issues

7 As an alternative approach, one could include a set of broader provisions governing the time of performance. These would mostly cover the question of whether the 30 day period, used by European lawmakers in several countries, could serve as sufficient basis to specify the time of performance (at least as a presumption), when the parties have not otherwise fixed the due date. However, there is no convincing basis for such a generalisation in the acquis, and therefore the rule of paragraphs (2) and (3) is confined to exceptional consumer cases. The question is left open as to whether these specific rules should be maintained here or relocated to other places which deal with these kinds of special obligations. Paragraph (4) contains a fundamental provision for each contractual system, which does not find sufficient basis in the acquis. Therefore it was drafted as a “grey rule” taken from Art. III. – 2:104 DCFR. An alternative wording for the rule, which would possibly better reflect the terminology of the acquis, could be: Unless either the contract provides, or the circumstances indicate otherwise, parties are bound to perform reciprocal obligations simultaneously. For the future the Acquis Group should probably consider, whether the principle stated by the ECJ in the C-306/06 01501 Telekom GmbH v Deutsche Telekom should be expressed as a rule.

B.

Commentary

1.

Meaning and Purpose

8 Obligations arising from a contract are to be performed at the time agreed by the parties. This requirement is quite obvious and there is no need to express it as a rule of performance. The situation is different when the time of performance is not fixed by the parties to the contract. In such case, the law must determine the time of performance in order to enable the creditor to demand fulfilment of a debtor’s obligation or to seek remedies due to the non-performance of the obligation. In this circumstance, the meaning of the provisions presented above is that they determine the time of performance when the parties have not agreed upon a time and their main purpose is to make the obligation enforceable where there is an indefinite time for performance.

2.

Context

9 The provision proposed here as paragraph (1) is an autonomous rule and, together with Art. 7:202 ACQP, constitutes a basic regulation of the so-called modalities of performance. The requirement of “no undue delay” is a specification of the good faith principle expressed in Art. 7:101 ACQP above.

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Article 7:201 Time of performance

Art 7:201 10–12

Time is of the utmost importance because late performance amounts to non-performance of the obligation (see Art. 8:101 ACQP). On the other hand, if the defined time has come, the creditor should have received the performance offered by the debtor (under the duty of co-operation, cf. Art. 7:104 ACQP supra). Paragraph (3) is linked with the right of termination because of the non-performance of the obligation (see Art. 8:303 ACQP). The similar duty in case of with drawal is imposed by Art. 5:105 ACQP. The consequence of the rule expressed in paragraph (4) is that each party can withhold its own reciprocal performance (see Art. 8:304 ACQP). The terms “business” and “consumer” are defined in Art. 1:201 and Art. 1:202 ACQP.

3.

Explanation

The first and most general rule is that an obligation having an indefinite time of perform- 10 ance has to be carried out without undue delay. This means that the debtor must perform as soon after the obligation arises as is possible under the circumstances. The period of time cannot be fixed in general and it depends on individual circumstances such as the nature and object of the performance (the goods or services to be supplied). The debtor has as much time as any diligent and well-organised person needs for preparing and completing the kind of performance in question. In other words the obligation should be performed within a reasonable time. This general rule does not apply to reciprocal obligations, i.e., obligations where both 11 parties are under the duty to supply payment, goods or services to each other. In that case, the order of performance may be regulated by the parties in their contract. It can also be determined by circumstances. For example, the nature of mutual duties may not allow the parties to carry them out at the same time (payment vs. long-term service). The particular aim of the obligation may require one party to perform first. The existing usage and customs may, for example, oblige one party to perform the non-monetary obligation (service) first and the other party to pay the remuneration after. If both contract and circumstances do not determine the order of performance, both parties must complete their performances simultaneously. Distance selling contracts, which are covered in paragraph (2), are contracts concerning 12 goods or services concluded under an organised distance sales or service-provision scheme run by the business, which, for the purposes of the contract, makes exclusive use of one or more means of distance communication up to and including the moment at which the contract is concluded (cf. Art. 2(1) of the Distance Selling D.). In this type of contract the “no undue delay” rule is stipulated so that the business (supplier) can not delay its performance under any circumstances for more than 30 days. In other words, in the case of distance contract, a business’ failure to perform the obligation for 30 days after the contract was concluded automatically amounts to undue delay.

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Art 7:201 13–18

Chapter 7: Performance of Obligations General Provisions . Section 2: Modalities of Performance

13 Paragraph (3) contains a special rule on the time of performance which applies when a business is obliged to reimburse money paid by a consumer under the contract that was subsequently brought to an end by termination of the contract. This rule combines both ways of determining the time of performance – a flexible formula “without undue delay” (here, “as soon as possible”) and a strict time limit of 30 days from the day when the obligation came into existence. The debtor has to carry out the reimbursement as soon after this obligation arises as is possible under the circumstances, but in any event within 30 days. In the case of withdrawal from a contract, Art. 5:105(1) sent. 3 ACQP contains a similar rule.

4.

Examples

Example 1 14 A agrees to lend B his car. The contract does not mention anything about when the car has to be handed over to B. According to Art. 7:201(1) the car ought to be provided by A without undue delay – in this case immediately after the contract is concluded. Example 2 15 Facts are the same as in Example 1, except that the contract is a loan agreement for 10,000 EUR. B is entitled to receive the money within a few days because it will take a few days for a lender to arrange and complete any money transfer. Example 3 16 Consumer C has bought a book online from an Internet bookstore. The bookseller is obliged to deliver the book to the buyer within 30 days from the day when the offer was accepted. Example 4 17 Facts are the same as in Example 3, but the buyer has paid for the book and then withdrawn from the contract by exercising his statutory right of withdrawal. The seller must return the sum of money as soon as possible and in any case no later than the 30th day after he has received the declaration of withdrawal. Example 5 18 D wants to go to a jazz concert held at a small club. According to existing usage or custom, D has to pay for admission before he is let in and before the concert begins.

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Art 7:201 1

Article 7:202 Place of performance

Article 7:202: Place of performance

2

(1) If the place of performance of an obligation cannot be otherwise determined from the terms regulating the obligation it is: (a) in the case of a monetary obligation, the creditor’s place of business; (b) in the case of any other obligation, the debtor’s place of business. (2) For the purposes of the preceding paragraph (a) if a party has more than one place of business, the place of business is that which has the closest relationship to the obligation; and (b) if a party does not have a place of business, or the obligation does not relate to a business matter, the habitual residence is substituted. (3) If, in a case to which paragraph (1) applies, a party causes any increase in the expenses incidental to performance by a change in place of business or habitual residence subsequent to the time when the obligation was incurred, that party must bear the increase.

Provisional Comment The acquis does not provide a sufficient basis for formulating rules on the place of per- 1 formance. However, to determine the real content of certain provisions of the Acquis Principles, it is necessary to specify the place of performance. It is probable that a court dealing with provisions relating to the reimbursement of money or supplied goods after withdrawal from the contract (cf. e.g. Art. 6(2) and Art. 7(3) of the Distance Selling D.) will be forced to find within the directive itself some hints to determine the place of performance. The Consumer Sales D. is also silent on this issue, although the place of performance is essential to determine the passing of the risk and it is also relevant in case of using remedies. The draft can only notice the gap in the acquis. The gap is to be filled with a “grey rule” taken from the DCFR (Art. III. – 2:101). A similar provision can be found in Art. 31(c) and Art. 57 CISG.

2

Grey rule from Art. III. – 2:101 DCFR.

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Specific Provisions Part A: Contracts Negotiated Away from Business Premises Article 7:A-01: Goods or services of equivalent quality A contract term whereby the business may supply goods or services of equivalent quality and price is invalid if the consumer has not been informed, in accordance with Article 2:204 (Clarity and form of information), of this possibility and of the fact that the business must bear the expense of returning what the consumer has received under the contract if the consumer exercises a right of withdrawal under Article 5:A-01 (Right to withdraw from contracts negotiated away from business premises).

A. Foundation in the Acquis 1.

Sources

1 The present Article is based on Art. 7(3) of the Distance Selling D.: Art. 7(3) Distance Selling D.

2.

Nevertheless, Member States may lay down that the supplier may provide the consumer with goods or services of equivalent quality and price provided that this possibility was provided for prior to the conclusion of the contract or in the contract. The consumer shall be informed of this possibility in a clear and comprehensible manner. The cost of returning the goods following exercise of the right of withdrawal shall, in this case, be borne by the supplier, and the consumer must be informed of this. In such cases the supply of goods or services may not be deemed to constitute inertia selling within the meaning of Article 9.

Development

2 Article 7(3) of the Distance Selling D. gives Member States the option to allow the supplier to provide the consumer with goods or services of equivalent quality and price. The majority of Member States have made use of this option in the implementation of the Distance Selling D. It is worth noting that national legislators have done so in different ways, depending on the decisions they made with a view to the following points. Firstly, there is the issue of the manner in which the consumer has to be informed of the possibility to deliver goods or services of equivalent quality and price. Article 7(3) has a dual approach: the consumer must be informed prior to the conclusion of the contract or

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Article 7:A-01 Goods or services of equivalent quality

Art 7:A-01 3, 4

in the contract itself. Where the first solution is chosen, the question arises whether the information given to the consumer has to meet any formal requirements (e.g. whether it must be given in textual form on a durable medium). Secondly, there is the question of how the consumer has to be informed of the fact that the costs of returning the goods following the exercise of his or her right of withdrawal are to be borne by the supplier. One might opt for the same requirements as those that apply to the information which has to be given about the possibility to deliver goods or services of equivalent quality and price. Alternatively, one might adopt a rule which states that the way in which the consumer is informed of the fact that the costs of returning the goods are to be borne by the supplier may differ from that in which the first-mentioned kind of information needs to be given (so that information about the costs of returning the goods may, e.g., be given after the contract has been concluded, or at the moment when the goods or services are delivered). The implementation of the Distance Selling D. in the Member States shows that the 3 above problems have been solved in various ways (see H. Schulte-Nölke, C. Twigg-Flesner, M. Ebers (eds.), EC Consumer Law Compendium, 2008, p. 360). The first question the drafters of this Article were facing was whether Art. 7(3) of the Distance Selling D. should be reflected in the Acquis Principles at all. After all, this provision contains nothing more than an option for national legislators. There are, however, two arguments which can be made in favour of adopting this provision for the Acquis Principles. First, the majority of Member States have made use of this option. Second, the option of Art. 7(3) emphasizes a particular feature of distance contracts: at the moment of concluding the contract, the supplier may not be aware of the fact that particular goods are out of stock. For this reason, the possibility to deliver similar goods or services serves the interests of both the consumer and the business. At the same time, making use of this option creates a danger for the consumer since he or she is exposed to the risk of receiving goods or services other than those expected. This highlights the importance of measures which protect the consumer’s interests. The consumer must not be taken by surprise by the provision of goods or services that are not identical to those that were ordered. Moreover, the consumer must have a right to withdraw from the contract if the goods or services that have been supplied do not meet his or her expectations. The first aspect of the protection given to the consumer is that he or she is granted a right 4 to withdraw from the contract. Secondly, if the consumer exercises this right of withdrawal, the cost of returning what the consumer has received under the contract is to be borne by the business. Finally, the consumer must be informed of these rights. As far as the first aspect is concerned, the provision at hand stipulates that the possibility of supplying goods or services of equivalent quality and price must be provided for by the contract itself (“a contract term”), meaning that both parties must agree to it. Maciej Szpunar

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Art 7:A-01 5, 6

Chapter 7: Performance of Obligations Specific Provisions . Part A: Contracts Negotiated Away from Business Premises

5 In order to strengthen the consumer’s protection, the Article at hand provides for very far-reaching information duties. The consumer must be informed, firstly, of the possibility to supply goods or services of equivalent quality and price and, secondly, of the fact that the business must bear the cost of returning what the consumer has received under the contract if the consumer exercises his or her right of withdrawal. The present Article introduces additional requirements concerning the way in which the consumer must be informed. To this end, it refers to Art. 4:104 ACQP. This means that a business must “at the outset” provide “explicit information”. Moreover, the business bears the burden of proving that the consumer has received the relevant information. It is clear from the wording of the present Article that if the consumer is not duly informed of his or her rights, a contract term allowing for goods or services of equivalent quality and price to be supplied is invalid.

B.

Commentary

1.

Meaning and Purpose

6 The main purpose of this provision is to allow the parties to a distance contract to agree that the business may supply goods or services of equivalent quality and price. As already mentioned above, the business may not be aware of the unavailability of certain goods, or of the impossibility to provide certain services, at the time of the conclusion of the distance contract (e.g. where an offer was accepted by fax or e-mail). The business would thus not be able to perform (with the consequences of this non-performance depending on the circumstances of the particular case, especially on the terms of the relevant contract), while the consumer can reasonably expect that the goods will be delivered or the services performed within a certain period of time following the conclusion of the distance contract. It is clear that the possibility to incorporate a contract term of the kind referred to in the present Article has the potential of serving the interests of both the business and the consumer. For obvious reasons, the business wants to sell as many products or services as possible. On the other hand, the consumer will often have an interest in receiving goods or services within a specific period of time (e.g. before leaving for holidays). The consumer’s main interest in the performance of the contract does not necessarily relate to particular features of a product or service, and may rather relate to the time of delivery. The consumer will then frequently accept goods or services that are not identical to those that were ordered, provided that they are delivered to him or her on time. One could also envisage a situation in which the consumer would willingly accept goods or services of equivalent quality and price, even if the time of delivery is not a crucial factor. The goods that were delivered may be suitable to meet the needs of the consumer in spite of not being identical to those that were initially ordered. There is a certain danger that a contract term of the kind referred to in the provision at hand might be abused by businesses offering goods or services. Since it would seriously

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Article 7:A-01 Goods or services of equivalent quality

Art 7:A-01 7, 8

undermine the consumers’ interests if they were to face the problem of receiving goods or services that do not meet their expectations, the mechanism of consumer protection offered by the provision at hand is very far reaching. The level of protection goes even further than that envisaged by Art. 7(3) of the Distance Selling D.

2.

Context

The Article at hand constitutes a specific rule on the performance of distance contracts. 7 It is the only specific rule on performance applicable to this type of contract, and it does not apply to other types of contract. If the business makes use of the possibility to supply goods or services of equivalent quality and price, the consumer has a right to withdraw from the contract. The right of withdrawal is governed by the provisions of Chapter 5 of the Acquis Principles, with the modification that in cases where the right of withdrawal results from the present Article, the business will have to bear the costs of returning what the consumer has received under the contract. The present Article also refers to Art. 4:104 ACQP which deals with information duties in real time distance communication. If a business wishes to incorporate a term allowing it to deliver goods or services of equivalent quality and price under a distance contract, this must be communicated to the consumer explicitly and at the time of “initiating real time distance communication with the consumer” (paragraph 1). The burden of proving that the consumer was provided with the relevant information is on the business (paragraph 3). This Article is also linked with Art. 8:A-01 ACQP, a specific provisions on non-performance for distance contracts. This provision obliges the business to inform the consumer immediately if the goods or services ordered are not available. Given that the main reason why a business would rely on a contract term of the kind referred to in the present Article is exactly such an unavailability of goods or services, Art. 8:A-01 ACQP applies whenever goods or services are unavailable, regardless of whether the contract provides for the possibility to deliver goods or services of equivalent quality and price.

3.

Explanation

This Article allows parties to agree that a business may supply the consumer with goods 8 or services of equivalent quality and price. This possibility is exclusive to distance contracts. The meaning of “distance contract” is identical with that which is used in Chapters 4 and 5 (Art. 4:104 and 5:A-01 ACQP). Accordingly, the present Article applies to contracts in which “the business has exclusively used means of distance communication for concluding the contract”. It does not apply to distance contracts enumerated in Art. 5:A-01(4) ACQP.

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Art 7:A-01 9, 10

Chapter 7: Performance of Obligations Specific Provisions . Part A: Contracts Negotiated Away from Business Premises

9 As far as the interpretation of this Article is concerned, the crucial problem is the meaning of “goods or services of equivalent quality and price”. To begin with, it needs to be emphasized that is it hard to imagine a supply of “services of equivalent quality and price” (although such possibility cannot be excluded from the outset). In that sense, the present Article can be said to apply essentially only to goods. It is impossible to propose any definition of “goods or services of equivalent quality and price”. In order to decide whether goods or services that have been supplied are of equivalent quality and price, regard must be given to all the circumstances of a particular case. Nevertheless, one should propose some general guidelines. First of all, the quality and price of goods or services supplied must be similar (comparable) to the quality and price of the goods or services to which the contract refers. However, a purposive interpretation of the provision suggests that the business should be allowed to supply goods (or services) which are of equivalent price but substantially higher quality, or goods (or services) which are of equivalent quality but substantially lower price. Additionally, the business must reasonably expect that the goods or services supplied will meet the expectations and needs of the consumer. In order to assess whether this criterion is fulfilled, one should take into account the circumstances of which the business is aware. This requirement results from the present Article which provides for a duty to perform in accordance with good faith and with regard to the legitimate expectations of consumers. If, taking into account the above-mentioned criteria, the goods or services supplied are not of equivalent quality and price, this amounts to non-performance on the part of the business. 10 A contract term which allows the business to supply goods or services of equivalent quality and price is valid only if the following conditions are met: 1) the consumer must be informed of the possibility to supply goods or services of equivalent quality and price; 2) the consumer must be informed of the fact that under Art. 5:A-02 ACQP the business must bear the expense of returning what the consumer has received under the contract if the consumer exercises a right to withdraw; and 3) the information referred to in points 1 and 2 above must be communicated to the consumer in accordance with Art. 4:104 ACQP. If even a single one of the above conditions is not fulfilled, the contract term will be invalid. Consequently, the delivery of goods or services of equivalent quality and price would amount to non-performance on the part of the business.

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Art 7:A-01, 11, 12 Art 7:B-01

Article 7:B-01 Conformity of goods to the contract

4.

Examples

Example 1 A consumer orders three air mattresses of a particular type via e-mail. The business in- 11 forms the consumer of the possibility to supply goods of equivalent quality and price, and does so in compliance with Art. 4:104 ACQP. Since the mattresses which have been ordered are out of stock the business delivers mattresses of equivalent quality and price. The consumer can either accept the delivery or exercise his right of withdrawal (in which case the business would bear the costs of returning the mattresses). Because he intends to go camping within a few days, the consumer accepts the delivery. Example 2 A consumer organizes a birthday party. He orders a consignment of wine over the tele- 12 phone. The business informs the consumer of the possibility to supply goods of equivalent quality and price, and does so in accordance with Art. 4:104 ACQP. The consumer receives a delivery of a different wine which is charged at a price higher than that of the wine which had been ordered. The contract has not been duly performed, and remedies for non-performance apply.

Part B: Contracts for the Delivery of Goods Article 7:B-01: Conformity of goods to the contract (1) When determining whether goods conform to the contract, regard is to be given in particular to whether the goods: (a) comply with the description given by the debtor and possess the qualities of the goods which the debtor has held out to the other party as a sample or model; (b) are fit for any particular purpose for which the creditor requires them, which the creditor made known to the debtor at the time of conclusion of the contract and which the debtor has accepted; and (c) are fit for the purposes for which goods of the same type are normally used. (2) Where the goods are to be installed by the debtor, the goods conform to the contract only if they are installed correctly. (3) Where the installation of goods is left to the creditor, the goods conform to the contract only if the installation instructions are sufficient.

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Art 7:B-01 1, 2

Chapter 7: Performance of Obligations Specific Provisions . Part B: Contracts for the Delivery of Goods

A. Foundation in the Acquis 1.

Sources

1 This Article reflects Art. 2(2)(a)-(c) of the Consumer Sales D. There was no need to replicate subparagraph (d) of this section, because it is already reflected in Art. 4:107 and 4:108 ACQP.

2.

Development

2 The Article at hand closely follows the wording of the Consumer Sales D. A number of modifications have been made in order to fit this provision into the overall system of the ACQP. Thus there was no need to take over Art. 2(2)(d) of the Directive since the relevance of pre-contractual statements by a contract party and that of pre-contractual public statements is already addressed by the more general Art. 4:107 and 4:108 ACQP. Moreover, what the creditor may reasonable expect is already established by Art. 7:101(2) ACQP. The present Article is not a consumer law provision. While the Consumer Sales D. only applies to consumer contracts, the directive’s test mechanism for conformity is not, in fact, tailored to the characteristics of consumer law. Given that it is not specifically devised to protect the interests of a weaker party, this mechanism is also useful in B2Btransactions. Where a consumer is involved, this will only make a difference as far as freedom of contract is concerned: according to Art. 7:B-02 ACQP, the present Article is mandatory in a contract under which a business sells goods, including goods to be manufactured or produced, to a consumer. The Consumer Sales D. excludes certain kinds of consumer contracts from its scope of application (Art. 1(2)(b)). The issue of goods sold by way of execution or otherwise by authority of the law is not dealt with. The matter depends on the national provisions governing the procedural aspects of civil execution and bankruptcy and need not, therefore, be dealt with in the present context. There is also the issue of whether contracts for the sale of water and gas should be excluded from the scope of application of the test of conformity where the said goods are not put up for sale in only a limited volume or a set quantity. The Article at hand does not contain such an exclusion. Since the Acquis Group decided to state the entire system of performance and remedies in the ACQP predominantly by way of generalizing from the Consumer Sales D., contracts for the sale of water, gas and electricity had to be included in the scope of application of the provision at hand. There was some debate as to what the relation should be between criteria (a) and (b). Proposals were made to clarify how they can be combined. Ultimately, however, the wording chosen was the one that came closest to the language of the Consumer Sales D.

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Article 7:B-01 Conformity of goods to the contract

3.

Art 7:B-01 3–6

Political Issues

The main issue has already been mentioned under 2. above, namely the way in which the 3 different criteria for determining conformity of the goods to the contract are to relate to one another. Should they always apply as a bundle, and if so, what should be done in cases where they turn out to contradict one another? Or should they only be considered as mere indicators to assist the judge in coming up with a model of conformity in each individual case? It was ultimately decided to opt for a flexible model. The first point of reference in assessing conformity with the contract should be the contract itself. The listed criteria are meant to help the judge in thus assessing conformity. In some cases fulfilment of only one criterion will be enough to establish conformity with the contract, while in other cases all of them will have to be met.

B.

Commentary

1.

Meaning and Purpose

The present Article aims to determine one particular aspect of the performance of the 4 obligation. In order for the debtor to have correctly discharged the obligation to deliver the goods, these need to be in conformity with the contract. While it is a necessary precondition to a complete performance of the obligation that the goods be in conformity with the contract, this will not in itself suffice to achieve performance (which also needs to occur at the right place, on time, etc.). The present Article is based on the assumption that the delivery of defective goods affects the evaluation of the completeness of performance. The given criteria are only meant to facilitate determining the content of the obligation as far as the quality of the goods is concerned.

2.

Context

This Article is one of the particular rules on performance. It completes the general rules 5 on performance in the area of contracts which oblige at least one party to deliver certain goods. First and foremost among them are the contracts of sale. Yet the provision also applies to barter contracts, contracts for the loan of goods, and donations. It equally applies where the obligation to deliver the goods arises from a binding unilateral promise. This conclusion cannot be drawn directly from Art. 4:109(2) ACQP since that provision quite narrowly refers only to provisions of contract law which protect one particular party. However, this narrow formulation does not stand in the way of applying the performance and non-performance regime to cases where the exact nature of the source of the obligation is irrelevant in terms of protecting the interests of the parties with a view to both performance and non-performance. At least by way of analogy the provision on conformity of goods is applicable to obligations established by a unilateral promise. Article 7:B-01 is not a consumer law provision. The Article gives three criteria for assessing conformity with the contract. There are also 6 other more general criteria to consider, such as the creditor’s legitimate expectations

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Art 7:B-01 7–9

Chapter 7: Performance of Obligations Specific Provisions . Part B: Contracts for the Delivery of Goods

(Art. 7:101(2) ACQP), pre-contractual statements by a contract party (Art. 4:107 ACQP), and pre-contractual statements by third parties (Art. 4:108 ACQP).

3.

Explanation

7 The present Article provides criteria that facilitate determining whether the goods delivered conform to the contract. The notion of “goods” is not defined in the ACQP. In the DCFR, “goods” are “corporeal movables”, including “ships, vessels, hovercraft or aircraft, space objects, animals, liquids and gases”. However, Article 1(2)(b) of the Consumer Sales D. excludes water and gas where they are not put up for sale in a limited volume or set quantity, and electricity. For the reasons stated under A.2. above, the notion of “goods” as used in the present context does extend to those items. Neither the definition of “goods” in the DCFR, nor that in Article 1(2)(b) of the Consumer Sales D. cover rights (or, to be more precise, rights other than property in tangibles). Since the ACQP do not define “goods” there is room for a more flexible interpretation. The general ACQP rules on performance and non-performance do not require a sharp distinction to be drawn between contracts with tangible and those with intangible subject matter. The test of conformity with the contract applies equally in case of intangibles. 8 The provision is mandatory for B2C-transactions (Art. 7:B-02 ACQP). Yet even where the provision is mandatory, the parties may still influence the outcome of the conformity test, depending on how they choose to describe the goods. In this sense a description, stating that a particular item is damaged and is not fit for the normal purpose of the goods of the same type, would not violate the mandatory nature of this provision in consumer contracts. 9 The Article lists three criteria for the test of conformity of the goods. Firstly, the goods need to comply with the description given by the debtor and need to posses the qualities of the goods which the debtor has held out to the other party as a sample or model. Secondly, they have to be fit for any particular purpose for which the creditor requires them, which the creditor made known to the debtor at the time of the conclusion of the contract and which the debtor has accepted. Thirdly, they have to be fit for the purposes for which goods of the same type are normally used. In this context, regard must also be given to pre-contractual statements by the party providing the goods and public statements by third parties who are situated within the business chain between the producer and ultimate consumer (Art. 4:107 and 4:108 ACQP). Taken together, these form the standard of the legitimate expectations of the creditor (Art. 7:101(2) ACQP). If the goods are not fit for the purposes for which goods of the same type are normally used, the party delivering the goods must disclose this fact prior to the conclusion of the contract. If the customer enters into the contract anyway, with full knowledge of such disclosure, he or she carries the risk of the goods being of a lower quality. The burden of proving such disclosure is on the party which is due to deliver the goods. Only in extraordinary cases such a disclosure might be qualified as a circumvention of the law, which would render it ineffective. Where the item is described as “totally damaged” specifically in order to cir376

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Article 7:B-02 Mandatory nature for consumer contracts

Art 7:B-01, 10, 11 Art 7:B-02, 1

cumvent the entire system of consumer protection, such description can be ignored so that the usual test applies. A similar issue arises in cases where the written description given by the debtor is at odds with the qualities of the goods which the debtor has held out to the other party as a sample or model, and which the creditor has examined or tested. In such cases, conformity will be tested against the creditor’s experiences with the model or sample, unless the party obliged to deliver the goods states clearly that the goods which it is to deliver do not possess certain features of the model or sample. A description given in standard terms needs to be incorporated in accordance with Art. 6:201 ACQP in order to be effective. The party delivering the goods may express acceptance of the particular purpose for 10 which the customer requires them by any means appropriate to the circumstances (cf. Art. 1:301 ACQP). If the customer expresses such a special need, silence on the part of the other party will usually be interpreted to constitute acceptance. The burden of proving that the customer expressed a need for fitness for a particular purpose and that the other party accepted this lies with the customer.

4.

Example

Business A sells a laptop to B. The manual states that the battery will last for at least 3 11 hours’ work with the computer. The buyer has informed the seller that she needs a computer which can be operated for at least five hours without being plugged in. The seller delivers the abovementioned laptop without addressing the issue. It turns out that the battery cannot work for more than three hours without being recharged. There is a lack of conformity because the seller failed to inform the buyer that the computer sold cannot work for as long as the customer has specified. The customer needs to prove that she informed the seller about this particular requirement and that the seller did not object to it.

Article 7:B-02: Mandatory nature for consumer contracts In a contract under which a business sells goods, including goods to be manufactured or produced, to a consumer, Articles 7:101 (Duty to perform) and 7:B-01 (Conformity of goods to the contract) are mandatory in the sense of Article 1:203 (Mandatory nature of consumer rules).

A. Foundation in the Acquis 1.

Sources

This provision reflects Art. 7(1) of the Consumer Sales D. According to Art. 7(1), “any 1 contractual terms or agreements” concluded with the seller before the lack of conformity Fryderyk Zoll

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Art 7:B-02 2– 4

Chapter 7: Performance of Obligations Specific Provisions . Part B: Contracts for the Delivery of Goods

is brought to the seller’s attention “which directly or indirectly waive or restrict the rights of the consumer” under this Directive are not binding on the consumer.

2.

Developments

2 The present Article brings the content of Article 7(1) of the Consumer Sales D. into line with the ACQP system. While the ACQP rules on performance are to a large extent derived from the Consumer Sales D., this was done by way of a twofold generalization. Firstly, the ACQP rules on performance extend to obligations beyond those arising under contracts of sale or contracts for the delivery of goods to be manufactured or produced: Article 7:101 ACQP is applicable to all kinds of obligations and Art. 7:B-01 ACQP to all contracts (including unilateral promises – see the Comments to Art. 7:B-01 ACQP) which establish an obligation to deliver goods. Secondly, the ACQP rules on performance go beyond the boundaries of consumer law. The Acquis Principles are firmly grounded on the principle of freedom of contract. As a general rule, only those rules are (semi-)mandatory which are prejudicial to the consumer and deviate from rules which apply specifically to relations between businesses and consumers. Art. 7:101 ACQP and Art. 7:B-01 ACQP are not consumer-specific rules, without the Article at hand they would therefore not in and of themselves be mandatory even in relations between businesses and consumers. This would lead to a lowering of the standard of consumer protection when compared to that of the Consumers Sales D. To avoid this result, the present Article had to be adopted.

3.

Political Issues

3 It might be argued that the reference in the present Article to Art. 7:101 ACQP should not extend to its paragraph (1), i.e. to the paragraph which establishes a duty to perform obligations in accordance with good faith, since this might invite the e contrario argument that it is possible to deviate from the standard of good faith in contractual relationships other than those in which a business sells goods, including goods to be manufactured or produced, to a consumer. However, this finding is actually quite correct, the parties may indeed agree to rely solely on the wording of the contract without recourse to extra-contractual standards. The e contrario argument is thus a valid argument to make in this particular context, meaning that there is no need to exclude the second paragraph of Art. 7:101 ACQP from the reference to Art. 7:101 ACQP in the present Article.

B.

Commentary

1.

Meaning and Purpose

4 The present Article states the semi-mandatory nature of two rules which would not otherwise be covered by Article 1:203 ACQP. The provision determines the extent to which Art. 7:101 and 7:B-01 ACQP are mandatory, so that Art. 7:101 ACQP, e.g., is not

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Article 7:B-02 Mandatory nature for consumer contracts

Art 7:B-02 5–8

mandatory in its entire sphere of application, but only in the field determined by the present Article (i.e. only in the field of consumer contracts for the sale of goods, including goods to be manufactured or produced).

2.

Context

The Article merely determines which rules are mandatory in the area of the consumer 5 contracts for the sale of goods, including goods to be manufactured or produced, with a view to the performance of the obligation. In the area on non-performance, the equivalent function is fulfilled by Art. 8:B-01 ACQP.

3.

Explanation

The Article declares Art. 7:101 and 7:B-01 ACQP to be mandatory in the sense of 6 Art. 1:203 ACQP. This means that the protection of the consumer may be extended, while it may not be restricted or excluded. The fact that contracts for the sale of goods (including goods to be manufactured or produced) cannot derogate from Art. 7:101 ACQP means that the following terms will not be binding on a consumer (even if the relevant contract has been individually negotiated): (1) contract terms purporting to exclude the obligation to perform the contract according to the content of the obligation; (2) contract terms purporting to exclude the duty to comply with the principle of good faith, as well as terms purporting to exclude the possibility to discharge one’s obligations under the contract according to the principle of good faith; (3) contract terms purporting to exclude the consumer’s legitimate expectations from serving as a criterion in the evaluation of performance, including the evaluation of whether or not the goods delivered conform with the contract. The fact that Art. 7:B-01 ACQP cannot be abrogated means that its provisions on how to 7 determine the conformity of goods with the contract cannot be changed in the contract to the detriment of the consumer. This does not, however, mean that the features of the item to be delivered may not be described in a rather loose fashion, for this is possible as long as it is not done specifically to circumvent the system of consumer protection. For further details see the Comments to Art. 7:101 ACQP. The effect of contract terms purporting to abrogate Art. 7:101 and 7:B-01 ACQP is gov- 8 erned by Art. 1:203(1) ACQP: they are not binding on the consumer. This means that if the contract stipulates that it is only the very text of the contract itself which is to matter as between the parties, the consumer may nonetheless rely on the principle of good faith, while the business may not.

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Art 7:B-02, 9 Art 7:E-01, 1, 2

4.

Chapter 7: Performance of Obligations Specific Provisions . Part E: Package Travel Contracts

Example

9 A brochure accompanying a delivery of goods to a consumer contains a clause stating that none of the features of the goods described in the brochure form part of the contract and that none of those features can serve the consumer as a basis to any claim. This clause is not binding on the consumer, because it goes against the consumer’s legitimate expectations as protected under Art. 7:101(2) ACQP.

Part E: Package Travel Contracts Article 7:E-01: Mandatory nature Contract terms which are prejudicial to the customer and which deviate from the provisions of this Part are not binding on the customer.

A. Foundation in the Acquis 1.

Sources

1 Art. 8 Package Travel D.

2.

Member States may adopt or return more stringent provisions in the field covered by this Directive to protect the consumer.

Development

2 The Package Travel D. does not have any rule which clearly expresses the imperative nature of its provisions or prevents consumers from waiving the rights conferred on them by the directive. Article 8 of the Directive only states that the standard of protection offered by the directive is a minimal one. However, one can indirectly deduce from this article that the directive’s protective provisions are mandatory in nature. As will be explained in the comments to Art. 7:E-02, the Package Travel D. uses the term “consumer” in a broad sense, so much so that for the purposes of the Acquis Principles that term has been replaced by the term “customer”. This has the effect of giving the articles commented on in the following a very broad scope of protection. That in turn means that any reference to Art. 1:203 ACQP would be misleading and that a special provision is needed to express the mandatory nature of the provisions commented below.

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Article 7:E-01 Mandatory nature

B.

Commentary

1.

Meaning and Purpose

Art 7:E-01 3–7

The Article aims to make all the particular rules on the performance of package travel 3 contracts mandatory in favour of customers.

2.

Context

The Article at hand relates to all the provisions of this Part.

3.

4

Explanation

The customer may not waive the rights conferred on him or her by the following provi- 5 sions. Any contractual terms aimed at depriving the customer of any of his or her rights or at limiting the protection granted to him or her by the law are ineffective.

4.

Examples

Example 1 The package travel contract between business B and customer C provides for the possi- 6 bility of modifying the price in case of an increase in the cost of fuel. The relevant contractual clause states that if the price of aircraft fuel rises after the contract has been concluded the customer is obliged to pay “an adequate additional charge”. The price of fuel does increase – by 5% – and the business demands that the customer pay an additional charge of 50 Euro. The customer is not obliged to pay that charge because the contractual clause allowing for the revision of price did not state how exactly the revised price was to be calculated and is thus ineffective for violating mandatory law, namely Art. 7:E-03 ACQP. Example 2 A package travel contract contains a clause stating that “if before departure the organiser 7 finds that due to circumstances beyond his control he is unable to provide his services, he may propose any modification of the contract, and if that modification is not accepted, the contract is dissolved without any liability”. A week before departure the business finds out that the air carrier with which it has co-operated has gone bankrupt. Other air carriers offer the same flight at a higher price or a cheaper flight to a different destination. The business informs its customers that they will fly to a different airport and will then be transferred to the hotel by bus, that the distance is 400 km and that the transfer will take approximately 5 hours. Most of the customers reject the modification, and the business claims that their contracts are thus dissolved. The customers do in fact have a right to damages for non-performance. The contractual clause which seeks to exclude this right is not binding since it violates the mandatory Art. 7:E-04 ACQP.

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Art 7:E-01, 8 Art 7:E-02, 1

Chapter 7: Performance of Obligations Specific Provisions . Part E: Package Travel Contracts

Example 3 8 A travel agency offers guided coach tours to Paris. The contract contains a clause stating that if the number of passengers turns out to be less than 20 the organiser has the right to cancel the trip provided that the customers are informed of the cancellation – via e-mail, SMS or telephone – no later than on the seventh day before departure. On the eighth day before departure the travel agency realizes that only 2 persons have enrolled for the trip and contacts those by telephone to inform them that the trip is cancelled. This cancellation – “termination” in the terminology of the Acquis Principles, see below under A.2. in the comments to Art. 7:E-05 ACQP – is not effective because the contractual clause allowing the business to make the notice of termination via telephone violates Art. 7:E-05 ACQP, which is mandatory law. The business is thus liable for non-performance of its obligation.

Article 7:E-02: Definition of package travel contract (1) “Package travel contract” means a contract under which a business is to provide a pre-arranged combination of travel services such as transport or accommodation or other related services. (2) A contract term according to which the business acts only as an intermediary for contracts concluded between the customer and other suppliers is not binding on the customer if the customer can reasonably expect, having regard to the circumstances of the conclusion of the contract, that the business itself is obliged to provide the travel services.

A. Foundation in the Acquis 1.

Sources

1 Art. 2 Package Travel D.

382

For the purposes of this Directive: 1. ‘package’ means the pre-arranged combination of not fewer than two of the following when sold or offered for sale at an inclusive price and when the service covers a period of more than twentyfour hours or includes overnight accommodation: (a) transport; (b) accommodation; (c) other tourist services not ancillary to transport or accommodation and accounting for a significant proportion of the package. The separate billing of various components of the same package shall not absolve the organiser or retailer from the obligations under this Directive; 2. ‘organiser’ means the person who, other than occasionally, organizes packages and sells or offers them for sale, whether directly or through a retailer;

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Article 7:E-02 Definition of package travel contract

Art 7:E-02 2, 3

3. ‘retailer’ means the person who sells or offers for sale the package put together by the organiser; 4. ‘consumer’ means the person who takes or agrees to take the package (‘the principal contractor’), or any person on whose behalf the principal contractor agrees to purchase the package (‘the other beneficiaries’) or any person to whom the principal contractor or any of the other beneficiaries transfers the package (‘the transferee’); 5. ‘contract’ means the agreement linking the consumer to the organiser and/or the retailer.

2.

Development

The definition in paragraph (1) of the present Article spells out the distinguishing fea- 2 tures of the package travel contract, namely that the business is to provide a pre-arranged combination of various travel services (transport or accommodation or other tourist services). These elements – different kinds of travel-related services are combined by a business and then offered as a package – are generally regarded as decisive factors for the very existence of the Package Travel D. and as determinants of its scope of protection. Other issues addressed by Art. 2 of the Package Travel D., such as the period of time covered by the service, the specific role in the business chain of a party to the contract (whether it be an organiser or retailer) and the option of buying a package on behalf of a third party or that of transferring the package, are of secondary importance. They do not make up the essence of the package travel contract and need therefore not to be included in its definition. Nevertheless the ACQP must not ignore the fact that in practice package travel contracts 3 are only very rarely concluded by those who actually provide the travel services. Instead, they are mainly entered into by various kinds of agents who sell combinations of services (as put together by themselves or by somebody else) which are ultimately provided by persons other than themselves. In short: package travel contracts are often concluded by persons interested in playing the role of an agent rather than that of the debtor. This creates many risks for the customer. He or she may be mistaken about who will be obliged to provide the services and who will be liable for any non-performance. Will the obligation be on the contracting business, while the services will be provided by a third person on its behalf, or is the business only acting as a middleman or representative who will not be under a duty to perform the contract? If the latter is the case, the customer may face difficulties in trying to exercise his rights against a remote service provider. Last but not least there is a danger that the customer may in fact be totally deprived of the protection provided by the rules on package travel contracts: a contractual clause defining the contracting business as an “intermediary” might result in breaking the connection between the services to be provided with the result that they no longer form a “package”. Paragraph (2) aims to reduce those risks.

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Art 7:E-02 4–6

Chapter 7: Performance of Obligations Specific Provisions . Part E: Package Travel Contracts

4 Article 2 of the Package Travel D. speaks of the purchaser of the package as the “consumer”. In doing so, the directive gives that term a specific meaning which differs from the definition of “consumer” established by Art. 1:201 ACQP. Under Art. 2 of the Package Travel D. “consumer” means any natural or legal person (even if it be a business) who takes or agrees to take the package (or is an “other beneficiary” or “transferee”). Using the term “consumer” in the sense of Art. 1:201 ACQP for the ACQP provisions governing package travel contracts would therefore lead to an unjustified limitation of the directive’s scope of protection. As far as the definition of the package travel contract is concerned, the very broad meaning attributed to the term “consumer” in the directive, effectively encompassing each and every natural person, made it superfluous to even so much as mention the party who pays for the service in the definition of the package travel contract. For those ACQP provisions which describe rights or duties of the buyer of the package, the term “customer” is used. In some of the following ACQP provisions the term “customer” will in turn be replaced by or employed alongside the term “traveller”, since the travelling person is not necessarily identical with the person who concluded the contract. Some of the duties under a package travel contract are imposed on the travelling person, and some of the business’s duties are owed to that person rather than to the other contracting party.

3.

Political Issues

5 The scope of protection provided by the Package Travel D. is not quite clear. As mentioned above, the directive uses the term “consumer” in a very broad sense and does not relate it to the purpose of a person’s activity. Starting from the strict wording of the Directive’s Art. 2(4), a person purchasing a package of travel services purely for business purposes is a “consumer” and may take advantage of the protection provided by the directive. A purposive interpretation of this provision leads to conflicting results. On the one hand, the directive’s recitals clearly indicate that the main purpose of the directive is the protection of tourists and the reinforcement of tourism as a part of the Member States’ economies (see also the ECJ decision C-237/97 – AFS Intercultural Programs Finland ry). On the other hand, the risks and dangers connected with travelling are specific and originate from the traveller’s dependence on the organiser rather than a supposed lack of knowledge or experience on the part of the traveller. This observation (together with the wording of the directive) points towards a broader scope of protection.

B.

Commentary

1.

Meaning and Purpose

6 By defining the term “package travel contract” paragraph (1) outlines the scope of application of the particular rules on performance and non-performance of such contracts.

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Article 7:E-02 Definition of package travel contract

Art 7:E-02 7, 8

Paragraph (2) supplements the definition of the package travel contract with the rule that a contractual clause aiming to exclude the application of the provisions on package travel contracts is not binding on the customer if such exclusion would be contrary to the customer’s reasonable expectations.

2.

Context

Being the provision which contains the definition of the package travel contract, the 7 present Article is linked to the particular provisions on performance (Art. 7:E-03 to 7:E-05 ACQP) and non-performance (Art. 8:E-01 to 8:E-04 ACQP) of that contract.

3.

Explanation

For the purposes of the Acquis Principles a package travel contract is a contract which 8 complies with the following requirements: – one of its parties is a business (the exact nature of the other party being irrelevant); – this party is under an obligation to provide more than one service related to travelling, such as transport, accommodation, meals, concert (or theatre or sporting event) tickets, and sightseeing; – the services are bound up with each other and together serve one main purpose, so that they form one compound service; – the combination of particular services is arranged by the business. It is of no relevance whether the customer is obliged to pay one overall price or whether some of the services are billed separately. With regard to “accommodation” as one of the services making up the package, the ECJ held in C-237/97 – AFS Intercultural Programs Finland ry that the specific type of accommodation, the duration of it and whether or not it be free of charge are not, as such and taken in isolation, defining elements of the concept of “accommodation” in the Package Travel D. However, the ECJ held that in the case of the accommodation of exchange students in host families – for a period of 6 months or more and free of charge – the combined effect of these elements was such that this kind of “hosting” could not be described as “accommodation” within the meaning of the Directive. When interpreting the last of the requirements listed above – that the combination of particular services needs to have been arranged by the business – one has to take into account the ECJ decision C-400/00 – Club-Tour, Viagens e Turismo SA v Alberto Carlos Lobo Gonçalves Garrido. The ECJ held that the term “package” used in Art. 2(1) of the Package Travel D. must be interpreted to include holidays organized by travel agents at the request of and in accordance with the specifications of a consumer or limited group of consumers. Moreover, the ECJ stated that the term “pre-arranged combination” used in Art. 2(1) of the Directive necessarily covers cases where the combination of tourist services is the result of wishes expressed by the consumer right up to the moment when the parties reach an agreement and conclude the contract. “Pre-arranged combination”

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Art 7:E-02 9–13

Chapter 7: Performance of Obligations Specific Provisions . Part E: Package Travel Contracts

would then have to be interpreted to include those combinations of tourist services which are put together at the time the contract is concluded between the travel agency and the consumer. 9 Paragraph (2) covers the case where a customer enters into a contract with a business – a contract that provides for services such as transport or accommodation or other travelrelated services – and the contract contains a clause saying that the business acts only as an intermediary while the service provider will be the actual party to the contract (the debtor). Such a clause is not invalid per se. Its binding force depends on the circumstances. The clause is not binding on the customer, meaning that the business itself is obliged and under a duty to perform, if: – the customer believes that it is the contracting business who is under a duty to perform the services and – the customer’s conviction is reasonable, that is to say justified with a view to the circumstances that accompanied the conclusion of the contract (among others: advertising, pre-contractual statements made by the business, the appearance of the business’s office and of the documents that are used to conclude the contract).

4.

Examples

Example 1 10 Customer A concludes a contract under which business Z undertakes to provide a service advertised as “Romantic evening at La Scala” and comprising two return tickets for a flight to Milan, a full board overnight stay for two persons at a five-star hotel, and two tickets for a performance at La Scala. The contract is a package travel contract under Art. 7:E-02 ACQP. Example 2 11 Customer B visits business Y and says that he is interested in spending a romantic weekend in Milan as a wedding anniversary present for his wife. The business proposes an overnight stay at a luxury hotel and a visit to the opera. The customer B agrees and the business books the flight, the hotel and the opera tickets and bills the customer separately for each of these services. Though the combination of services is put up in accordance with the customer’s specifications and the individual parts of it are priced separately, the services make a whole and the contract is a package travel contract. Example 3 12 University C orders business X to organize a trip to Singapore for professor D who will take part in a conference held there. The business X arranges the flight, accommodation and meals for professor D. The contract is a package travel contract where C is the customer and D the traveller within the meaning of the ACQP provisions relating to package travel. Example 4 13 Business W offers holidays at the French Côte d’Azur comprising 14 days accommodation, meals and two sightseeing tours by bus. Transport to the Côte d’Azur and back is not 386

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Art 7:E-02, 14 Art 7:E-03, 1

Article 7:E-03 Revision of price

part of the service, the tourists have to make their own arrangements. Such a contract is nevertheless a package travel contract because it contains more than one travel service and the services are linked with each other. Example 5 Travel agency U advertises holidays in Crete using the slogan “Go to Greece with us”. 14 Customer E signs a written contract under the heading “Holidays in Greece”. Paragraph 15 of the contract states that “While concluding this contract Travel Agency U acts in the name and on behalf of Air Carrier T and Hotel Group S who are solely responsible for the provision of the services described in the contract”. This contract term is not binding on the customer because she had reasonable grounds to believe that she was buying a package of services put together by U.

Article 7:E-03: Revision of price (1) Revision of price in a package travel contract requires an express contractual term which must also state precisely how the revised price is to be calculated. The reasons for revision must be limited to variations in: (a) transportation costs, including the cost of fuel; (b) dues, taxes or fees chargeable for certain services, such as landing taxes or embarkation or disembarkation fees at ports and airports; or (c) the exchange rates applied to this package. (2) The price may be increased only until the twenty-first day before departure. (3) The customer may (a) terminate the contract; or (b) accept the revised price. (4) If the customer does not notify the business of its decision without undue delay, an appropriate price revision is considered as accepted.

A. Foundation in the Acquis 1.

Sources

Art. 4(4) and (5) Package Travel D.

Piotr Machnikowski

4. (a) The prices laid down in the contract shall not be subject to 1 revision unless the contract expressly provides for the possibility of upward or downward revision and states precisely how the revised price is to be calculated, and solely to allow for variations in: – transportation costs, including the cost of fuel, – dues, taxes or fees chargeable for certain services, such as landing taxes or embarkation or disembarkation fees at ports and airports, – the exchange rates applied to the particular package.

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Art 7:E-03 2, 3

Chapter 7: Performance of Obligations Specific Provisions . Part E: Package Travel Contracts

(b) During the twenty days prior to the departure date stipulated, the price stated in the contract shall not be increased. 5. If the organiser finds that before the departure he is constrained to alter significantly any of the essential terms, such as the price, he shall notify the consumer as quickly as possible in order to enable him to take appropriate decisions and in particular: – either to withdraw from the contract without penalty, – or to accept a rider to the contract specifying the alterations made and their impact on the price. The consumer shall inform the organiser or the retailer of his decision as soon as possible.

2.

Development

2 The provisions of the Package Travel D. concerning the content of the obligation are unclear and incoherent. This is probably partly due to the fact that they were written without any shared notion of rules of general contract law that might accompany them. Therefore the main task in formulating the Acquis Principles on package travel contracts was not only to extract the essential contents of the provisions cited above, but also to juxtapose them with the general ACQP rules on performance and non-performance of the contract and to find out which parts of the directive support those general rules and which parts constitute exceptions or supplements to them. The directive contains several provisions on content and performance of the obligation: Article 4(4): possibility of changing the prices laid down in the contract if the contract provides for such a change and some further conditions are met. Article 4(5): possibility of altering the essential terms of the contract if the business is “constrained” to do so; the customer is entitled to terminate (withdraw from) the contract (without penalty) or to accept the change. Article 4(6): if the customer terminates (withdraws from) the contract because of the change of terms, he or she is entitled to take a substitute package or to be repaid all sums paid by him or her under the contract. In both cases, the customer is entitled (if appropriate) to be compensated for non-performance of the contract, except where termination (cancellation) is due to the fact that the number of passengers is less than the minimum number required or termination is for reasons of force majeure. 3 Only some parts of the directive’s provisions justify a special Acquis Principles provision on content and performance of a package travel contract, namely those which constitute exceptions to the rule that the contract is to be performed as agreed. Articles 4(4) and 4 (5) of the Package Travel D. amount to such exceptions as they provide for the possibility to change the content of the obligation. This modification of the contract occurs before performance has begun and entails specific rights and duties for the parties. Accordingly, 388

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Article 7:E-03 Revision of price

Art 7:E-03 4, 5

the rules governing this modification are located within the chapter on content and performance of the contract. In contrast to that, alternative arrangements made after departure are treated as instances of non-performance of the contract and regulated in Chapter 8 (Art. 8:E-02 ACQP). Following the directive’s approach, the ACQP start by regulating the contractual clause which permits the business to revise the price of the package (present Article). Then Art. 7:E-04 ACQP regulates both the possibility and the consequences of significantly modifying contractual terms. There also is the issue of termination of the contract, which is addressed by Art. 7:E-05 ACQP. The above-mentioned provisions of the Package Travel D. on the possibility of changing 4 the price were reformulated in order to express their essential content in a shorter and clearer way. As far as the consequences of such a change are concerned, the present Article aims to improve the existing acquis. Article 4 of the Package Travel D. does not make it entirely clear whether the customer may withdraw from the contract once a revision of price has occurred under a contract which provides for the possibility of such a revision. The Acquis Group is of the opinion that in this respect there is no difference in substance between a modification of contract made on the basis of a contractual clause and a modification made by virtue of statutory empowerment, particularly so since most package travel contracts are standard ones supplied by the business. Therefore the legal consequences set forth in Art. 4(5) of the Package Travel D. should equally apply to modifications made in accordance with Art. 4(4) of that Directive. Where the directive uses the word “withdraw”, the Acquis Principles speak of the customer’s right of “termination” in order to avoid confusion with the “right of withdrawal” connected to the cooling off period as regulated in Chapter 5. The directive is not quite consistent with respect to the time-limit for the customer’s decision. It requires the customer to either accept the modification or to terminate the contract and obliges him or her to take that decision as quickly as possible. However, it says nothing about the consequences of a customer failing to notify the business of his or her decision without undue delay. Therefore the ACQP provisions supplement the directive’s content with a provision stating that where the customer fails to notify the business of his or her decision without undue delay, that will be equivalent to approval.

B.

Commentary

1.

Meaning and Purpose

The Article concerns the issue of a unilateral change of price in the period after the con- 5 tract has been concluded and before the time of performance has come.

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Art 7:E-03 6–8

2.

Chapter 7: Performance of Obligations Specific Provisions . Part E: Package Travel Contracts

Context

6 This provision represents an exception to the rule that the contract must be performed as agreed (see Art. 7:101 ACQP). It is also linked with the rules on notice (Art. 1:301 and 1:302 ACQP) and with the rules on formation of contract (Art. 4:101 ACQP et seq.) since it provides that modifications to the contract proposed by the business may be accepted tacitly, i.e. without the customer notifying the business. The customer’s obligation to react to a proposed modification of price is a consequence of the parties’ duty to co-operate with each other (Art. 7:104 ACQP). The notices required under the present Article are to be communicated in accordance with the rules of Chapter 1, Section 3. Information requirements regarding the revision of price are dealt with in Art. 2:E-01 ACQP.

3.

Explanation

7 There will usually be a certain interval between the conclusion of the package travel contract and the beginning of performance. During that period of time the cost of the services to be provided by the business may change because of various economic factors. The business has a vested interest in the possibility of changing the price after the conclusion of the contract. The present Article allows such a change on a number of conditions. First of all, the contract must expressly provide for the possibility of a revision of price. The contractual term permitting the revision must specify the possible reasons for such a modification. The present Article limits those reasons to variations in certain costs the business incurs in providing the travel services. In order to give the business the option to modify the price, the contractual term in question must also specify the exact method of the envisaged modification, i.e. how exactly a change in particular costs will influence the price of the package. Finally, an upward revision of price is allowed only until the twenty-first day before departure. The term “departure”, which is used in the directive, is slightly misleading in that the definition of package travel contracts set forth in Art. 7:E-02 ACQP extends to contracts that do not in fact contain any transportation. In those instances “departure” should be understood as referring to the moment of time when the business begins to perform its main contractual obligation (relating e.g. to accommodation or guided tours). 8 Provided all the abovementioned requirements are met, the business will inform the customer that the price of the package has changed. If the customer does not accept the modification, he or she is entitled to terminate the contract. Alternatively, the customer may accept the modification. Should the customer fail to notify the business of his or her

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Article 7:E-04 Duty to notify of proposed modifications

Art 7:E-03, 9, 10 Art 7:E-04

decision without undue delay, an appropriate price revision will be considered as accepted. The customer may not reject the modification and demand that the contract be performed in accordance with its original content. The termination of contract under paragraph (3)(a) is distinct from the ordinary remedy 9 of termination for non-performance. As its grounds and time-limit are established in the provision discussed here, Art. 8:301 and 8:302(2) and (3) ACQP do not apply. Only Art. 8:302(1) and 8:303 ACQP remain applicable in the present context, meaning that the right of termination is exercised by notice to the debtor and has the effect that the parties are released from their obligations as from the time when termination becomes effective, and that each party has to return to the other what has already been performed under the contract. Neither party is entitled to damages as regards the revision of price or the termination of the contract.

4.

Example

The package travel contract between business B and customer C provides for the possi- 10 bility to modify the price if there is an increase in the cost of fuel. The relevant contractual term states that if the price of aircraft fuel should rise by more than 10 per cent once the contract is concluded, the customer will be obliged to pay an additional charge of 20J. The price of fuel does increase – by 15 per cent – and the business informs the customer of the revision of price. The customer fails to react and is consequently obliged to pay the additional charge.

Article 7:E-04: Duty to notify of proposed modifications (1) If, before departure, it becomes impossible or excessively burdensome for the business to perform the contract without significant modifications, the business must immediately notify this to the customer, indicating proposed modifications. (2) The customer may (a) terminate the contract and claim damages for non-performance under Chapter 8; or (b) accept the proposed modifications. (3) If the customer does not notify the business of its decision without undue delay, proposed appropriate modifications are considered as accepted.

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Art 7:E-04 1, 2

Chapter 7: Performance of Obligations Specific Provisions . Part E: Package Travel Contracts

A. Foundation in the Acquis 1.

Sources

1 Art. 4(5) and (6) Package Travel D.

2.

5. If the organiser finds that before the departure he is constrained to alter significantly any of the essential terms, such as the price, he shall notify the consumer as quickly as possible in order to enable him to take appropriate decisions and in particular: – either to withdraw from the contract without penalty, – or to accept a rider to the contract specifying the alterations made and their impact on the price. The consumer shall inform the organiser or the retailer of his decision as soon as possible. 6. If the consumer withdraws from the contract pursuant to paragraph 5, or if, for whatever cause, other than the fault of the consumer, the organiser cancels the package before the agreed date of departure, the consumer shall be entitled: (a) either to take a substitute package of equivalent or higher quality where the organiser and/or retailer is able to offer him such a substitute. If the replacement package offered is of lower quality, the organiser shall refund the difference in price to the consumer; (b) or to be repaid as soon as possible all sums paid by him under the contract. In such a case, he shall be entitled, if appropriate, to be compensated by either the organiser or the retailer, whichever the relevant Member State’s law requires, for non-performance of the contract, except where: (i) cancellation is on the grounds that the number of persons enrolled for the package is less than the minimum number required and the consumer is informed of the cancellation, in writing, within the period indicated in the package description; or (ii) cancellation, excluding overbooking, is for reasons of force majeure, i.e. unusual and unforeseeable circumstances beyond the control of the party by whom it is pleaded, the consequences of which could not have been avoided even if all due care had been exercised.

Development

2 Paragraphs (5) and (6) of Art. 4 of the Package Travel D. address a number of separate issues and do so in a very unclear manner. They mix such diverse matters as the possibility of changing the content of the obligation prior to the beginning of performance, the customer’s right to “withdraw” from the contract (which, in fact, is not really a right of withdrawal since it is combined with a right to substitute performance), the business’s right to terminate the contract, and the customer’s right to damages for non-performance. The Acquis Group realized that in order to arrive at a set of genuine ACQP rules the directive

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Article 7:E-04 Duty to notify of proposed modifications

Art 7:E-04 2

could not simply be reproduced, but that its customer protection system would rather have to be re-developed on the basis of the Package Travel D. in order to embed them in the ACQP general rules on performance and non-performance of obligations. The starting point of that exercise had to be the fundamental assumption, which can be found in the directive’s Art. 4(6) itself, namely that any deviation from the contractual standards of performance is a non-performance, and that the remedies for non-performance should therefore apply. This assumption must, however, be adjusted in order to take the distinctiveness of the package travel contract into account. In the area of travel services, many factors that influence the performance of the contract are quite independent of the service provider and are, moreover, unforeseeable in nature. Accordingly, there is a real need for a mechanism which facilitates modifications of the contract that will not infringe the principle of pacta sunt servanda. Two aspects which are intertwined in the directive had to be separated: the abovementioned modification of the contract before the beginning of performance, and the “cancellation” of the contract by the business. The former concerns the content of the contract and is regulated in the present Article. The latter simply amounts to non-performance and falls under the rules of Chapter 8 of the Acquis Principles, with the notable exception of those instances where the possibility of cancellation – “termination” in the terminology of the Acquis Principles, see under A.2. in the comments to Art. 7:E-05 ACQP below – is provided for in the contract (these are covered by Art. 7:E-05 ACQP). As to the modification of the contract, the expression “[i]f the organiser finds that before the departure he is constrained to alter significantly any of the essential terms” was considered too vague to establish genuine legal requirements for a revision of the contractual terms. It has therefore been replaced with “[i]f [...] it becomes impossible or excessively burdensome for the business to perform the contract without significant modifications”, which conveys the relevant idea more precisely. Regulating the consequences of the proposed modification the directive uses the term “withdraw”. This has been replaced by the concept of “termination” so as to avoid confusion with the right of withdrawal connected to the cooling off period and regulated in Chapter 5 of the Acquis Principles. Speaking of the right to damages the directive uses the expression “if appropriate”. It is not clear from the directive whether this is meant to constitute a new prerequisite of liability, or whether it is just meant to be a reference to the general requirements; the Acquis Group opted for the second alternative. The present Article does not address the customer’s right to take a substitute package in cases of termination. The possibility of agreeing on a substitute service in case of an expected non-performance is a mere consequence of the principle of freedom of contract and needs not be specifically provided for by any rule. The business’s duty to refund the difference in price where the substitute package is of a lower quality equally needs not be spelled out because the duty to return the received price arises as a consequence of termination. Piotr Machnikowski

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Art 7:E-04 3–5

B.

Commentary

1.

Meaning and Purpose

Chapter 7: Performance of Obligations Specific Provisions . Part E: Package Travel Contracts

3 The Article regulates those instances where non-performance of the business’s obligation is to be expected. On the one hand, the provision aims to facilitate the modification of the contract when this is acceptable from the customer’s point of view. On the other hand, it aims to allow the customer to “withdraw” from the contract – to “terminate” the contract in ACQP terminology, see under A.2. in the comments to Art. 7:E-05 ACQP below – when the proposed amendments are unsatisfactory.

2.

Context

4 The notices required under the present Article are to be communicated in accordance with the rules of Chapter 1, Section 3. The customer’s obligation to react to a proposed modification of the contract is a consequence of the parties’ duty to co-operate with each other (Art. 7:104 ACQP). The Article is also linked with the rules on notice (Art. 1:301 and 1:302 ACQP) and with the rules on formation of contract (cf. Chapter 4), insofar as it states that modifications to the contract proposed by the business may be accepted tacitly, i.e. without the customer notifying the business. Termination and its effects are regulated in Art. 8:302(1) and 8:303 ACQP. Termination of the contract triggers the application of the rules on damages (cf. Chapter 8). However, the other rules on remedies, those on specific performance (Art. 8:202 ACQP), and those on reduction of performance (Art. 8:301 ACQP) do not apply.

3.

Explanation

5 The Article at hand regulates the relations between the parties only during the period of time which precedes the moment when the business has to begin performing its main contractual obligation. If during that period performance of the business’s duties in accordance with the contract becomes impossible or excessively burdensome, the business is obliged to inform the customer that the contract cannot be performed properly. Performance is “excessively burdensome” when it is possible but requires such an amount of money or such efforts that it would be unreasonable to insist on performance. The application of the present Article does not depend on who is responsible for the impossibility of performance, i.e. on whether it is caused by circumstances which are beyond the debtor’s control. This last criterion is, however, relevant in terms of the customer’s right to damages.

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Article 7:E-04 Duty to notify of proposed modifications

Art 7:E-04 6, 7

The notice must contain an explanation of the reasons that made the performance impossible or excessively burdensome. It must also include a proposal of a modification of the contract which would make its performance possible and reasonable. Having received the notice, the customer needs to react without undue delay if he or she wants to prevent the proposed modifications from being regarded as accepted. The customer may, of course, also accept them expressly. The present Article not only enables the business to modify the contract with the customer’s (if only tacit) consent, but also ensures that the customer will either accept the modifications (if only tacitly), or terminate the contract prior to the time of performance. This results in minimizing the scale of damage suffered by the customer and the amount of compensation that the business may be obliged to pay. If the customer does not accept the changes, he or she is only entitled to terminate the 6 contract by notifying the business accordingly, without undue delay, and to claim damages if the requirements of Art. 8:401 ACQP are met. Termination under the present Article is not an ordinary remedy for non-performance. Its grounds and time-limit are established in the provision discussed here, therefore Art. 8:301 and 8:302(2) and (3) ACQP do not apply. Under Art. 8:302(1) and 8:303 ACQP, which do apply here, the right to terminate the contract is exercised by notice to the debtor. Exercise of this right has the effect of discharging the parties of their obligations as from the time when termination becomes effective, and of obliging each of them to return what they have already received under the contract. By virtue of the Article at hand, the customer may claim damages for loss caused by non-performance of the obligation, unless the non-performance is excused in the sense of Art. 8:401(2) ACQP. The measure of damages is governed by Art. 8:402 ACQP. In the case of package travel contracts damages will usually cover non-pecuniary losses. The customer cannot reject the modification and demand that the contract be performed in accordance with its original content; there is no right to specific performance (Art. 8:202 ACQP does not apply). If, however, the business’s claim that the performance is impossible or excessively burdensome is not true, or the proposed modifications of the contract are not appropriate, the customer may reject the proposal and, once the time of performance has come, exercise the remedies for non-performance. If the business fails to inform the customer about the expected non-performance and then fails to perform the contract it may equally be liable for the non-performance under the rules of Chapter 8.

4.

Example

Business A is obliged under a package travel contract to provide a tourist trip to a small 7 town in the centre of the Republic of Congo. One month before departure, the business realizes that the hotel where the travelling persons were supposed to stay, which was the only hotel in town, has burned down. The business proposes to its customers to change Piotr Machnikowski

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Art 7:E-05 1, 2

Chapter 7: Performance of Obligations Specific Provisions . Part E: Package Travel Contracts

destination and go to a different town. Customer B accepts this modification of the contract, customer C rejects it and terminates the contract, while customer D does not notify the business of any decision. Under Art. 7:E-04, customers B and D are still bound by the contract, the terms of which are now modified according to the business’s proposal. Customer C is entitled to repayment of the sums he paid under the contract. He is also entitled to damages, unless the non-performance of the obligation is excused (Art. 8:401 ACQP).

Article 7:E-05: Business’s right of termination (1) The business may terminate the package travel contract without incurring liability if the number of persons enrolled is less than the required minimum number set out in the contract in accordance with Article 2:E-01 (Specific pre-contractual duties for package travel contracts) paragraph (4)(e). The notice of termination must be made in writing and communicated to the customer within the period specified in the contract. Writing may be replaced by another textual form on a durable medium, provided this is reasonably accessible to the customer. (2) Article 8:303 (Effects of termination) applies accordingly.

A. Foundation in the Acquis 1.

Sources

1 Art. 4(6) Package Travel D.

2.

If the consumer withdraws from the contract pursuant to paragraph 5, or if, for whatever cause, other than the fault of the consumer, the organiser cancels the package before the agreed date of departure, the consumer shall be entitled: (...) (b) (...) to be repaid as soon as possible all sums paid by him under the contract. In such a case, he shall be entitled, if appropriate, to be compensated by either the organiser or the retailer, whichever the relevant Member State’s law requires, for non-performance of the contract, except where: (i) cancellation is on the grounds that the number of persons enrolled for the package is less than the minimum number required and the consumer is informed of the cancellation, in writing, within the period indicated in the package description; (...)

Development

2 Apart from the issue of an expected non-performance, Art. 4(6) of the Package Travel D. also deals with the “cancellation” of the package by the business. This is exercised by a unilateral declaration stating that the contract will not be performed. If this is done by a 396

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Article 7:E-05 Business’s right of termination

Art 7:E-05 3–5

party who was not in fact entitled to terminate the contract, this will simply amount to non-performance of the obligation. No special rules are needed for such a case. The crucial element of the above-cited provision is the possibility for the business to terminate the contract on certain grounds if such termination was provided for in the description of the package. In order to bring the provisions of the directive in line with general notions of contract law, in particular the maxim of pacta sunt servanda, the requirement that any such termination right must be provided by the contract is of fundamental importance. However, this possibility is not expressly stated in the directive, which instead addresses the matter in the negative form by excluding the customer’s right to damages when the cancellation is due to there being less than the minimum number of travellers. The present Article aims to present this implied content of Art. 4(6)(b)(i) of the Package Travel D. positively, namely as a contractual right of termination given to the organiser which, when exercised, will not result in non-performance. Therefore the term “cancellation”, as employed by the directive, has been replaced by “termination”, which is normally used to describe rights of that kind. The directive requires the notice of “cancellation” to be given in writing. However, the subsequent development of the acquis communautaire (especially Art. 9 of the E-Commerce D.) has made this requirement seem out of date.

B.

Commentary

1.

Meaning and Purpose

In the travelling business, profitability will depend on various circumstances, among 3 them the number of persons that will take part in the planned trip. The organisers have an interest in the possibility of cancelling the trip if the number of customers fails to reach the limit of profitability. The present Article regulates the effects of a contractual clause which requires a minimum number of persons to be enrolled.

2.

Context

The information duties regarding a minimum number of travellers are set out in Art. 2:E- 4 01(4)(e) ACQP. As far as the form of the notice of termination is concerned, the Article at hand constitutes an exception to the rule of Art. 1:303 ACQP. The meaning of “in writing”, “textual form”, and “durable medium” is explained in Art. 1:305 to 1:307 ACQP.

3.

Explanation

The present Article applies when the package travel contract contains a clause to the 5 effect that the package travel services will be performed only if a certain minimum number of persons buy the relevant package.

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Art 7:E-05, 6 Art 7:E-06

Chapter 7: Performance of Obligations Specific Provisions . Part E: Package Travel Contracts

If that minimum number is not reached, the business may still perform its obligation, but it may alternatively terminate the contract. This is a contractual right of termination, not a remedy for non-performance of the obligation, and Art. 8:301 to 8:303 ACQP do not apply directly. The exercise of the said right does not result in any liability for damage suffered by the customer. The notice of termination must be given in writing or in any other textual form on a durable medium that is reasonably accessible to the customer. The notice is effective only if it is delivered to the customer within the time-limit set out in the contract. As to the effect of termination, the provision discussed here refers to Art. 8:303 ACQP, with the effect that the parties are discharged of their obligations as from the time when termination becomes effective, and are obliged to return to the other what they have already received under the contract.

4.

Example

6 Travel agency A offers guided tours to Stonehenge. The contract contains a clause stating that should the number of passengers be less than 20, the organiser has the right to cancel the trip, provided that the customers are informed of the cancellation no later than on the twenty-first day before departure. On the twenty-second day before departure, the travel agency realizes that only 15 persons have enrolled for the trip. The travel agency immediately sends an e-mail to all the customers, explaining that the number of passengers has not reached the required minimum number and that the trip is therefore cancelled. The customers have no right to the performance of the contract, nor do they have a right to damages; what they are entitled to is to obtain a refund of any sums paid under the contract.

Article 7:E-06: Information before departure

Rules only

Before departure, the business must inform the customer about: (a) times and places of intermediate stops and transport connections and travel accommodation details, e.g., cabin or berth on ship, or sleeper compartment on train; (b) the address and identity of the organiser and of the organiser’s and/or retailer’s local representative; or the address of local agencies on whose assistance a traveller in difficulty could call; (c) where the representatives or local agencies referred to in (b) above do not exist, the customer must be provided with an emergency telephone number or other contact information that enables the traveller to contact the business; (d) if minors are travelling on their own, the address or contact details to reach them or the person responsible for them; and (e) the optional conclusion of a travel insurance policy.

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Article 7:E-06 Rules only Information before departure

Part G: Payment Services3 Part H: Commercial Agency Contracts4 3 4

The specific rules on Payment Services are not repeated here. They are presented on pp. 29-35. The specific rules on Commercial Agency Contracts are not repeated here. They are presented on pp. 35-39.

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Chapter 8: Remedies General Provisions Section 1: General Rules

Article 8:101: Definition of non-performance Non-performance is any failure to perform an obligation, including delayed performance, defective performance and failure to co-operate in order to give full effect to the obligation.

A. Foundation in the Acquis 1.

Sources

At present, there are a number of specific rules of Community law concerning various 1 forms of non-performance of specific contracts. The most important provisions in this context are Art. 3 of the Consumer Sales D., Art. 17 and Art. 18 of the Commercial Agents D., and Art. 5 of the Package Travel D. Other instances of non-performance of specific obligations are dealt with, inter alia, in the following provisions: – Art. 5, 6 and 7 of the Regulation 261/2004, which establish common rules on compensation and assistance to be given to passengers in the event of denied boarding and of cancellation or long delay of flights, and which repeal Regulation 295/91; – Art. 6 and 7 of the Cross Border Credit Transfer D. (non-execution of the cross-border credit transfer within the time limit and breach of the duty to execute the crossborder credit transfer order in accordance with the originator’s instructions), compare now Art. 75 of the Payment Services D.; – Art. 3 of the Late Payment D. (modifying the contractual or statutory period of payment of interest). The UN Convention on Contracts for the International Sale of Goods (CISG) is an important secondary source for the Acquis Principles on non-performance of the obligation. Its influence on the ACQP is both direct and indirect. Firstly, the Consumer Sales D. is at least to some extent modelled on the CISG, especially with respect to the notion of “lack of conformity”. Secondly, the Acquis Group decided early on that, although the CISG does not per se form part of the acquis, because of its influence on the Consumer Sales D., it should be taken into account whenever it can be seen to illuminate EC law more

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Art 8:101 2, 3

Chapter 8: Remedies General Provisions . Section 1: General Rules

generally. One has to bear in mind that in its Art. 45 et seq. and 61 et seq. the CISG contains a comprehensive set of rules applicable when a party to a contract of sale fails to perform any of its obligations.

2.

Development

2 The acquis neither makes use of any general notion of “non-performance of the obligation”, nor does it give a definition of it (see Riesenhuber, Europäisches Vertragsrecht, Berlin 2003, pp. 326 et seq.; Schmidt-Kessel, Remedies for Breach of Contract in European Private Law – Principles of European Contract Law, Acquis Communautaire and Common Frame of Reference, in: Schulze [ed.], New Features in Contract Law, München (2007), p. 184). Moreover, it does not confine the concept of non-performance to the non-performance of the debtor’s main obligations. Nevertheless, it is possible to develop a comprehensive and coherent system of liability for the infringement of any contractual obligation on the basis of particular rules contained in the directives mentioned above (especially Art. 3 of the Consumer Sales D.) (see Zoll, The Remedies for Non-performance in the System of the Acquis Group, in: Schulze [ed.], Common Frame of Reference and Existing EC Contract Law, München (2008), p. 189). This approach is based on the view that the different remedies provided by specific provisions of the acquis are not limited to particular kinds of non-performance in their scope of application. As stated above, a general notion of “non-performance of the obligation” also finds a firm basis in CISG. 3 The notion of “conformity with the contract” plays a pivotal role in Art. 2 of the Consumer Sales D. According to that article, the seller is obliged to deliver goods which are in conformity with the contract of sale. The notion of “conformity with the contract of sale” cannot be understood in a narrow sense. Instead, it also addresses the question of whether the goods comply with the description given by the seller, and the question of whether they show the quality and performance which are normal in goods of the same type and which the consumer can reasonably expect (Art. 2(2)(a) and (d)). It is important to note that the notion of “conformity with the contract” forms the very basis of the rules on the seller’s liability. According to Art. 3, the seller is liable to the consumer for any “lack of conformity” which exists at the time when the goods are delivered. The concept of “lack of conformity” may be considered as the most general and broadest conceivable reference to any violation of the contractual obligation to deliver goods. This explains why the ACQP, too, set forth a broad concept of non-performance of the obligation. The expression “lack of conformity” is strongly linked to contracts for the delivery of tangible goods. Since it would seem improper to use it with regard to other types of contract and other kinds of contractual duties, the provision at hand refrains from doing so. The argument that any kind of failure to perform any contractual obligation may trigger a party’s responsibility derives further support from Art. 5 of the Package Travel D. That article provides that “Member States shall take the necessary steps to ensure that the or402

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Article 8:101 Definition of non-performance

Art 8:101 4–6

ganizer and/or retailer party to the contract is liable to the consumer for the proper performance of the obligations arising from the contract, irrespective of whether such obligations are to be performed by that organizer and/or retailer or by other suppliers of services without prejudice to the right of the organizer and/or retailer to pursue those other suppliers of services.” Another argument in favour of a broad concept of non-performance of the obligation is linked to Sec. 1(b) of the Annex to the Unfair Terms D. This paragraph deals with clauses that inappropriately exclude or limit the legal rights of the consumer in the event of “total or partial non-performance or inadequate performance by the seller or supplier of any of the contractual obligations”. The Acquis Principles do not use the expression “breach of contract”. This notion forms 4 part of the terminology of the common law, while the EC legislator usually avoids it (Recital 16 of the Late Payment D. being an exception). The Acquis Group decided to use “non-performance of the obligation” instead, which also establishes a higher degree of conformity with the DCFR (see, for example, Art. III. – 3:101 DCFR).

B.

Commentary

1.

Meaning and Purpose

The definition of non-performance contained in the Article at hand is of crucial impor- 5 tance for the proper understanding of the following articles on remedies as it determines their scope of application. The provision at hand is of fundamental value for the ACQP system of contractual liability which in turn constitutes an important part of the Acquis Principles. Non-performance of an obligation is understood broadly as any failure to perform any contractual obligation. This definition is a cornerstone of the system of contractual liability under which a party to a contract is entitled to pursue an appropriate remedy against the other party if that party fails to fulfil all of its contractual obligations.

2.

Context

The present Article links the provisions on specific remedies to the rules on performance 6 (Chapter 7). The duties of the parties are determined by the provisions contained in Chapter 7 and by the contract itself. The consequences of non-performance of these duties are set out in the present Chapter 8. The field of application of the rules on non-performance is broader than one can gather from reading Art. 8:101 alone. By virtue of some specific provisions of the ACQP, the following rules apply also to the non-fulfilment of certain pre-contractual duties, namely

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Art 8:101 7–10

Chapter 8: Remedies General Provisions . Section 1: General Rules

the duty to provide information (Art. 2:208 ACQP) and the duty to acknowledge the receipt of an electronic offer (Art. 4:110(3) ACQP).

3.

Explanation

7 The Acquis Principles understand obligations to give rise to particular duties, most notably the duty to perform (Art. 7:101(1) ACQP). The Rules contained in Chapter 8 (remedies for non-performance) apply to all kinds of obligations imposed by a contract on either party to the contract. These rules apply to any circumstances which fall short of complete and correct fulfilment of an obligation, like for instance the complete failure to perform, partial or incomplete performance, delayed performance, defective performance, etc. They equally apply to the non-fulfilment of a debtor’s or a creditor’s duty to co-operate with the other party (established by Art. 7:104 ACQP). Although the general notion of non-performance denotes a total lack of performance as well as incomplete or defective performance, the applicable remedies may vary (see Zoll, The Remedies for Non-performance in the System of the Acquis Group, in: Schulze [ed.], Common Frame of Reference and Existing EC Contract Law, München (2008), p. 189). For example, Art. 8:301 ACQP uses the expressions “minor non-performance” and “partial non-performance” to grant appropriate remedies; according to Art. 8:404 et seq. ACQP the creditor is entitled to interest in case of delay. The notion of non-performance of an obligation is strictly objective. A debtor’s (or a creditor’s) conduct amounts to non-performance irrespective of whether they are aware of the fact that such conduct amounts to non-performance, and irrespective of fault. However, the application of the relevant remedies may depend on subjective criteria.

4.

Examples

Example 1 8 A sells a computer to B. The computer is defective. This constitutes non-performance of the obligation, for which A is liable. Example 2 9 C buys a book from an internet bookstore. According to the contract, the bookseller is obliged to deliver the book to the buyer within 14 days from the day of acceptance. Delivery after that period constitutes a non-performance of the obligation pursuant to the present Article. Example 3 10 D and E agree that E is to repair the air-conditioning located in D’s office. D later refuses to let E have access to the office. This amounts to non-performance of an obligation owed by D to E under the contract.

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Article 8:102 Exclusion or restriction of remedies

Art 8:102 1–3

Article 8:102: Exclusion or restriction of remedies The creditor is precluded from exercising remedies against the debtor to the extent that non-performance is attributable to the creditor.

A. Foundation in the Acquis 1.

Sources

The acquis does not contain any explicit provision which generally restricts or excludes 1 the creditor’s remedies for non-performance to the extent that the creditor itself is responsible for the non-performance. To date, the acquis provides only with respect to damages that contributory negligence on the part of the creditor reduces or even excludes a claim for damages (see also Art. 8:403 ACQP). The underlying idea of the present Article can be found to some extent in Art. 11(1) second indent of the Commercial Agents D. where the agent’s right to commission is not extinguished if the principal is to blame for the non-execution of its contract with the third party. The principle of contributory negligence is, however, a principle of general application (see also the comments to Art. 8:403 ACQP and the references therein). It generally forbids that a creditor should profit from its own misdoings, or from causes for non-performance for which this party is responsible. The contributory negligence principle must therefore be extended beyond the remedy of damages to other remedies such as reduction and, as far as possible, termination. A provision rather similar to Art. 8:102 is contained in Art. 80 CISG.

2.

Development

Although thus far the acquis has explicitly expressed the principle of contributory negli- 2 gence only for the remedy of damages it is clear that this is a general rule which has its ultimate foundation in the principle of good faith and fair dealing. It is part of this contributory negligence principle that no one should profit from a self-induced hindrance of performance, and that no one should be able to acquire a claim against another person by one’s own negligent conduct. The present Article translates this principle to the general area of remedies in case of non-performance.

3.

Political Issues

The above-mentioned general policy consideration underlying the present Article is un- 3 likely to be controversial. It is, however, a policy issue whether mere causation of nonperformance may preclude the remedy or whether the creditor must have neglected a duty of care or must have assumed the risk that caused the non-performance. The acquis is not very coherent in this respect. Article 5(2) first indent of the Package Travel D. and the Art. 6(3) of the Cross Border Credit Transfer D. use the expression “attributable”; this speaks slightly in favour of more than mere causation. The Payment Service D., re-

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Art 8:102 4–6

Chapter 8: Remedies General Provisions . Section 1: General Rules

pealing the former Cross Border Credit Transfer D., integrates a comparable provision in its Art. 75(1) sent. 1. However, the new provision is formulated positively. It is no longer using the term “attributable”. Art. 3(3) of the Air Carrier Liability Regulation requires rather clearly that the damage is “caused by, or contributed to by, negligence of the injured or deceased passenger.” Art. 8(2) of the Product Liability D. relieves the producer partly or wholly from liability where “the damage is caused both by a defect in the product and by the fault of the injured person or any person for whom the injured person is responsible.” From these provisions the principle can be inferred that mere causation should not suffice but that the creditor must be responsible for his or her own contribution to the non-performance either by acting negligently or by having undertaken the respective risk. 4 The acquis may also be not fully coherent insofar as Art. 6(3) of the Cross Border Credit Transfer D. excludes any compensation while the other cited instruments allow a reduction or exclusion of damages depending on the circumstances. Yet, these rules can be generalised insofar as an apportionment should be allowed. 5 This latter point raises, however, the further policy issue whether and how the present Article applies to the remedy of termination (Art. 8:301 ACQP) and likewise to the remedy of performance (Art. 8:201 and Art. 8:202 ACQP). Here, an apportionment is only possible in those – probably rare – cases where performance is clearly severable so that partial termination or performance becomes possible. In all other cases termination and performance can only be granted or denied as a whole. It must then be decided whether and when the creditor’s contribution to the non-performance precludes its right to terminate the contract or to request performance thereof. The present Article does not explicitly solve the problem. But the provision should be probably read in the sense that termination or performance is only excluded if the creditor’s negligent contribution was the preponderant reason for non-performance.

B.

Commentary

1.

Meaning and Purpose

6 The Article at hand extends the principle of contributory negligence which commonly relates to damages (see also Art. 8:403 ACQP) to all remedies if an obligation has not been performed. If a creditor attributably causes non-performance, then this creditor is precluded from exercising the remedies it could otherwise have exercised. The Article seeks to avoid that a party profits from causes for the non-performance of an obligation which are attributable to that party. Such an outcome would offend the essential requirements of good faith and fair dealing.

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Article 8:102 Exclusion or restriction of remedies

2.

Art 8:102 7–10

Context

The present Article concerns all remedies available after a contractual or pre-contractual 7 obligation has been breached. The provision must also be seen in conjunction with Art. 8:403 ACQP which specifies the principle for the remedy of damages.

3.

Explanation

The present Article requires, firstly, the non-performance of a contractual or pre-con- 8 tractual obligation. Secondly, the non-performance must be attributable to the creditor, meaning that the creditor must have caused the non-performance in a way for which it is responsible. Thus, the creditor must have either violated the duty not to hinder performance or must have accepted the risk of non-performance. It is not necessary that the creditor alone caused the non-performance. The provision is also applicable where both creditor and debtor contributed to the non-performance. The exercise of the remedy is, however, precluded only to the extent to which the cred- 9 itor is responsible for the non-performance. This solution enables a fair apportionment of the consequences of non-performance and does not pose greater difficulties in case of the remedy of price reduction. The price can be apportioned according to the extent of the parties’ contribution to the non-performance. Such a solution can be more difficult with respect to the remedy of performance of a non-monetary obligation or in case of termination. Only if performance is severable, partial performance or partial termination can be granted. In case of non-severable performance, only an all or nothing solution remains feasible; the creditor should then be precluded from the exercise of these remedies only if its negligent contribution was the preponderant reason for non-performance.

4.

Example

Business A sells a car to consumer B. The delivery date is 7 January and the place of de- 10 livery is at A’s office. B does not show up on that date and at that place but appears two weeks later and then collects the car. B’s later request for price reduction due to late delivery is unjustified under Art. 8:102.

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Section 2: Performance and cure of non-performance Article 8:201: Monetary obligations

1

(1) The creditor is entitled to recover money payment of which is due. (2) Where the creditor has not yet performed the reciprocal obligation for which payment will be due and it is clear that the debtor in the monetary obligation will be unwilling to receive performance, the creditor may nonetheless proceed with performance and may recover payment unless: (a) the creditor could have made a reasonable substitute transaction without significant effort or expense; or (b) performance would be unreasonable in the circumstances.

Provisional Comments 1 There is insufficient basis in the acquis for formulating such a rule. The above DCFR rule is reproduced in order to show the context in which the Acquis Principles can operate. Please note that the words and expressions used in the rule above may be inconsistent with Acquis Group terminology. Even though there is no basis in the acquis for a precise and comprehensive set of rules on the specific performance of monetary obligations, there is some for the fundamental principle that a creditor is entitled to recover payment of money which is due. The main argument in support of such a principle is Art. 5 of the Late Payment D. According to that provision, the Member States are obliged to ensure that an enforceable title can be obtained by a creditor within a specified period of time. Art. 2(5) of the same directive provides that “enforceable title” means any decision, judgment or order for payment issued by a court, or other competent authority, whether for an immediate payment or payment by instalments, which permits the creditor to have his claim against the debtor collected by means of forced execution. The same principle can be derived from the Regulations on the enforcement of foreign judgments, the European Enforcement Order and the European Payment Order. These provisions make it clear beyond doubt that an obligation to pay money must be enforceable.

1

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Art 8:102 1, 2

Article 8:202 Non-monetary obligations

Article 8:202: Non-monetary obligations

2

(1) The creditor is entitled to enforce specific performance of an obligation other than one to pay money. (2) Specific performance includes the remedying free of charge of a performance which is not in conformity with the terms regulating the obligation. (3) Specific performance cannot, however, be enforced where: (a) performance would be unlawful or impossible; (b) performance would be unreasonably burdensome or expensive; or (c) performance would be of such a personal character that it would be unreasonable to enforce it. (4) The creditor cannot recover damages for loss or a stipulated payment for non-performance to the extent that the creditor has increased the loss or the amount of the payment by insisting unreasonably on specific performance in circumstances where the creditor could have made a reasonable substitute transaction without significant effort or expense.

Provisional Comments There is insufficient basis in the acquis for formulating such a rule. The above DCFR rule 1 is reproduced in order to show the context in which the Acquis Principles can operate. Please note that the words and expressions used in the rule above may be inconsistent with Acquis Group terminology. Though European law does not regulate the enforcement of non-monetary obligations, the concept of specific performance of such obligations is not alien to European private law. Most of the European regulations and directives which aim to protect the weaker party of the contractual relationship require Member States to take such measures as are appropriate to ensure that the rights of that party are respected. Granting that party the power to enforce its rights is one of the most effective measures when it comes to ensuring such respect. Some of the provisions in the acquis on remedies for non-performance of the contract (in 2 particular Art. 3 of the Consumer Sales D.) could possibly be considered to serve as a basis for a rule similar to Art. III. – 3:302(2) and (3) DCFR (see Magnus, Richtlinie 1999/44 / EG des Europäischen Parlaments und des Rates zu bestimmten Aspekten des Verbrauchsgüterkaufs und der Garantien für Verbrauchsgüter, in: Grabitz/Hilf [eds.], Das Recht der Europäischen Union, München 2007, p. 11; Riesenhuber, Europäisches Vertragsrecht, Berlin 2003, pp. 326; Schmidt-Kessel, Remedies for Breach of Contract in European Private Law – Principles of European Contract Law, Acquis Communautaire and Common Frame of Reference, in Schulze [ed.], New Features in Contract Law, München 2007, p. 188; Zoll, The Remedies for Non-performance in the System of the Acquis 2

Grey rule from Art. III. – 3:302 DCFR. Paragraph (4) of that provision was not adopted as grey rule for the reasons indicated below; paragraph (5) of that provision has become Art. 8:202(4) ACQP.

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Art 8:102 2

Chapter 8: Remedies General Provisions . Section 2: Performance and cure of non-performance

Group, in: Schulze [ed.], Common Frame of Reference and Existing EC Contract Law, München (2008), p. 189). These provisions were not, however, considered to form a sufficient basis in the existing acquis to justify incorporating the rule at hand into the Acquis Principles. The DCFR rule was not adopted in its entirety because its paragraph (4) was found to be incompatible with the acquis (essentially with Art. 3 of the Consumer Sales D.) and with the system of non-performance and remedies set forth in the ACQP. Thus, unlike Art. III. – 3:302 DCFR, the present Article entitles the creditor to enforce specific performance of a non-monetary obligation irrespective of whether or not the creditor requested performance within a reasonable time after this party has become, or could reasonably be expected to have become, aware of the non-performance. However, the general requirement of good faith in exercising any remedies (Art. 7:102 ACQP) applies, so that, in some cases, a result similar to that envisaged by Art. III. – 3:302(4) DCFR may in fact be achieved.

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Section 3: Termination and reduction of performance Article 8:301: Grounds for termination and reduction (1) The creditor may reduce its own performance appropriately, or terminate the contract: (a) if the creditor has no right to performance or cure under Section 2 above or (b) if the debtor has not provided the remedy under Section 2 above within a reasonable time. The creditor is not entitled to terminate the contract if the debtor’s failure to perform amounts to a minor non-performance. (2) Regardless of paragraph (1), the creditor is entitled to terminate the contract for non-performance if the creditor cannot be reasonably expected to be bound by the contract, in particular because of the kind of non-performance or because of the nature of the obligation. (3) The creditor can terminate the contract under paragraph (1) only with respect to that part which is affected by non-performance, unless partial performance is of no utility to the creditor. Paragraph (2) applies correspondingly. (4) The creditor is entitled to reduce its own performance if the cure under Section 2 above has not restored the original value of performance. (5) The remedies provided for in the preceding paragraphs do not prejudice the creditor’s right to damages.

A. Foundation in the Acquis 1.

Sources

The acquis provides a right to terminate a contract in Art. 3(5) and 3(6) of the Consum- 1 er Sales D. and, less explicitly, in Art. 4(7) subparagraph 2 of the Package Travel D. The latter Directive establishes a duty of the organiser to return the consumer to the place of departure (or to transport the consumer to another place that the consumer has agreed to, if the organiser is not able to provide a suitable alternative arrangement or if the consumer does not accept it for good reasons). This could be qualified as a quasi-right of the consumer to terminate a contract. Both Directives treat the right to terminate a contract as an ultimate remedy, to be applied only if the cure of a contract cannot be attained by other means. The Consumers Sales D. allows a consumer to terminate a contract (to “rescind” as the 2 Directive provides) only – if the consumer is entitled to neither repair nor replacement; or – if the seller has not completed the remedy (i.e. repair and replacement) within a reasonable time; or

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Art 8:301 3–7

Chapter 8: Remedies General Provisions . Section 3: Termination and reduction of performance

– if the seller has not completed the remedy without significant inconveniences to the consumer. Moreover, the consumer cannot terminate the contract if the lack of conformity is minor. 3 The Package Travel D. provides an instance of what is considered a minor breach. In the case of non-performance of a significant proportion of the services contracted for (or if the organiser perceives that it will not be able to perform these services as according to Art. 4(7) of the Package Travel D.), a consumer may require to be taken back to the place of departure or another return-point (which can be treated as a right to terminate a contract) only if the organiser does not offer an alternative service, or if the consumer has a good reason to reject such a service. Both Directives are seeking a possibility to continue a contractual relationship despite the breach of an obligation, if it is possible and reasonable and not too burdensome for the other party to do so. 4 The right to terminate a contract is also implicitly recognized by Art. 16 of the Commercial Agents D. According to this provision, nothing in this Directive affects the application of the law of the Member States where the latter provides for the immediate termination of the agency contract, inter alia, because of the failure of one party to carry out all or part of its obligations. It follows that the acquis recognizes the principle that non-performance by the debtor may lead to the creditor’s right to terminate the contract. 5 Another remedy besides termination of contract is reduction of the creditor’s own performance. In the acquis there is an instance of a remedy of price reduction. This is expressly provided in Art. 3(5) of the Consumer Sales D. It applies whenever termination of contract is available, and additionally if the lack of conformity of the goods to the contract is minor. 6 Similar remedies, or at least remedies with a similar effect, can be found in the Package Travel D. (Art. 4(6)(a), Art. 4(7) subpara. 1) and the Regulation No 261/2004 – Denied Boarding Regulation – (Art. 8(1)(a)). In the first case, the aim of the remedy is to compensate the lower value of the alternative arrangement offered by the organiser, in the second case, it provides reimbursement of the costs of the ticket for that part of the journey which was not provided. All remedies discussed under this paragraph can be applied regardless of the reason for non-performance. Termination of contract and reduction of the creditor’s own performance are available in the cases mentioned above, even if the non-performance can be attributed to force majeure. 7 The acquis generally accepts that termination of contract and reduction of the creditor’s own performance do not prevent the creditor from resorting to other remedies, provided that, according to their content, these remedies can be applied cumulatively. The Consumer Sales D. refers in Art. 8(1) to the national rules governing contractual or non-contractual liability, stating that they can be applied alongside one another.

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Article 8:301 Grounds for termination and reduction

Art 8:301 8–10

A similar reference is contained in Art. 4(6) of the Package Travel D. Equally, according to Art. 12 of the Denied Boarding Regulation, remedies provided by this regulation do not exclude any rights of passengers to receive further compensation. The provisions of Community law mentioned above have not yet been interpreted by the 8 Court of Justice. To date, the ECJ has neither delivered any decision on grounds of the termination of a contract, nor on the reduction of performance, as a matter of Community law. It may be worth mentioning, however, that the Court occasionally faces the issue of termination of a contract in cases involving disputes over contracts between the Community and beneficiary institutions from various Member States. These contracts are governed by the law of one of the Member States and, therefore, the decisions of the Court in these cases cannot be considered as a part of Community law. These contracts usually contain clauses allowing the Commission to terminate a contract on the ground of non-performance (see: judgment of 9 June 1999, C-172/97 – SIVU, para. 17-21; judgment of 16 January 2001, C-40/98 – TVR, para. 26-34).

2.

Development

The Acquis Principles have generalised the system of remedies of termination of contract 9 and price reduction in several ways. Both of these remedies may be available to any party to a contract; they are not limited to B2C contracts, but form part of general contract law. Some authority for this extension is provided by the Package Travel D. and the Denied Boarding Regulation. These acts are not confined to consumers in the narrow sense (see Art. 2(4) of the Package Travel D.). The notion of passenger is not defined under the Denied Boarding Regulation, and hence there is not a reason to confine it to consumers. The broader personal scope of the application of the system of remedies is however not only justified by the broader nature of the sources quoted above, but also (or even predominantly) by the neutral character of these remedies. Reduction re-establishes the equilibrium of performance in a contract, and termination of contract allows for the reversal of the negative results of non-performance, including partial or defective performance, irrespective whether a B2C or B2B contract is concerned. Termination of contract as a remedy has an established tradition among the European legal systems and in international treaties such as the CISG. Termination of contract provides an appropriate sanction of non-performance regardless of the nature of either party. The same is also true for price reduction or reduction of performance in general. The termination of a contract and the reduction in price also constitute the part of the general system of remedies in the PECL and DCFR as well as other instruments such as the Proposal of the European Code of Contracts prepared by the Gandolfi-Group. The Acquis Principles broaden the present sectoral approach of EC private law directives 10 and regulations into more generalized rules. The system of remedies which has been adopted in the Consumer Sales D. is capable of being applied to other contracts. The Consumer Sales D. itself applies not only to contracts of sale in a narrow sense, but also to contracts for the supply of consumer goods to be manufactured or produced (Art. 1 (4)). The Package Travel D. may apply to a variety of services contracts (see: definition Jerzy Pisulin´ski/Fryderyk Zoll/Maciej Szpunar

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Art 8:301 11–14

Chapter 8: Remedies General Provisions . Section 3: Termination and reduction of performance

of the package in Art. 2(1)). The Denied Boarding Regulation is concerned with transport contracts. The right to terminate a contract is recognized by many legal systems as the general remedy which is not limited to specific contracts. Termination of contract, irrespective of it classification, is available as a remedy under all academic works on principles of contract law (see: Art. 9:301 PECL; Art. III. – 3:301 DCFR; Art. 7. 3. 1. of the UNIDROIT Principles; Art. 114 of the Proposal of the European Code of Contracts prepared by the Gandolfi-Group). All of these drafts are rooted (albeit to different extents) in the system of CISG, which also served as a source of inspiration for the Consumer Sales D. Hence the right to terminate a contract can be generalized into a core remedy within the system of non-performance of contracts. 11 The Acquis Principles also generalize a remedy of price reduction into a wider remedy of reduction of performance. This generalization has two aspects: firstly, the remedy is elevated to a general level which is not confined to particular types of contracts; secondly, reduction is not limited to monetary obligations but is available in reciprocal contracts for all kinds of obligations which are capable of being reduced or diminished. 12 Both generalisations require some explanation. In many national laws, the remedy of price reduction has traditionally been linked to contracts of sale and similar contracts. Common law systems do not even recognize price reduction as a remedy which is separate from damages. We can, however, observe a tendency in academic works on principles of contract law to allow the remedy of price reduction beyond specified cases, as in PECL (Art. 9:401) and the Gandolfi Draft (Art. 113.1). The UNIDROIT Principles, on the other hand, do not follow this pattern. Reduction of performance may serve as a useful remedy in broader sense, because it facilitates the restoration of the contractual equilibrium between the value of performances without having to rely on the more complicated system of damages. 13 Termination of contract and reduction of performance under the Acquis Principles are predominantly based upon the system which arises from the Consumer Sales D. The scope of their application is, however, enlarged. It goes beyond cases of lack of conformity of the delivered goods to extend to all cases of non-performance, as defined in Art. 8:101 ACQP. The example from the Package Travel D. (Art. 4(6)(7)), cf. also Art. 8(1)(a) Denied Boarding Regulation, Art. 16(a) Rail Passenger’s Rights Regulation, illustrates that reduction of performance can also be applicable in cases of non-performance other than defective performance. 14 The present Article builds on, but also further develops the system of the Consumer Sales D. Paragraph (2) determines more precisely than Art. 3(3) subparagraph 3 of the Consumer Sales D. the circumstances under which a party may terminate the contract. The Acquis Principles allow the termination without giving the other party the possibility to cure the performance if the non-performance is so serious that the other party can no longer be expected to adhere to the contract; this result is not obvious under the Consumer Sales D.

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Article 8:301 Grounds for termination and reduction

Art 8:301 15–17

The right to terminate the contract immediately is comparable to Art. 4(7) of the Package Travel D. which allows the consumer to reject the alternative suitable arrangement for “good reason”. The Consumer Sales D. does not deal explicitly with the case that only a part of the goods delivered are affected by a lack of conformity. Paragraph (3) closes this gap with a general rule on the scope of the termination if only a part of a contract is affected by the non-performance.

3.

Political Issues

An important policy issue is whether there should be a mandatory sequence in which 15 remedies are to be exercised. In some instances, a party may resort to termination of a contract or reduction of performance only if performance or cure are not effectuated. The Consumer Sales D. and the Package Travel D. follow this model of a mandatory sequence of remedies; this is evident in the case of the Consumer Sales D. (Art. 3(5)). Similarly, under the Package Travel D. the consumer has to accept an alternative suitable arrangement (Art. 4(7)). The right to cure has the effect that the debtor gets a second chance to perform in full and thereby to prevent the termination or reduction of performance. In the future it might be considered whether the debtor’s right to cure (which is much wider and therefore to be distinguished from a possible right of the creditor to enforce cure under Art. 8:202 ACQP) should be expressed explicitly in a separate Article in order to make this distinction clearer. The Acquis Principles do not use the notion of the “fundamental breach of contract” known in CISG (Art. 25). However, a similar effect is reached by the application of paragraph (2). The development of the remedy of price reduction into the remedy of “reduction of per- 16 formance” is also a political question. It diminishes the relevance of the right to damages by creating an instrument with a compensatory function and broad scope. The applicability of this instrument to remedy other kinds of non-performance than just the defective performance may cause some friction with other remedies such as (partial) termination and damages, but also facilitates restoration of the balance between parties.

B.

Commentary

1.

Meaning and Purpose

The purpose of the present Article is to determine the requirements for termination of 17 contract and reduction of performance in cases of non-performance. It also provides that these remedies may apply to all cases of non-performance, without being confined to specific contracts or specific types of non-performance (such as impossibility or delay).

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Art 8:301 18–20

2.

Chapter 8: Remedies General Provisions . Section 3: Termination and reduction of performance

Context

18 This Article applies to cases of non-performance of contractual obligations. It may also apply to violations of pre-contractual duties, but only if the contract has been concluded (see Art. 2:208(2) ACQP). It is furthermore feasible to allow reduction of the performance to reciprocal obligations beyond those arising from the contract itself. This can be the case if an invalid contract is unravelled or if the parties seek to recover what they have performed under the contract which has been terminated (see Art. 8:303 ACQP). Paragraph (5) regulates the relationship between termination and reduction on the one hand, and damages on the other. Damages may be cumulated with remedies under the present Article. This does, however, not mean that termination or reduction do not have any influence on damages. Reduction of performance diminishes the creditor’s loss; termination of contract will likewise lead to a different calculation of damages, as the creditor’s loss is not reduced by any performance made or owed under the contract. The creditor may also be entitled to claim damages of costs caused by the termination of the contract.

3.

Explanation

19 The present Article governs two remedies for non-performance of contract, namely termination of contract and reduction of performance. The effects of termination are governed by Art. 8:303 ACQP. Termination in this sense should not be confused with termination by notice of long-term contracts for reasons other than non-performance of an obligation. Reduction of performance is available even if a non-monetary obligation is to be reduced, provided that reduction of this performance is possible without depriving the performance of its economic purpose. If the party entitled to the reduction of performance has not yet performed, then its obligation is reduced accordingly. If, on the other hand, this party has already provided complete performance, then it is entitled to recover for that part of the performance which is no longer due as a result of the exercise of the remedy. 20 As the aim of reduction of performance is to restore the contractual equilibrium between the performances owed, then the reduction should be measured proportionally according to the following formula: V1 : V2 = P1 : P2 V1 V2 P1 P2

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value of debtor’s full performance in conformity with the contract value of performance actually made by debtor price of creditor’s full performance in conformity with the contract price of performance owed by creditor after reduction

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Article 8:301 Grounds for termination and reduction

Art 8:301 21–24

Termination of contract may be available for all cases of non-performance, unless the 21 non-performance is minor (see paragraph (1) last sentence). Non-performance is defined in Art. 8:101 ACQP and includes all kinds of failure in performance. It can mean, in particular, that the obligation has not been performed at all (which includes cases of initial or subsequent impossibility), or that it has been performed incorrectly (lack of conformity), or that performance was late. It does not matter whether the non-performance was caused by the fault of the debtor, or whether it has been caused by an impediment beyond the control of this party. Only in the case of a minor non-performance, the creditor is barred from terminating the contract (paragraph (1)). A party who has terminated the contract may nevertheless be liable for damages caused to the other party provided that the requirements of Art. 8:401 ACQP are fulfilled. Reduction of performance has two built-in limitations. Firstly, it only functions for reci- 22 procal obligations. Secondly, it cannot apply in cases of complete failure to perform; there has to be at least partial performance. Otherwise, however, this remedy can be available in all cases of non-performance. It does not require any fault, and – unlike termination – also applies if the non-performance is only “minor”. Non-performance qualifies as minor if the non-performance does not endanger the purpose of the obligation and still allows for the creditor’s interest to be satisfied. Reduction of performance can be combined with termination of contract if the creditor terminates part of the contract, and reduces its performance in relation to the part which has not been terminated. Termination of contract and reduction of performance are frequently ultimate remedies. 23 This is because in many cases, the debtor may, by providing cure for any non-performance, prevent that the creditor obtains the right to terminate or to reduce performance. Cure means the remedying free of charge of a performance which is not in conformity with the terms regulating the obligation. The right to cure gives the debtor a second chance to effect full performance and thereby to avoid termination or reduction of performance by the other party. Such right to cure (“the second chance”) is independent of the question whether the creditor can enforce cure against the debtor. In other words, the debtor may have a right to cure even in those cases where the creditor cannot enforce the cure under Art. 8:202(2), (3)(b) and (c) ACQP. According to paragraph (1) the creditor may reduce his own performance or terminate if either the creditor has no right to performance or cure under Section 2 (e.g. performance unlawful or impossible, paragraph (3)(a)) or if the debtor has not provided the cure (e.g. in cases where cure is lawful or possible but unreasonably burdensome or of the personal character, paragraph (3)(b)(c)). The present Article does not require the creditor to fix an additional period for perform- 24 ance as a condition for termination of contract. The reasonable time requirement arises directly from the present Article and does need to be expressed by the creditor. The period, qualified as the reasonable time starts with the knowledge of the debtor about the non-performance. This knowledge could result from the notice given by the creditor or from another source. In some cases the nature of non-performance itself would allow to assume the knowledge of the debtor (for example lack of payment). Jerzy Pisulin´ski/Fryderyk Zoll/Maciej Szpunar

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Art 8:301 25, 26

Chapter 8: Remedies General Provisions . Section 3: Termination and reduction of performance

When deciding which length of time should be reasonable for performance or cure, regard should be given to the nature of the obligation and the time which the debtor would normally be allowed for undertaking those steps which are required to complete performance. 25 The Article at hand, while laying down a sequence of remedies, also provides exceptions from this rule. Firstly, it allows – under certain conditions – for the remedies of cure and of reduction of performance to be cumulated (paragraph (4)). This applies, for example, if the debtor has cured a defective performance (for instance by repair) but the repair has not restored the value which would have been provided by proper performance. In such a case, the creditor may reduce his own performance by taking into account the lower value of the cured performance. Secondly, the creditor may terminate the contract without asking for the cure if the creditor cannot be reasonably expected to be bound by the contract, having regard in particular to the kind of non-performance or the nature of the obligation (paragraph (2)). This provision applies if cure is possible, but where the non-performance has been particularly grave, as in cases of serious breaches of a duty to loyalty, or where any trust between parties has been destroyed. In these situations, there is no interest of the legal order to force the creditor into maintaining such a contractual relationship. This provision expresses an idea which is similar to the concept of fundamental breach of contract, even though immediate termination under paragraph (2) requires a graver violation of the obligation, which must be committed in such a way that the creditor has no reason to expect that the cure will really bring the performance into conformity with the contract. It does not matter in this context whether the effects of non-performance for the creditor were predictable for the debtor. 26 Paragraph (3) limits of the scope of termination of contract if only a part of it is affected by non-performance. According to this provision, termination encompasses only that part of the contract which is affected by non-performance. Typically, this is the case if a seller has delivered only part of the goods which had been ordered. In such a case, termination is limited to those goods which should have been, but in fact have not been delivered. If there is a further delivery outstanding but not yet due, then termination will generally not affect that part. Partial termination may also apply in a case where, although the object of performance is not divisible, a portion of performance which has already been completed has significant economic value (e.g. where a part of a building has been constructed, but the building has not been completed). The creditor may nevertheless terminate the whole contract if the partial performance is of no utility to the creditor. This is the case if partial performance cannot satisfy the creditor’s interest under the contract (even in part) and includes the case in which the creditor cannot use the part of performance which has been delivered in further work, or is too burdensome on the creditor. In some cases, partial termination of a contract can have effects which are similar to those of reduction of performance. If a part of the obligation has not been performed and the creditor terminates a contract with respect to this part, the result will be the same as if 418

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Article 8:301 Grounds for termination and reduction

Art 8:301 27–30

the creditor reduced his own performance. This does not mean that either one of these remedies is obsolete. On the contrary, the differences between them are significant. If a part of the performance, which has already been provided, is affected by a lack of conformity, partial termination means that the creditor must return the part of the performance which has been affected and may claim damages for non-performance of this part under Art. 8:401 ACQP. If the creditor instead chooses reduction of performance, he or she would keep e.g. the delivered goods, and their defect would be relevant only for calculating the accordingly lower value of the creditor’s performance (e.g. payment of a lower price). In such cases it is relevant as to whether the defect which affects the delivered goods allows qualifying the non-performance as minor. If this is the case, termination is excluded, and the creditor must resort to reduction of performance. Neither termination of contract nor reduction of performance prevent a creditor from 27 claiming damages according to the Art. 8:401 ACQP, provided all requirements of this Article are fulfilled – see paragraph (5). In the case of termination of a contract, the creditor can be entitled to claim damages which are caused by the fact that the creditor has not obtained any performance, and by the fact that the creditor was obliged to return what he or she has received. It has to be stressed that it is equally possible to terminate a contract or to reduce performance without being entitled to damages, in particular if the non-performance is excused under Art. 8:401 ACQP. In the case of reduction of performance, the value saved by this remedy needs to be taken into account when assessing the damages.

4.

Examples

Example 1 A has sold a car to B. Payment is due ten days after delivery. The car has been delivered 28 by the seller, but the buyer has not paid the price. Two weeks after payment has become due, the seller declares termination of contract. This declaration of termination is effective, even though the seller has not demanded payment from the debtor, because the reasonable time in the sense of paragraph (1) has lapsed. Example 2 An old clock has been sold in ignorance of the fact that it had just been completely de- 29 stroyed by an unfortunate event. The buyer may terminate the contract immediately, because there is no right to cure due to impossibility (paragraph (1)). The contract is valid and it does not become invalid or ineffective ipso facto. Example 3 A instructs a well-known architect to design a building. The project is to be delivered 30 within a fixed period of time, but the architect fails to comply with this time limit. The client wants to terminate the contract immediately, i.e. without demanding performance. The debtor has, however, a right to cure within the reasonable time in the sense of paragraph (1). The period starts when the debtor becomes aware of the non-performance. In this case the architect is aware of the non-performance when the obligation has Jerzy Pisulin´ski/Fryderyk Zoll/Maciej Szpunar

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Art 8:301 31–34

Chapter 8: Remedies General Provisions . Section 3: Termination and reduction of performance

become due. The creditor may not terminate the contract before the “reasonable” time period has lapsed. It is not necessary that the creditor warns the debtor. Example 4 31 A bathtub with a hydro-massage function has been installed as according to the order made by A. However, the plumber, disregarding the producer’s instructions, has connected the tubes in a way which endangers the life of the users. Customer A may immediately terminate the contract with the plumber according to paragraph (2) without asking for a cure. The reason is that A’s loss of trust in the plumber’s competence justifies an abrupt end to the contractual relationship. The customer cannot be forced to ask for performance from a manifestly incompetent contractor. Example 5 32 A has bought a house for a sum to be paid in 36 equal instalments. A fails to pay the final instalment. The seller cannot terminate the contract because the non-performance is minor taking into consideration the proportion between the amounts unpaid and the value of the contract as whole. In such a case, the seller is limited to the remedies of performance and damages. Reduction of the seller’s performance is not available since that performance cannot be divided. Example 6 33 A and B have agreed that A will supply 10 bicycles to B, with B to pay the agreed price in advance. B has paid in due time, but only 80% of the price. When A asks B for full payment, B fails to respond. A may reduce his own performance and deliver only 8 bicycles. Partial termination would have the same effect. Example 7 34 A passenger flies with a ticket for business class. Unfortunately, an economy class passenger dies during the flight. As economy class is fully booked, the crew decide to transfer the corpse to business class and to tie it to the seat next to the one occupied by A. A may ask for a reduction of price which he or she paid for the flight, because having to sit next to a corpse does not conform with the passenger’s legitimate expectations, even if the air operator had no alternative option to solve the problem. In such a case it is difficult to determine a value of the reduction, since there is evidently not a market for flights with a corpse placed next to your seat. Possibly, the price should at least be reduced to the level of the price for economy class. Example 8 A has agreed to deliver a vintage car to a film producer who wants to use it for filming a movie. A fails to deliver. The producer terminates the contract after the lapse of a reasonable time. The producer has to pay actors and other staff, and incurs other expenses for additional days of filming, and also additional costs for finding another vintage car – for which the producer also has to pay a higher rental fee. Regardless of the termination, all of these costs may in principle be recovered under the rules on damages, Art. 8:401 ACQP in connection with the present Article.

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Art 8:302, 1 Art 8:303, 1

Article 8:302 Notice of termination

Article 8:302: Notice of termination

3

A right to terminate under this Section is exercised by notice to the debtor.

Provisional Comments There is insufficient basis in the acquis for formulating such a rule. The above DCFR rule 1 is reproduced in order to show the context in which the Acquis Principles can operate. Please note that the terminology used in this rule may be inconsistent with Acquis Group terminology. The Consumer Sales D., which serves as a main source of ACQP rules on remedies for non-performance, provides for the possibility to terminate the contract (although it speaks of “rescission” – see Art. 3). However, it does not settle the exact manner in which this remedy is to be exercised. CISG generally requires notice of termination (“declaration of avoidance”, see Art. 26, 49 and 64 CISG). Some sources in the acquis use the expression “notice of termination”, but do so in a completely different context (cf. Art. 15(1) of the Commercial Agents D. and Sec. 1(g) of the Annex to the Unfair Terms D.).

Article 8:303: Effects of termination (1) Termination of the entire contract releases both parties from their obligations to perform as from the time when termination becomes effective. In case of partial termination, both parties are released from their obligations which relate to the terminated part. (2) On termination, each party is obliged to return to the other what has been performed under the contract. In case of partial termination, both parties are obliged to return to the other what has been performed under the terminated part of the contract.

A. Foundation in the Acquis 1.

Sources

The Community law does not govern the effects of termination of contract. Consumer 1 directives are largely silent on this issue. There are, however, some regulations concerning similar institutions which may serve as a basis for the formulation of a black letter rule. Art. 6(2) of the Distance Selling D. regulating the effects of the withdrawal from the distance contract by the consumer imposes an obligation on the business to reimburse 3

Grey rule from Art. III. – 3:507(1) DCFR.

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Art 8:303 2

Chapter 8: Remedies General Provisions . Section 3: Termination and reduction of performance

any sums paid by the consumer. The same idea is also expressed by Art. 7(4) of the Financial Services Distance Selling D. The obligation to return the sums paid or property acquired arises under Art. 7(5) of the latter Directive. Art. 7(2) of the Distance Selling D. is also related to the problem of the effect of termination. This provision governs the consequences of the supplier’s failure to perform due to an unavailability of the ordered goods or services. In this case the supplier must refund any sum paid by the consumer. A claim for reimbursement of sums paid arises also under Art. 4(6) of the Package Travel D. in the event of the consumer’s withdrawal from the contract due to the alteration of the contract before departure. Additionally, Art. 8 of the Cross Border Credit Transfer D. gives some indications about the effects of termination. According to this provision, in case of non-execution of the transfer, the originator’s institution is obliged to refund to the originator the transferred sum with interest and charges carried by the originator. A similar idea is expressed by Art. 75 of the Payment Services D.

2.

Development

2 The sources quoted above prove that the notion of returning performances which have been made is not unknown in the Community law. Some of these sources deal with the situation where the contract has been brought to an end by a failure in performance, or by the fact that the aim of the contract was not achieved. The European legislator has not determined the consequences of the “rescission” (termination) of contract in the Consumer Sales D., perhaps in awareness of the fact that recovery of performances would usually be allowed under the laws of Member States. The fact that the Consumer Sales D. was drafted with the model of the CISG in mind justifies the assumption that the effects of termination are envisaged at least in accordance with the basic concept of CISG (see: Art. 81 of CISG). However, there is insufficient basis in the acquis for a wholesale adoption of those CISG provision on effects of termination (“avoidance”) which have not been repeated in the Directive. In particular, there is no basis in the acquis for taking over the provision on abandoned goods which were to be returned. Neither does the acquis touch the problem of compensation for the use of the goods in case of termination. One could perhaps consider filling these gaps by using grey letter rules derived from the DCFR (Art. III. – 3:509 to III. – 3:515). The effects of a partial termination are not directly governed by the sources of Community law. The possibility that partial non-performance may cause limited consequences as far as the effects of termination are concerned must be assumed. In case of partial nonperformance one should provide for a solution midway between the total termination of the contract and the denial of the right to terminate the contract. It has been argued that the principle of proportionality should call for partial termination in suitable cases under the existing Consumer Sales D. 422

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Effects of termination

3.

Art 8:303 3–6

Political Issues

As the acquis does not contain more specific regulations on termination, the Article at 3 hand addresses only the main problems of termination leaving the vast majority of detailed questions open. One could argue that existing provisions should be completed by grey letter rules taken from DCFR; however this solution risks a reduction in the level of consumer protection afforded by the Consumer Sales D. The Directive’s silence may be interpreted in the following ways: firstly, the Directive protects consumers from bearing additional costs, and secondly, consumers are not excluded the right to terminate the contract in the event that the goods sold have been abandoned or damaged after delivery.

B.

Commentary

1.

Meaning and Purpose

The function of this provision is to define the effects of termination of a contract, includ- 4 ing cases of partial non-performance.

2.

Context

After termination of a contract, the parties are obliged to return everything which has 5 been performed; therefore, the termination generates new obligations. The rules on performance and non-performance apply to the obligations resulting from the termination. Almost all the rules on performance may apply, with the exception of Art. 7:103 ACQP. Rules on non-performance, and on damages in particular, are also applicable. The remedy of reduction of performance is not excluded (Art. 8:301(1) ACQP). On the other hand, rules on termination do not apply to a failure to comply with obligations arising from termination. It should be remembered that Art. 8:301 ACQP limits the right of termination to contractual obligations.

3.

Explanation

After termination of a contract, the parties may no longer claim performance of the ori- 6 ginal obligation. On the other hand, one should not refer to the fiction that a terminated contract has never been concluded. Generally, termination acts pro futuro. The original obligation arising from the contract is replaced by the obligation to return e.g. the goods supplied. It is not possible to return services that have been already supplied; therefore the party who has profited from services should reimburse a value corresponding to the services performed. The provision does not deal with the case when it is not possible to return the goods. The Acquis Principles provide a solution by the possibility of withholding the reciprocal performance, which, in case of permanent impossibility, has the same effect as extinguishing the corresponding reciprocal obligation. In case of partial impossibility or of reduction of the value of the performance to be returned after the passing of

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Art 8:303 7–11

Chapter 8: Remedies General Provisions . Section 3: Termination and reduction of performance

risk, the party authorized to receive the reduced performance may reduce the value of his own performance correspondingly. 7 There is insufficient basis in the acquis for this provision to regulate a possible obligation to remunerate the intermediate use of the goods which are to be returned. A decision of the ECJ is expected in this case. Neither does the acquis settle the question whether natural or legal fruits are to be returned. In some situations, the rules on damages may provide a partial answer. The effect which termination may have on the property of goods affected is also not decided by the present Article. This provision gives only an indication that the effects of the obligation are not retroactive: a solution which can be read as a slight indication in favour of those legal systems under which property transfer is not directly affected by termination of contract. 8 If termination affects only a part of an obligation, the parties are obliged to return only that part of the performance which is affected by termination. For example, in the case of an otherwise fully performed contract for the sale of goods of which one part is defective, the buyer has to return the defective goods, and the seller has to return that part of the purchase price which corresponds to the defective goods. If the other party has not yet performed, it may deduct the value of its own performance which corresponds to the nonperformed counterpart. In some cases this deduction might lead to the same effects as a reduction of performance would.

4.

Examples

It is presumed for all of the following examples that the requirements of Art. 8:301 ACQP are met. Example 1 9 A has sold a scooter to B. B has failed to pay the price and A terminates the contract. B is no longer obliged to pay the price, but must return the scooter. Example 2 10 A has sold five cars to B, but one has turned out to be defective and B terminates the contract in respect of the defective vehicle. A may demand the return of the defective car and B is not obliged to pay that part of the price which corresponds to the returned car. If B has already paid, she can recover the same part. Example 3 11 A has rented an apartment from B. The building’s heating system fails to function in February and A cannot live in the apartment during this month. A terminates the contract at the end of February. The tenant has to return the apartment to the landlord and may ask for return of the rent for the time during which the use of apartment was impossible.

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Art 8:303, 12, 13 Art 8:304, 1

Article 8:304 Right to withhold performance of reciprocal obligation

Example 4 A has rented a car but has failed to pay the hire charge for the last month. The owner of 12 the car terminates the contract. The owner may demand the return of the car and may also ask for payment of the value of the use of the car in this month (this value may differ from the agreed charge). Example 5 A has sold a picture to B and has delivered it to the buyer. B has failed to pay. The picture 13 is then stolen without fault of the buyer. Being unaware of the theft, A terminates the contract. This case cannot be resolved in a convenient way under Art. 8:303. The acquis does not provide sufficient basis for a rule whereby in such a case the value of what has been performed under the contract is to be returned (cf. Art. III. – 3:511(4) DCFR).

4

Article 8:304: Right to withhold performance of reciprocal obligation

(1) A creditor who is to perform a reciprocal obligation at the same time as, or after, the debtor performs has a right to withhold performance of the reciprocal obligation until the debtor has tendered performance or has performed. (2) A creditor who is to perform a reciprocal obligation before the debtor performs and who reasonably believes that there will be non-performance by the debtor when the debtor’s performance becomes due may withhold performance of the reciprocal obligation for as long as the reasonable belief continues. However, the right to withhold performance is lost if the debtor gives an adequate assurance of due performance. (3) A creditor who withholds performance in the situation mentioned in paragraph (2) has a duty to give notice of that fact to the debtor as soon as is reasonably practicable and is liable for any loss caused to the debtor by a breach of that duty. (4) The performance which may be withheld under this Article is the whole or part of the performance as may be reasonable in the circumstances.

Provisional Comments There is insufficient basis in the acquis for formulating such a rule. The above DCFR rule 1 is reproduced in order to show the context in which the acquis Principles can operate. Please note that the terminology used in this rule may be inconsistent with Acquis Group terminology. The acquis does not contain any clear provision allowing one party to withhold its performance when the other party’s reciprocal performance is delayed. There is only one provision, namely Art. 3(1)(c) of the Late Payment D., which suggests that such a rule might be part of Community law (see Riesenhuber, Europäisches Vertragsrecht, Berlin 2003, pp. 272 et seq.; Schmidt-Kessel, Remedies for Breach of Contract in European Pri4

Grey rule from Art. III. – 3:401 DCFR.

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Art 8:304 1

Chapter 8: Remedies General Provisions . Section 3: Termination and reduction of performance

vate Law – Principles of European Contract Law, Acquis Communautaire and Common Frame of Reference, in Schulze [ed.], New Features in Contract Law, München 2007, p. 188). Nevertheless, that provision was found to be too narrow in its scope of application and too unclear to serve as a basis for an ACQP rule. It states, inter alia, that the creditor is entitled to interest for late payment to the extent that it has fulfilled its obligations. This might be understood to mean that a debtor has a right to withhold its performance until the creditor performs (or, more precisely, until the creditor fulfils all its obligations, both primary and secondary). This is, however, only one possible interpretation. One might equally argue that the Late Payment D. provides only for a right to interest (see Art. 8:405 ACQP), conditional on the creditor’s own performance, and not for a right to the payment itself. The rule confining the right to claim “extraordinary” interest does not influence the other parts of the obligation (see Zoll, The Remedies for Nonperformance in the System of the Acquis Group, in: Schulze [ed.], Common Frame of Reference and Existing EC Contract Law, München (2008), p. 189, at 100). One should also bear in mind that the directive’s scope of application is rather narrow, given that it is limited to monetary obligations resulting from commercial transactions. Accordingly, the Acquis Group decided against adopting what is now Art. 8:304 as an ACQP black letter rule.

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Section 4: Damages Article 8:401: Right to damages (1) The creditor is entitled to damages for loss caused by non-performance of an obligation, unless such non-performance is excused. (2) Non-performance is excused if it is due to circumstances beyond the control of the debtor and of any person engaged by the debtor for performing this obligation, provided that the consequences of those circumstances could not have been avoided even if all due care had been exercised.

A. Foundation in the Acquis 1.

Sources

On the one hand, there are several legislative instruments of the EU which explicitly deal 1 with the remedy of damages for breach of contract. On the other hand these are less frequent than could be expected. Not rarely, private law Regulations and Directives merely require that the Member States must introduce sanctions which are “effective, proportionate and dissuasive” (see Art. 7 Regulation 2560/2001; Art. 16(3) Regulation 261/ 2004; Art. 8 sent. 2 of the Price Indication D.; Art. 20 sent. 2 of the E-Commerce-D.; Art. 17(2) of the D. on General Framework for Equal Treatment in Employment and Occupation; Art. 11 of the Financial Services Distance Selling D.) The Directives explicitly dealing with the remedy of damages comprise the following: The Package Travel D. provides that the tour organiser and/or retailer is liable for damage resulting from the failure to perform, or the improper performance of the contract unless such failure is attributable to the other party, a third party or to force majeure (Art. 5(2) of the Package Travel D.). The Late Payment D. gives a right to damages when agreed terms on the date of payment, or on the consequences of late payment, are grossly unfair to the creditor (Art. 3(3)). The Denied Boarding Regulation provides for compensation if the passenger is not transported to the final destination for which he or she has a valid ticket or if the transport is delayed. The sanction – fixed sums for defined cases – resembles, however, rather a contractual penalty than the remedy of damages. The Air Carrier Liability Regulation also deals with damages though only with the case where an air passenger has been injured or killed due to the operation of an aircraft. The

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Art 8:401 2, 3

Chapter 8: Remedies General Provisions . Section 4: Damages

Regulation grants a certain level of damages but requires that the air carrier is liable under the applicable law. The Commercial Agents D. provides for an indemnification or compensation where either the principal has terminated the contract of agency without just reason or where the agent has terminated the contract with just reason (Art. 17, 18). The Cross Border Credit Transfers D. provides for a right to compensation in case of delayed cross-border payments unless the delay is attributable to either the originator or the beneficiary of the payment (Art. 6(1), (2) and (3)). However, the Consumer Sales D. where a provision on damages could be expected does not mention damages at all but rather leaves this issue to national law. 2 The European Court of Justice had to decide on the remedy of damages in connection with contractual liability only on few occasions. In Case C-168/00 – Leitner v TUI Deutschland the ECJ decided that under the Package Travel D. the consumer’s right to damages does not only cover compensation for material losses but also for immaterial harm. In the Rechberger-Case (C-140/97) the Court had to deal with Austria’s failure to implement the Package Travel D. correctly. The Court decided in that case also on the issue whether the incorrect implementation had caused damage to the claimants. Although this decision admittedly does not concern causation in the context of the contractual remedy of damages, the decision nonetheless deals with causation in connection with damages – under the Francovich doctrine (cf. Case C-6/90 and C-9/90 – Francovich v Italy) – and can therefore give guidance with respect to causation in general. The Court stated here that intervening acts of third parties or unforeseeable events not normally break the chain of causation where direct causation is established and where the intervening event would not have caused the damage in any event. Though again the decisions are not strictly in point, general rules on damage, causation, fault and contributory negligence can be inferred from many ECJ judgments on the liability of the Community under Art. 288(2) EC Treaty (See, e.g., ECJ, T-47/93 – C v Commission; ECJ, T-168/94 – Blackspur DIY v Council and Commission; ECJ, T-230/94 – Farrugia v Commission). 3 However, full sets of rules concerning damages for breach of contract are contained in the CISG, the PECL and the UNIDROIT Principles. The CISG provides for a right to damages in any case of breach of contract, unless the breach can be excused because it was due to an unforeseeable and unavoidable impediment outside the control of the party in breach (Art. 45, 61, 79 CISG). Damages may be cumulated with any other remedy.

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Article 8:401 Right to damages

Art 8:401 4–6

The PECL contain the following rule (Art. 9:501(1)): “The aggrieved party is entitled to damages for loss caused by the other party’s non-performance which is not excused under Art. 8:108.” (Art. 8:108 exempts the debtor from liability if the non-performance of the duty is due to an unforeseeable and unavoidable impediment beyond the debtor’s control). The UNIDROIT Principles prescribe: “Any non-performance gives the aggrieved party a right to damages either exclusively or in conjunction with any other remedies except where the non-performance is excused under these Principles.” (Art. 7. 4. 1). Art. 7.1.7 UNIDROIT Principles excuses non-performance if it was due to an unforeseeable and unavoidable impediment beyond the debtor’s control. The acquis is clear insofar as the entitlement to damages for a breach of a contractual 4 duty requires at least: non-performance of an obligation, damage and its causation through the non-performance. Under the present acquis it is less clear whether these requirements suffice or whether fault is additionally required. However, taken all mentioned rules together, the acquis appears to militate against rather than favour an additional requirement of fault.

2.

Development

It has been observed that the acquis remains somewhat reluctant as regards remedies for 5 breach of contractual duties. Though it is already rather frequent that Directives and Regulations prescribe certain contractual or even pre-contractual duties, the EU instruments often omit to provide for corresponding remedies where these duties have been infringed. Partly, they only provide that the sanctions must be “effective, proportionate and dissuasive” (See for instance: Art. 7 Regulation 2560/2001; Art. 16(3) Regulation 261/2004; Art. 8 sent. 2 of the Price Indication D.; Art. 20 sent. 2 of the E-Commerce-D.; Art. 17(2) of the D. on General Framework for Equal Treatment in Employment and Occupation; Art. 11 of the Financial Services Distance Selling D.) or the contractual sanctions are left to national law. Nonetheless, as shown supra, there is already a considerable and growing number of legislative acts and judicial dicta which address the issue of damages or provide at least for this remedy and allow a generalisation of certain rules on damages.

3.

Political Issues

The main policy issue of the Article at hand is the question whether the remedy of dam- 6 ages should be based on the principle of fault or on a principle of strict liability which does not require fault on the part of the debtor. Under the present acquis it is (as mentioned) not clear whether or not fault is additionally required though the rules of the present acquis can be taken to favour rather the principle of strict contractual liability. To some extent the decision depends on what losses are covered by the two principles. If all consequences of a breach of contract must be compensated, even those which could

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Art 8:401 7–9

Chapter 8: Remedies General Provisions . Section 4: Damages

not be foreseen or avoided, then strict liability might appear as being too drastic. If there is, however, a reasonable limit to it, the strict liability principle can be accepted as a general principle. In order to meet this standard, paragraph (2) excuses only such non-performance which is caused by circumstances beyond the debtor’s control and which could not have been avoided even if all due care had been exercised.

B.

Commentary

1.

Meaning and Purpose

7 The provision above is the introductory as well as the basic norm concerning damages. It deals with the right to damages and defines the general conditions under which a creditor is entitled to damages. Damages are the principal, though in many cases not the only sanction for the violation of a contractual or pre-contractual duty. In principle, an entitlement to damages requires a loss on the part of the creditor and its causation by the debtor. The loss must stem from the non-performance of an obligation. The provision establishes further that the debtor is also responsible for losses caused by persons whom he or she has engaged for the performance of a duty. Liability does not depend on the fault of the debtor who is generally strictly (‘objectively’) obliged to fulfil his or her obligation. However, no liability is incurred if the debtor is excused because unavoidable circumstances beyond his or her control have caused the damage. The formulation of the provision indicates that the debtor must prove such exonerating circumstances.

2.

Context

8 The Article introduces the damages within Chapter 8, which provides which remedies are available if an obligation has not been performed as promised. Damages are the most common remedy and are available in case of non-performance of any kind of obligation. The present Article defines this reaction to cases of non-performance. Article 8:401 leaves it to Art. 8:101 ACQP et seq. to define non-performance as “any failure to perform an obligation”. Obligations which arise from a contract are formulated in preceding Chapters where Art. 8:401 et seq. are specifically referred to by Art. 2:208(3), Art. 4:104(4) sent. 3, Art. 4:105(4) sent. 3, Art. 5:105(2), indirectly also by Art. 3:202 ACQP. Qualifications of the measure and extent of damages are addressed in Art. 8:402 and 8:403 ACQP.

3.

Explanation

a)

Non-performance

9 Paragraph (1) of the present Article requires as a first necessary though not sufficient condition for any liability in damages that there has been non-performance of an obliga-

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Article 8:401 Right to damages

Art 8:401 10, 11

tion. This includes both contractual and pre-contractual obligations, and extends to both the contractual and pre-contractual duties. This principle is in particular confirmed by the Package Travel D. (Art. 5(2): “failure to perform or the improper performance of the contract”) but also, for instance, by Art. 45(1)(b), Art. 61(1)(b) CISG. The present Article presupposes that such an obligation exists. Many contractual obligations are provided for by law – see Chapters 2 and 7 – but they may also be inferred from the nature of the respective contract. The present Article further presupposes that the respective obligation has not been fulfilled. In general, it is neither necessary that the non-performance is of a specific nature or weight, nor that the other party has given prior notice of the non-performance. Mere non-performance suffices. This general rule does, however, not exclude the possibility that specific requirements apply to specific situations, e.g. a requirement that a buyer must notify the seller in the case of delivery of non-conforming goods. b)

Damage

It is clearly a general principle that the creditor must have suffered a loss in order to be 10 entitled to damages. The acquis requires generally such a loss as pre-condition for damages, as is evidenced for instance by Art. 5(2) of the Package Travel D. (“damage resulting ...”). Here shall also be referred to the decisions of the ECJ on the liability of the Community under Art. 288 (ex Art. 215) EC Treaty cited supra in Note 2. Without a loss, in principle no damages are due. But the ECJ has also acknowledged the possibility of nominal damages – an award of a symbolic J – where the claimant had suffered a wrong without a loss, or cannot prove the precise amount of a loss, which was also shown in the Case C-34/87 – Culin v Commission (symbolique Franc). Thus far, the acquis does, however, not provide for punitive sanctions which aim at a civil punishment by means of money, which the defendant is ordered to pay irrespective of any proportion to the extent of the damage. On the other hand, damages have often a deterrent effect for the public in general, and the aprty which has failed to adhere to its duties or obligations in particular. This preventive function should be activated in appropriate cases, for instance in discrimination cases (cf. Art. 3:202(2) ACQP). c)

Loss caused by non-performance

Damages are only owed for such losses which have been caused by the debtor’s non-per- 11 formance. This is a more or less self-evident principle which also forms part of the acquis (for instance in Art. 5(2) of the Package Travel D. it says “damage resulting ... from the failure to perform”) and it has been repeatedly stated by the ECJ (cf. C-140/97 – Rechberger). If causation cannot be established between the conduct of the defendant and the suffered by the claimant, no damages are due. The same rule (Art. 5(2) of the Package Travel D.) has been, and has to be, adopted for cases of non-performance.

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Art 8:401 12, 13

Chapter 8: Remedies General Provisions . Section 4: Damages

To date, the requirement of causation has not been further specified by EU-legislation. The ECJ requires that at least the “but for” (conditio sine qua non) test is met (Compare for instance Case C-358/90 – Compagnia italiana alcool v Commission; CFI, T-572/93 – Odigitria v Council and Commission. d)

No excuse

12 Under the Article at hand, the entitlement to damages does not require fault on the part of the non-performing party. The provision follows the principle of strict liability with certain grounds of exoneration. Such grounds are unforeseeable and unavoidable circumstances which are outside the control of the debtor and whose risk the debtor has not accepted. A ground for exoneration is in particular force majeure, but also an unforeseeable and unavoidable act of a third person. If those circumstances have caused the debtor’s inability to perform the obligation, then the debtor is not liable for losses which have resulted from the non-performance. This rule can arguably be inferred from two acquis rules. Firstly the Package Travel D. is to be mentioned (here shall the contrary decision of the German Federal Court in NJW 2005, 418, 419 et seq. be shortly referred to. The Court held in this case that the Package Travel D. was based on the principle of presumed fault. To clarify the question the Court should have referred the question to the ECJ). The other acquis rule to be mentioned is Art. 9 of the Cross Border Credit Transfers D. Apart from these directives, the principle is also in line with Art. 79 CISG. However, this principle may be subject to certain exceptions. The nature of the contract may nonetheless require proof of fault, or operate with the presumption of fault which may be rebutted by the debtor. Such an exception to the rule can, for example, be encountered where the contract does not oblige the debtor to achieve a certain result but only to use his or her best efforts (as, for instance in most contracts for medical treatment). The same solution can be found within the PECL (Lando/Beale (ed.), Principles of European Contract Law I and II (2000) p. 434). Though the Article does not expressly address the burden of proof, its formulation indicates that the debtor bears the burden to prove that circumstances beyond his or her control hindered the performance. e)

Cumulation of damages with other remedies

13 Though the acquis is not really explicit on this matter, it nevertheless appears to favour the principle that damages can be claimed in conjunction with any other remedy. Both the Consumer Sales D. and the Package Travel D. evidently do not exclude the creditor’s right to damages if, for instance, this party justified reasons terminates the contract at the same time. The CISG (Art. 45(2), 61(2)) has also adopted the very same rule. The Acquis Principles follow this approach (Art. 8:302(5) ACQP). Obviously, damages are available in combination with other remedies only insofar as there is still a loss not compensated by the other remedy.

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Article 8:402 Measure of damages

4.

Art 8:401, 14, 15 Art 8:402, 1

Examples

Example 1 A enters into a package tour contract with tour organiser B. In a hotel which B has se- 14 lected for the tour A is injured because she falls on the slippery and unsafe staircase of the hotel. A is liable and must compensate A for her loss. Example 2 A enters into a package tour contract with tour organiser B. Shortly before the start of the 15 tour a hurricane destroys the booked hotel and B cannot offer any equivalent alternative. B’s non-performance is excused because circumstances beyond its control are responsible for the non-performance which could not have been avoided even if B had exercised all due care.

Article 8:402: Measure of damages (1) Damages are a money payment of the amount necessary to put the creditor into the position in which it would have been if the obligation had been duly performed. (2) Damages cover the loss suffered by the creditor, including the loss of profits. (3) Without prejudice to rules on recovery of costs in judicial proceedings, damages include reasonable costs for the enforcement of an obligation. (4) Damages cover non-pecuniary losses only to the extent that the purpose of the obligation includes the protection or satisfaction of non-pecuniary interests.

A. Foundation in the Acquis 1.

Sources

Present EC legislation is not exactly explicit on which losses are to be compensated and 1 how damages are to be assessed. On the specific aspect of recovery of enforcement costs the Late Payment D. grants a recovery claim (see Art. 3(1)(e) of the Late Payment D. “all relevant recovery costs incurred through the ... late payment”). On a general level, the Package Travel D. and the Air Carrier Liability Regulation mention the different categories of property damage and personal injury damage. Art. 4(6) of the Package Travel D. leaves the specific assessment of damages partly to national law. However, where the tour operator does not fully perform its obligations the Directive entitles the traveller to compensation for “the difference between the services offered and those supplied” (Art. 4(7) of the Package Travel D.). It is evident from this provision that the traveller is to be placed in a position by way of compensation as if he or she had received the services as promised. Where these Directives and other Regulations and Directives already cited supra at Art. 8:401 ACQP provide for liability for damage it can therefore be inferred from their formulation and purpose that the whole loss has to be compensated, even though this is not expressly stated. It can further be inferred that compensation must

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Art 8:402 2–5

Chapter 8: Remedies General Provisions . Section 4: Damages

make good the loss in such a way that the claimant is put in the position which he or she would have if the loss had not occurred and the obligation had been duly performed. The same idea can be inferred from the Product Liability D. which defines the notion of “damage” in its Art. 9. Though this Directive deals primarily with tort situations, the general principles for compensation and damages are – and should be – more or less identical in tort and contract. The ECJ has also made clear on various occasions that damages should cover the entire loss including future profits (e.g. C-308/87 – Grifoni II), and may include compensation for immaterial harm (Cases C-308/87 – Grifoni II and C-168/00 – Leitner v TUI Deutschland). 2 The CISG, the PECL, Art. 7.4.2 para. 1 of the UNIDROIT Principles and the Principles of European Tort Law each contain a number of provisions concerning damages. Art. 10:101 of the latter e.g. says: “Damages are a money payment to compensate the victim, that is to say, to restore him, so far as money can, to the position he would have been in if the wrong complained of had not been committed. Damages serve also the aim of preventing harm.” They are all based on the fundamental principle of full compensation (restitutio in integrum).

2.

Development

3 The acquis is underdeveloped as far as the assessment of damages is concerned. Yet, the few available sources allow a generalisation in the sense expressed by the present Article.

3.

Political Issues

4 The general principle that damages should compensate for the whole loss is widely accepted. Nonetheless, it could be argued that a reduction clause should limit damages to a measure that is proportionate to the degree of fault of the debtor. However, neither the present acquis nor the traditions of the EU Member States provide such a solution. It could be more doubtful whether non-pecuniary losses should be compensated in the field of contract law. But where the purpose of the obligation also includes the protection of non-pecuniary interests, infringement thereof should also be compensated.

B.

Commentary

1.

Meaning and Purpose

5 The Article expresses the compensatory aim of damages, namely to reinstate the party who has been affected by non-performance, as far as money can do, to the state it would have been in had the obligation been duly performed (principle of restitutio in integrum).

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Article 8:402 Measure of damages

Art 8:402 6–8

The provision details further which kinds of losses are to be compensated. It clarifies that damages must not only compensate an ensued damage (damnum emergens) but also lost profits (lucrum cessans) as well as costs reasonably incurred to enforce the infringed obligation and, where appropriate, non-pecuniary losses. The compensation principle of the Article gives also some guidance on the assessment of damages which are generally a money payment and have to make good the entire loss.

2.

Context

The provision is part of the damages section of Chapter 8 and supplements the basic dam- 6 ages norm of Art. 8:401 ACQP by specifying how the amount of damages is to be assessed.

3.

Explanation

a)

Aim of compensation

According to the present Article, the general aim and function of damages is compensa- 7 tion. Damages should reinstate the creditor as far as possible to the state which would have existed had the contractual or pre-contractual obligation been correctly performed. Here shall be referred to Art. 4(7) of the Package Travel D. and also to Art. 17(3) of the Commercial Agents D. (“The commercial agent shall be entitled to compensation for the damage he suffers as a result of the termination of his relations with the principal.”). As far as the mentioned EU instruments concern damages such as the Regulation on Air Carrier Liability and the Package Travel D. – but also the Product Liability D. – they follow the maxim that damages due are only if the creditor has suffered a loss which has been caused by the other party’s non-performance of an obligation. As already indicated, this is also the basic principle of the CISG and in other sets of International Principles. Damages therefore require a loss and have to compensate the entire loss caused by the 8 breach of the obligation. At the same time nothing more than the loss has to be made good. By argumentum e contrario it has to be inferred that damages must not enrich the claimant. The formulated principle does not exclude nominal damages (cf. ECJ C-34/87 – Culin v Commission); however, it does not allow for punitive damages to be granted which place a money sanction on the debtor which is not related to the extent of the loss of the claimant but to the character of the conduct of the debtor. None of the Regulations and Directives mentioned above, which provide for damages, grant punitive or other non-compensatory damages. Even the penalty available under the Denied Boarding Regulation aims mainly at the compensation of the discomfort and possible costs of passengers whose flights were cancelled or overbooked. As a rule, compensation is achieved by a money payment.

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Art 8:402 9–12

b)

Chapter 8: Remedies General Provisions . Section 4: Damages

General measure of damages

9 The general measure of damages is the amount necessary to reinstate the claimant to the position which this party would have if non-performance had not occurred (paragraph (1)). This party is entitled to what he could expect under the contract and this expectation interest has to be compensated. Though not explicitly stated by the Package Travel D. and the Commercial Agents D., this principle is nonetheless to be inferred from these Directives by necessary implication (See Art. 4(7) of the Package Travel D. and Art. 17(3) of the Commercial Agents D.). The amount of damages need not only compensate any emerging loss, but must also cover a sufficiently likely gain of which the claimant has been deprived (paragraph (2)). Where, however, non-performance of the obligation has resulted in damage to the integrity of the claimant’s person or property, this loss of integrity interest has also to be compensated (As an example cf. the decision of the ECJ in Leitner v TUI). In case of personal injury, this covers in particular the costs required for recovery, but also includes lost earnings. In case of damage to property, it is usually the costs for repair or for a substitute. In appropriate cases, the compensation principle may also require that the loss of use must be compensated. 10 Paragraph (3) states further that damages also include costs for the enforcement of an obligation. This covers in particular costs for legal advice etc., however, subject to the condition that these costs were reasonable. That means that the enforcement costs were necessary and that their amount conforms with the generally usual amount. However, as far as costs for legal proceedings are regulated by specific legislation, those rules will prevail. 11 The present Article does not explicitly define the yardstick according to which infringed interests, in particular mere economic interests, are to be assessed in money terms. The compensation principle has, however, the consequence that generally that a sum of money is owed which is necessary to provide identical goods on the market in order to reinstate the claimant. The regular measure of damages is therefore the market value of the infringed position. c)

Pecuniary and non-pecuniary damage

12 Paragraph (4) specifically addresses non-pecuniary losses: “where the purpose of the obligation includes the protection or satisfaction of non-pecuniary interests” non-pecuniary losses must also be compensated. Thus, the nature of the obligation must allow and require that damages for immaterial harm are granted, for instance, if the non-performance of a debtor’s duty caused bodily harm combined with pain and suffering to the aggrieved person. In most cases the loss caused by a breach of contract or of a pre-contractual duty will, however, be of a pecuniary nature, namely a diminution of the aggrieved person’s assets either because this person has lost profits, or because its tangible and intangible property rights have been damaged or destroyed or because this person had to spend money on making good the damage.

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Article 8:403 Contributory negligence and mitigation

Art 8:402, 13, 14 Art 8:403, 1

But as the ECJ held in the Leitner v TUI decision (C-168/00) in appropriate cases, non- 13 pecuniary damage such as pain and suffering has also to be compensated. In order to be compensable, this kind of damage must be covered by the protective scope of the contract; the contract must intend to prevent such loss. A package tour contract during the performance of which a protected person is injured such as in Leitner v TUI is a good example of a contract which intends to prevent discomfort or injury to the traveller.

4.

Example

A enters into a package tour contract for himself and his family with tour organiser B. A’s 14 daughter suffers a salmonella infection caused by contaminated food served in the booked hotel. B cannot prove that the salmonella infection was beyond B’s control. B is therefore liable for the damage. The amount of damages includes cost of medical treatment but also a reasonable compensation for pain and suffering and loss of holiday enjoyment.

Article 8:403: Contributory negligence and mitigation Damages are reduced or excluded to the extent that the creditor wilfully or negligently contributed to the effects of the non-performance or could have reduced the loss by taking reasonable steps.

A. Foundation in the Acquis 1.

Sources

Several EU Regulations and Directives recognise that the creditor’s contribution to the 1 damage reduces or even excludes this person’s claim for damages. These include the Regulation on Air Carrier Liability (Art. 3(3)), the Package Travel D. (Art. 5(2) first indent), the Cross Border Credit Transfer D. (Art. 6(3)) and the Product Liability D. (Art 8(2)). Moreover, the ECJ has applied the principle of contributory negligence in order to reduce the claim of an injured party (see Case C-308/87 – Grifoni II; though in this case Italian law was agreed as applicable). Articles 77, 80 CISG, Art. 9:504 and 9:505 of the PECL and Art. 7.4.7 and 7.4.8 UNIDROIT Principles also provide that contributory negligence of the claimant or this party’s failure to mitigate the damage afterwards may reduce or exclude the right to damages. The same rule is recognised by the Principles of European Tort Law (Art. 8:101).

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Art 8:403 2– 4

2.

Chapter 8: Remedies General Provisions . Section 4: Damages

Development

2 The principle that contributory negligence may reduce or even exclude a claim is widely accepted and belongs to those principles which have for long been part of the acquis.

3.

Political Issues

3 The recognition of contributory negligence is mainly based on the policy argument that a creditor cannot claim full damages for a loss which the creditor himself or herself contributed to and which he or she could have avoided or reduced. The formulations by which the present acquis expresses the principle of contributory negligence are not very coherent (see also the comment to Art. 8:102 ACQP). The Package Travel D. and the Cross Border Credit Transfer D. use the expression that failed performance must be “attributable” to the creditor (cf. Art. 5(2) first indent of the Package Travel D. and Art. 6(3) of the Cross Border Credit Transfer D.). The Air Carrier Liability Regulation requires in Art. 3(3) that the damage is “caused by, or contributed to by, negligence of the injured or deceased passenger.” Art. 8(2) of the Product Liability D. partly or wholly relieves the producer from liability where “the damage is caused both by a defect in the product and by the fault of the injured person or any person for whom the injured person is responsible.” But despite the differing formulations the underlying general principle is clear and can be expressed as formulated by the present Article. The coherence of the acquis may be also doubted insofar as Art. 6(3) of the Cross Border Credit Transfer D. excludes any compensation in case a delay is attributable to the creditor while the other instruments cited allow a reduction or exclusion of damages depending on the circumstances. The inconsistency can be removed if Art. 6(3) of the Cross Border Credit Transfer D. is understood to refer only to a delay which is exclusively attributable to the creditor. This interpretation would make way for a generalisation, namely that an apportionment according to the circumstances should be allowed.

B.

Commentary

1.

Meaning and Purpose

4 The Article at hand states a widely accepted principle. A creditor cannot claim damages insofar as and to the extent that he or she is (also) responsible for the creation of a damage or has failed to reduce the consequences after a damage has occurred. The reduction or even exclusion of a damages claim because of contributory negligence or failure to mitigate requires, however, that the creditor has neglected a duty in the own interest to look after his or her own goods or other interests and avoid damage.

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Article 8:403 Contributory negligence and mitigation

2.

Art 8:403 5–8

Context

The provision is part of the damages section of Chapter 8 and specifies a qualification for 5 damages claims. It is based on the more general principle that a creditor should not profit from his or her own wrongs. The Article must also be seen in conjunction with Art. 8:102 ACQP. While the present Article addresses the stage (and the creditor’s duties) when a loss has occurred, Art. 8:102 ACQP expresses the same idea for the phase of non-performance of an obligation which need not necessarily result in a loss.

3.

Explanation

a)

Contribution or mitigation

It does not matter whether the creditor’s contributory negligence relates to the creation 6 of the damage or to subsequent mitigation of its effects (or lack of it) after the initial damage had already occurred. In both phases the creditor is obliged to avoid damage as far as this is reasonable. If the creditor neglects this duty this results in a reduction of the amount of damages to the extent to which the creditor could have avoided the damage. In case of contributory negligence the amount of damages is to be reduced, in extreme cases even to nil. Generally, it falls on the liable party to plead and prove the facts which found the defence of contributory negligence or omitted mitigation. b)

Relevant factors

Present EC legislation does not state which factors have to be taken into account for the 7 eventual reduction or exclusion of the creditor’s claim for damages. It is, however, necessary that the creditor has negligently violated the duty to protect his or her own goods or other interests.

4.

Example

A enters into a package tour contract for himself and his family with tour organiser B. A’s 8 daughter suffers a salmonella infection caused by contaminated food served in the booked hotel. Immediate treatment would have avoided a longer stay at hospital. However, A waits for several days before consulting a medical practitioner. B is liable for the damage (cost of medical treatment), but B is liable only for those costs which A would have incurred if he had consulted a medical practitioner immediately.

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Art 8:404, 1 Art 8:405, 1, 2

Article 8:404: Interest on delayed payment

Chapter 8: Remedies General Provisions . Section 4: Damages

5

(1) If payment of a sum of money is delayed, whether or not the non-performance is excused, the creditor is entitled to interest on that sum from the time when payment is due to the time of payment at the average commercial bank short-term lending rate to prime borrowers prevailing for the contractual currency of payment at the place where payment is due. (2) The creditor may in addition recover damages for any further loss.

Provisional Comments 1 There is insufficient basis in the acquis for formulating such a rule. The DCFR rule above is reproduced in order to show the context in which the acquis rules can operate. Please note that the words and expressions used in the rule above may be inconsistent with Acquis Group terminology.

Article 8:405: Interest in case of creditor’s non-performance The creditor is not entitled to interest to the extent that there has been non-performance of the creditor’s reciprocal obligation.

A. Foundation in the Acquis 1.

Sources

1 The acquis contains a similar rule in Art. 3(1)(c)(i) of the Late Payment D. according to which “the creditor shall be entitled to interest for late payment to the extent (. . .) that he has fulfilled his contractual and legal obligations (. . .)”.

2.

Development

2 The acquis deals with questions of interest rather extensively. The above-mentioned provision of the Late Payment D. can be generalised.

5

440

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Article 8:405 Interest in case of creditor’s non-performance

3.

Art 8:405 3–7

Political Issues

It can be questioned whether a creditor should be entitled to interest only if this party has 3 fulfilled its own obligations. However, the synallagmatic relationship of contracts strongly favours this solution.

B.

Commentary

1.

Meaning and Purpose

The Article restricts the creditor’s right to interest. Under Art. 8:404 ACQP, the debtor 4 is obliged to pay interest irrespective of whether the non-performance of his or her payment obligation is excused, because in any case the debtor could use the money which he or she owed the creditor. The present Article excludes the creditor’s right to interest if and to the extent that the creditor has not fulfilled the own reciprocal obligation.

2.

Context

The Article prevails over Art. 8:406 ACQP which determines the time from which in- 5 terest starts to run. This latter provision must be understood as being subject to the present Article. Otherwise, the Article would have almost no practical application.

3.

Explanation

It is a consequence of the general maxim of good faith and fair dealing that the creditor 6 can claim interest only if this party has fulfilled its own corresponding obligation. If, for instance, the buyer withholds payment because delivery has not occurred (assuming that the buyer is neither obliged to pay in advance, nor irrespective of delivery at a certain date), then it would offend the principle of good faith if the seller would nonetheless be entitled to interest from the date of the agreed delivery. However, it should also be noted that the provision refers only to the reciprocal obligation of the creditor. If the creditor does not fulfill an obligation which is entirely unrelated to the debtor’s payment obligation, then interest is due.

4.

Example

Business A has sold a printing machine to business B. The date of delivery is 30 June, the 7 date of payment 30 July. A delivers on October 31 and B pays on November 15. A is not entitled to interest for the time between the contractual date of payment and the actual payment since A had not performed the own reciprocal obligation i.e. delivery. Art. 8:405 calls for the contract being interpreted in such a way that B had a payment period of one month after delivery.

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Art 8:406 1, 2

Chapter 8: Remedies General Provisions . Section 4: Damages

Article 8:406: Interest in commercial contracts (1) If a business delays the payment of a price for goods or services owed to a business without being excused under Article 8:401 (Right to damages), interest is due at the rate specified in paragraph (4), unless a higher interest rate is applicable. (2) Interest at the rate specified in paragraph (4) starts to run (a) on the day which follows the date or the end of the period for payment provided in the contract, and otherwise (b) 30 days after the date when the debtor receives the invoice or an equivalent request for payment; or (c) 30 days after the date of receipt of the goods or services, if the date under (b) is earlier or uncertain, or if it is uncertain whether the debtor has received an invoice or equivalent request for payment. (3) If conformity of goods or services to the contract is to be ascertained by way of acceptance or verification, the 30 day period under paragraph (2)(c) starts to run on the date of acceptance or verification. (4) The interest rate for delayed payment (“the statutory rate”) is the interest rate applied by the European Central Bank to its most recent main refinancing operation carried out before the first calendar day of the half-year in question (“the reference rate”), plus seven percentage points (“the margin”), unless otherwise specified in the contract. For the currency of a Member State which is not participating in the third stage of economic and monetary union, the reference rate is the equivalent rate set by its national central bank. (5) The creditor may in addition recover damages for any further loss.

A. Foundation in the Acquis 1.

Sources

1 Community rules on interest are to be found in Art. 3 of the Late Payment D. (on the date from which interest is running and on the rate of interest) and in Art. 6(1) and (2) of the Cross Border Credit Transfer D. (on the right to interest). ECJ and CFI have recognised in several decisions, e.g. C-104/89 and C-37/90 – Mulder a.o. v Council and Commission and T-231/97 – New Europe Consulting Ltd. a. o. v Commission that interest has to be paid on sums which are due. Interest is due at least from the day of the judgment. Art. 78 and 84(1) CISG, Art. 9:508 of the PECL and Art. 7(4) and (9) of the UNIDROIT Principles also contain provisions which allow for interest if the payment of a sum of money is delayed.

2.

Development

2 The provision follows the Late Payment D. which details the obligation to pay interest between businesses if a payment has been delayed.

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Article 8:406 Interest in commercial contracts

3.

Art 8:406 3–7

Political Issues

A policy issue is the question whether or not interest should be due if the debtor’s delayed 3 payment is excused by grounds beyond his or her control. However, irrespective of any exoneration during delay, the debtor is in possession of the money that should actually be in the hands of the creditor. For this reason, the CISG for example does not apply the exoneration provision to interest claims. On the other hand, it can likewise be argued that an exoneration to pay must also extend to the duty to pay interest. The acquis follows this latter rule.

B.

Commentary

1.

Meaning and Purpose

The Article addresses the obligation to pay interest between businesses and specifies (for 4 them) the general provision contained in Art. 8:404 ACQP; which follows exactly the provisions of the Late Payment D. The interest due under the present Article accrues only if the business is not excused from delayed payment by circumstances beyond its control. The present Article further details the date from which on the interest obligation starts to run, and it fixes the rate of interest.

2.

Context

The Article is to be read in conjunction with Art. 8:405 and Art. 8:401 ACQP. If the 5 creditor itself does not perform his or her own reciprocal obligation, then he or she cannot claim interest. Furthermore, the debtor is exonerated from the duty to pay interest if the delay is excused by circumstances beyond the debtor’s control. Paragraph (5) reserves the creditor’s right to recover damages for any further loss under Art. 8:401 ACQP.

3.

Explanation

a)

Right to interest

The right to interest amongst businesses accrues when the payment of a sum of money is 6 delayed. The right accrues automatically without specified notice being necessary (see Art. 3(1)(a) and (b) of the Late Payment D.). The ground for the delay is generally irrelevant. The right to interest does, however, not accrue if the debtor can prove that he or she is not responsible for the delay. b)

Relevant date

Paragraph (2), the wording of which is taken from Art. 3 of the Late Payment D., fixes 7 the regular date from which interest starts running for transactions between commercial parties: first, on the agreed date; otherwise 30 days after the receipt of the goods or ser-

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Art 8:406, 8–10 Art 8:407

Chapter 8: Remedies General Provisions . Section 4: Damages

vices or, if later, 30 days after receipt of the invoice. Paragraph (3) postpones this date where goods or services have to first be ascertained in a certain way. c)

Relevant rate

8 Paragraph (4) fixes the relevant rate of interest in accordance with Art. 3(1)(d) of the Late Payment D. if the parties to the contract have not agreed on another rate of interest. d)

Further damage

9 Interest is a means to fix in a rather abstract way the damage caused by delayed payment. Since the concrete damage of the creditor may be higher, paragraph (5) provides that this party may also recover further damage.

4.

Example

10 Business A has sold a lorry to business B for J 100.000. The parties have not agreed on particular dates for delivery and payment. The lorry is delivered on 5 May. A sends an invoice which B receives on 17 July. B pays on 30 October. The money reaches A’s bank account on the same date. B is obliged according to Art. 8:406(2)(b) to pay interest from 30 days after the date when it received the invoice (the earlier receipt of the lorry is irrelevant). Interest therefore runs from 17 August until 29 October. The rate of interest is to be determined according to Art. 8:406(4). If A had to take credit at a higher interest rate or had other losses caused by the delay, A is still entitled to recover damages for that loss (Art. 8:406(5)).

Article 8:407: Unfair terms relating to interest (1) A term whereby a business pays to another business interest on a price for goods or services from a date later than that specified in the preceding Article paragraph (2)(b) and (c) and paragraph (3), or at a rate lower than that specified in paragraph (4), is not binding to the extent that the term is unfair. (2) A term whereby a business is allowed to pay to another business the price for goods or services later than the time when interest starts to run under the preceding Article paragraph (2) (b) and (c) and paragraph (3) does not deprive the creditor of interest to the extent that the term is unfair. (3) A term is unfair for the purposes of this Article if it grossly deviates from good commercial practice.

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Article 8:407 Unfair terms relating to interest

Art 8:407 1–5

A. Foundation in the Acquis 1.

Sources

The Article is based on Art. 3(3) of the Late Payment D. That provision allows the al- 1 ternative options either to invalidate unfair clauses on interest or deferred payment or, to grant a claim for damages instead. The present provision opts for the first alternative. Neither the CISG nor the PECL or the UNIDROIT Principles contain a comparable rule.

2.

Development

The provision is part of the EU strategy to improve the situation of small and medium- 2 sized enterprises for which late payment is a particular problem and burden often threatening their existence (see also Recital 1 and 7 of the Late Payment D.). Cross-border trade and the proper functioning of the single market is also regarded as being impaired by different payment rules and practices (Recital 9 of the Late Payment D.).

3.

Political Issues

The Late Payment D. requires a choice between the option to either invalidate clauses 3 inconsistent with the Directive, or to award damages where inconsistent clauses are used. A policy choice could also combine both approaches by first invalidating such clause and then entitling the creditor in addition to damages with respect to any further loss caused through late payment.

B.

Commentary

1.

Meaning and Purpose

The Article invalidates certain clauses concerning interest and late payment between 4 businesses when these clauses are grossly unfair to the creditor. The provision intends to “prohibit abuse of freedom of contract to the disadvantage of the creditor” (see verbally Recital 19 of the Late Payment D. which justifies the respective provision of that Directive).

2.

Context

The provision belongs to the Articles on interest (Art. 8:405 to 8:407 ACQP) which in 5 essence intend to discourage late payment. The Article does not preclude a claim for damages if the use of unfair interest terms should have caused any damage to the creditor.

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Art 8:407 6–10

3.

Explanation

a)

Deviation from prescribed interest parameters

Chapter 8: Remedies General Provisions . Section 4: Damages

6 Paragraph (1) invalidates a clause under which the date or rate of interest deviates from the standards provided by law if, in the light of all circumstances, the clause is grossly unfair to the creditor. The term ‘clause’ does not require a standard contract term; individually negotiated clauses are also covered Art. 3(3) of the Late Payment D. uses the notion “agreement” and thus comprises also individually negotiated terms. However, the purpose of the provision requires that the clause must be proposed by, and agreed upon on the initiative of, the debtor. If the creditor voluntarily proposed the clause, it cannot be regarded as grossly unfair to this party. 7 Whether a clause is grossly unfair depends on all the circumstances and must be objectively assessed with respect i. a. to good commercial practice (e.g. the usual date and rate of interest in the specific branch) and the nature of the goods or services. Attention must be paid to the fact whether the debtor has any objective reason to deviate from the statutory interest parameters (see explicitly Art. 3(3) of the Late Payment D.). b)

Extension of payment date

8 Paragraph (2) provides that the creditor does not lose the entitlement to interest if a clause extends the time for payment over the period from which interest would normally start running and if such an extension is grossly unfair to the creditor. The question of gross unfairness has to be answered in the same way as under paragraph (1). c)

Consequences

9 If a clause is grossly unfair, it cannot be enforced (Art. 3(3) of the Late Payment D.). The debtor cannot rely on it. Standard legal rules on interest, as provided by Art. 3(3) of the Late Payment D., will apply instead. This rule however, allows that the national courts may determine differing fair conditions.

4.

Example

10 Business A (seller) and business B (buyer) have entered into a contract on the sale of computer hardware. B’s standard terms have been validly incorporated into the contract. The standard terms contain the following clause: “In case of delayed payment, interest starts running only if the delivered hardware has functioned correctly for a period of twelve months.” The clause must be interpreted contra proferentem (Art. 6:203 (1)ACQP). It must therefore be read as meaning that the contractual date at which interest starts running is one year after delivery. A further requirement is the correct functioning of the delivered goods. This clause drastically deviates from the normal date when interest begins to run. It must be regarded as grossly unfair and incompatible with good commercial practices since it excludes an effective sanction for delayed payment. In

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Article 8:407 Unfair terms relating to interest

Art 8:407 10

fact, if valid, the clause would encourage the buyer to delay payment for a whole year. The buyer’s /debtor’s interest to ensure that the bought goods conform to the contract would be one-sidedly preferred at the expense of the seller /creditor.

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Specific Provisions Part A: Contracts Negotiated Away from Business Premises Article 8:A-01: Goods or services ordered are unavailable (1) Where a business is unable to perform its obligations under a contract concluded by means of distance communication because the goods or services ordered are unavailable, it must inform the consumer immediately and refund any sums paid by the consumer without undue delay and in any case within 30 days. The consumer’s remedies for non-performance remain unaffected. (2) Paragraph (1) is mandatory in the sense of Article 1:203 (Mandatory nature of consumer rules).

A. Foundation in the Acquis 1.

Sources

1 This Article is based on Art. 7(2) of the Distance Selling D.: Art. 7(2) Distance Selling D.

2.

Where a supplier fails to perform his side of the contract on the grounds that the goods or services ordered are unavailable, the consumer must be informed of this situation and must be able to obtain a refund of any sums he has paid as soon as possible and in any case within 30 days.

Development

2 The present Article deals with the situation where a business is unable to perform its obligations under a contract concluded by means of distance communication because the goods or services ordered are unavailable. The provision imposes two obligations on the business. The first is to immediately inform the consumer about the unavailability. The second is to refund any sums paid by the consumer without undue delay and in any case within 30 days. It is correctly submitted in parts of the literature that these two obligations can be inferred from the general rules of contract law. This is why some national legislators decided not to include this provision into the legislation implementing the Distance Selling Directive (see ConsLC, p. 354 and 355).

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Article 8:A-01 Goods or services ordered are unavailable

Art 8:A-01 3–5

These two obligations can be also inferred from the Acquis Principle (see point B.2. below). Nevertheless, the problem of unavailability of goods or services deserves particular consideration in the case of contracts concluded by means of distance communication. At the moment of concluding such a contract, the business may be unaware of the fact that goods or services are not available. On the other hand, the consumer can reasonably expect that the goods or services will be supplied to him or her in due time. The protection of these expectations requires that once the business has become aware of the fact that the goods or services ordered are unavailable, the consumer must be informed of this immediately. As far as the obligation to refund any sums paid by the consumer is concerned, its importance results from another particular feature of contracts concluded by means of distance communication. The consumer’s access to the supplier is substantially limited or even excluded. This puts the consumer in a very uncomfortable position. The explicit obligation to refund any sums paid by the consumer helps clarify the relations between the parties and improve the otherwise disadvantageous position of the consumer to a certain extent.

B.

Commentary

1.

Meaning and Purpose

The main purpose of the Article at hand is to explicitly impose two obligations on the 3 business in case of the goods or services ordered being unavailable. The business must inform the consumer about the unavailability and must refund any sums paid by the consumer.

2.

Context

As has already been mentioned above, the two obligations referred to in the Article at 4 hand could also be inferred from the general principles of contract law. As far as the Acquis Principles are concerned, the obligation to inform the consumer about the unavailability may be said to result from Art. 7:101 ACQP which expresses the duty to perform in accordance with good faith, as well as the duty to respect the legitimate expectations of consumers. The obligation to refund any sums paid by the consumer has its origins in the provisions of Chapter 8 (Remedies). The protection offered by the present Article is restricted to contracts concluded by 5 means of distance communication. Nevertheless, this should not lead to the e contrario argument that a similar protection of consumers cannot exist for other types of specific contracts. For such other types of contract, similar obligations of the business can be deduced from general principles of contract law.

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Art 8:A-01 6, 7

Chapter 8: Remedies Specific Provisions . Part A: Contracts Negotiated Away from Business Premises

The Article gives additional protection to the consumer. The provision’s second sentence ensures that the consumer’s remedies for non-performance remain unaffected. It has to be emphasized that if the business cannot perform because the goods or services are unavailable, this constitutes non-performance.

3.

Explanation

6 The Article imposes two obligations on the business. The first is to immediately inform the consumer about the unavailability. The second is to refund any sums paid by the consumer without undue delay and in any case within 30 days. The Article does not specify any requirements concerning the way in which the consumer must be informed about the unavailability of the goods or services ordered. This means that the general rules on notice and form apply (Chapter 1 Section 3). The provision does, however, require the business to inform the consumer immediately once it has become aware of the unavailability. It is also reasonable to require the business to verify whether the goods or services ordered are available immediately after the contract has been concluded. 7 As far as the obligation to refund any sums paid by the consumer is concerned, the present Article states that it must be fulfilled “without undue delay and in any case within 30 days”. This raises the issue of the moment of time from which the period of 30 days will start to run. That could be either the moment in which the business becomes aware of the unavailability, or the moment of the conclusion of the contract. A purposive interpretation points towards the second solution. Opting for the moment when the business becomes aware of the unavailability would create too much uncertainty since it will be extremely difficult to prove when that moment occurred. By contrast, the moment of the conclusion of the contract is easy to identify. That way, the time-limit for refunding the sums paid by the consumer will often coincide with the time-limit for delivery (see Art. 7:201 ACQP). Moreover, the business has to verify if goods or services are available immediately after the conclusion of the contract. Having in mind that, ultimately, the two alternative moments of time will not, in practice, be that far apart – since the business’s duty to verify availability immediately after the conclusion of the contract means that if the business were to become aware of an eventual unavailability, that would be immediately after the conclusion of the contract at any rate – as well as for the additional reasons mentioned above –, the period of 30 days starts to run at the moment of the conclusion of the contract.

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Art 8:B-01 1–3

Article 8:B-01 Mandatory nature for consumer contracts

Part B: Contracts for the Delivery of Goods Article 8:B-01: Mandatory nature for consumer contracts In a contract under which a business sells goods, including goods to be manufactured or produced, to a consumer, Articles 8:101 (Definition of non-performance), 8:301 (Grounds for termination and reduction) to 8:303 (Effects of termination), 8:B-02 (Time of conformity) to 8:B-05 (Return of replaced goods) are mandatory in the sense of Article 1:203 (Mandatory nature of consumer rules).

A. Foundation in the Acquis 1.

Sources

According to Art. 7(1) of the Consumer Sales D. “any contractual terms or agreements 1 concluded with the seller before the lack of conformity is brought to the seller’s attention which directly or indirectly waive or restrict the rights resulting from this Directive shall, as provided for by national law, not be binding on the consumer”. Similar provisions expressing the imperative nature of consumer protection rules can be found in other Directives (cf. comments No. 1-5 to Art. 1:203 ACQP).

2.

Development

Instead of repeating more or less literally Art. 7(1) of the Consumer Sales D. the present 2 Article refers to Art. 1:203 ACQP which formulates the general principle that contract terms which are prejudicial to the consumer and which deviate from the rules applicable specifically to relations between businesses and consumers are not binding on the consumer. This technique avoids the repetitive (and also inconsistent) style of the acquis which contains a number of “mandatory law” provisions in the various Directives. The rules enumerated in the present Article mainly reflect Art. 3 and 5 of the Consumer Sales D.

B.

Commentary

1.

Meaning and Purpose

According to the Article any contract terms in B2C contracts which are prejudicial to 3 the consumer and which deviate from rules enumerated in this provision are not binding on the consumer.

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Art 8:B-01, 4–6 Art 8:B-02, 1

2.

Chapter 8: Remedies Specific Provisions . Part B: Contracts for the Delivery of Goods

Context

4 The Article is not the only provision making provisions regarding the delivery of goods mandatory in B2C contracts. A similar provision is Art. 7:B-02 ACQP which makes certain provisions from Chapter 7 (Content and Performance of Obligations) mandatory.

3.

Explanation

5 According to the Article the rules enumerated in this provision are mandatory in the sense of Art. 1:203 ACQP. In consequence, any contract terms in a B2C contract which are prejudicial to the consumer and which deviate from those rules are not binding on the consumer. However, according to Art. 1:203(1) sent. 2 ACQP the mandatory law rule does not apply to agreements which settle an existing dispute.

4.

Example

6 In a B2C contract for the sale of a car, the seller includes a term pursuant to which the consumer is entitled to repair only in case of non-conformity. This contract term is not binding on the consumer as it is prejudicial to him or her, and as it deviates from Art. 8:B-04 ACQP according to which the consumer may choose between repair and replacement as cure of non-performance.

Article 8:B-02: Time of conformity (1) For goods sold, including goods to be manufactured or produced, any lack of conformity in the sense of Article 7:B-01 (Conformity of goods to the contract) which exists at the time when the goods are delivered amounts to non-performance. (2) Paragraph (1) applies accordingly to other contracts under which goods are to be delivered.

A. Foundation in the Acquis 1.

Sources

1 This Article reflects Art. 3(1) of the Consumer Sales D., which states that “[t]he seller shall be liable to the consumer for any lack of conformity which exists at the time the goods were delivered”. The provision at hand closely follows the wording of that article.

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Article 8:B-02 Time of conformity

2.

Art 8:B-02 2–5

Development

The Article does not deviate from the wording of the directive, apart from a small seg- 2 ment which has been inserted to determine the article’s scope of application. This addition was necessary since the various provisions of this Part differ in their scopes of application.

3.

Political Issues

There was some debate among the members of the Acquis Group on whether the scope of 3 application of the rule at hand should be extended to contracts other than those for the sale of goods (including goods to be manufactured or produced). It was ultimately decided that such generalization was not feasible with a view to long-term contracts, particularly rental contracts, since with such contracts the debtor can also be liable for a lack of conformity arising after delivery. The narrower formulation was thus adopted, yet this should not prevent the application of this rule to other similar kinds of contract (such as, for example, barter contracts) by way of analogy. The Acquis Principles intentionally abstain from defining “sale”, thereby leaving room for flexible reasoning.

B.

Commentary

1.

Meaning and Purpose

The present Article determines the point of time relevant for the passing of the risk onto 4 the buyer. It draws a line between the seller’s sphere of risk and that of the buyer. If the lack of conformity arises after the time of delivery, there will be no liability on the part of the seller, who also retains the right to be paid in full.

2.

Context

The Article rounds off the general system of non-performance, as governed by Art. 8:101 5 to 8:407 ACQP, with a view to contracts for the sale of goods (including goods to be manufactured or produced). Its notion of “goods” is identical to that of Art. 7:B-01 ACQP. “Lack of conformity” is used as the opposite of “conformity to the contract” in the sense of Art. 7:B-01 ACQP. The present Article might just as well have been placed in the section on performance since it has a dual function. By determining who is bearing the risk of the item becoming defective, and until what point of time, the present Article also determines whether the debtor has fulfilled its obligation correctly. The decision where to place this rule is therefore a purely technical one which has no influence on the actual content of the rule. The Article is closely linked with Art. 8:B-03 ACQP which establishes a presumption as to when a lack of conformity will be considered to have come into existence.

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Art 8:B-02 6, 7

3.

Chapter 8: Remedies Specific Provisions . Part B: Contracts for the Delivery of Goods

Explanation

6 If a lack of conformity arises after the goods have been delivered, the seller is not liable for this “non-performance” (strictly speaking, there is no non-performance since the debtor has performed its obligation correctly). The term that is crucial to the explanation of this provision is that of “delivery”. The Acquis Principles do not define “delivery”, while Annex I to the DCFR does contain such a definition. According to the Annex, “delivery to a person” means handing over corporeal movable property, or otherwise transferring physical control over it, to that person, or taking steps to ensure that that person can obtain physical control over it. There is no reason to deviate from that notion of “delivery” for the purposes of the Acquis Principles. All this does, however, raise the question of the extent to which the system of the Acquis Principles can be considered as complete. The Consumer Sales D. does not have any rules on modifying the provision on the time of delivery in particular circumstances. Other questions include that of the goods being sent to another place than the place of performance, or that of a delay on the part of the creditor in taking over goods which the debtor had placed at the creditor’s disposal at the place of performance (see also Art. IV. A. – 5:101 DCFR). The present Article creates liability for the debtor in these two last-mentioned cases. Although the debtor has performed its obligation, delivery has not taken place and the debtor is still carrying the risk. This result is acceptable, at least in consumer cases. The notion of “delivery” is thus not linked to the place of performance. Even if the debtor has placed the item at the creditor’s disposal at the place of performance, and the creditor is delayed in taking over the goods, the debtor is still carrying the risk. This result mirrors the directive. The interests of the debtor are protected by Art. 8:102 ACQP which states that the creditor is precluded from exercising remedies against the debtor to the extent that non-performance is attributable to the creditor. Article 8:403 ACQP on contributory negligence may also apply. In B2B and P2P cases this result might seem harsh, but it has to be remembered that with the exception of consumer cases the Article at hand may be modified by contract (Art. 8:B-01 ACQP). If a certain defect appears only after delivery, while its origins were already present in the sold item prior to delivery, the risk will still lie with the seller. While the present Article governs only the issue of a lack of conformity, it should nonetheless also apply to other cases of non-performance (for example, where due to the loss of the item delivery is impossible once and for all). An argument a fortiori can be made for this outcome.

4.

Example

7 A has sold a TV set to B. B is supposed to collect it from A’s shop on Friday but fails to show up. Unfortunately, the TV set is stolen on Saturday night. A is liable for non-performance since delivery has not occurred, but liability may be excluded under Art. 8:102, depending on the circumstances.

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Article 8:B-03 Presumption

Art 8:B-03 1–3

Article 8:B-03: Presumption In a contract under which a business sells goods to a consumer, including goods to be manufactured or produced any lack of conformity which becomes apparent within six months of delivery of the goods is presumed to have existed at the time of delivery, unless such a presumption is incompatible with the nature of the goods or the nature of the lack of conformity.

A. Foundation in the Acquis 1.

Sources

This Article is rather close to Art. 5(3) of the Consumer Sales D. which states that 1 “[u]nless proved otherwise, any lack of conformity which becomes apparent within six months of delivery of the goods shall be presumed to have existed at the time of delivery unless this presumption is incompatible with the nature of the goods or the nature of the lack of conformity”.

2.

Development

Art. 5(3) of the Consumer Sales D. required some reformulation. It is obvious that a “pre- 2 sumption” cannot be raised against proof to the contrary. The wording “unless proved otherwise (...) shall be presumed” is thus confusing, and the directive’s provision was reformulated accordingly for the purposes of the Article at hand.

3.

Political Issues

It might be argued that the presumption of the present Article should be extended. This 3 argument has already been put forward in relation to the Consumer Sales D. More specifically, it has been argued that the presumption should be operative for as long as there is liability on the part of the seller. It is obvious that such presumption would facilitate the enforcement of consumer rights. While taking note of these problems, the Acquis Group ultimately decided to maintain the time period stated in the directive since changing it would require a purely political decision. In the current system of the Acquis Principles it would also be difficult to adopt a different system given that there are no rules on the time limits for the enforcement of rights. The Acquis Group also discussed whether the presumption at hand should be extended to other types of contracts. It ultimately decided that this would be to too harsh on the debtor, particularly in the case of gratuitous contracts.

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Art 8:B-03 4–7

B.

Commentary

1.

Meaning and Purpose

Chapter 8: Remedies Specific Provisions . Part B: Contracts for the Delivery of Goods

4 The present Article makes it easier for the consumer to establish lack of conformity. In numerous cases concerning the issue of the defectiveness of goods, the question of the burden of proof will be decisive to the outcome of the case. Without the device of a presumption working in his or her favour, a consumer might be prevented from even trying to assert his or her rights, due to the considerable cost of experts and other practical difficulties in furnishing proof.

2.

Context

5 The Article needs to be read together with Art. 8:B-02 ACQP. The provision relieves the consumer from having to prove that the lack of conformity existed at the time of delivery in cases where the lack of conformity became apparent within six months after delivery. See also the comments to Art. 8:B-02 ACQP.

3.

Explanation

6 The Article uses the notions of “goods” and “lack of conformity” in the same way as does Art. 8:B-02 ACQP (see the comments to that article). Generally, a party who resorts to the remedies of non-performance needs to prove the existence of all elements which are necessary for creating liability of the debtor. However, the law will facilitate the enforcement of rights in certain circumstances by changing the burden of proof. One such case is the present Article. The existence of a lack of conformity at the time of delivery is thus presumed if: (1) there is a contract for the sale of goods, including goods to be manufactured or produced; (2) that contract is concluded between a business and a consumer; (3) the lack of conformity becomes apparent within a period of six months after delivery; and (4) such presumption is not incompatible with the nature of the goods or the nature of the lack of conformity. 7 If the consumer notifies the seller of the lack of conformity once this six months period has passed, he or she will have to prove that the lack of conformity became apparent within the six-month period if he or she wants to benefit from the presumption under the present Article. The period of six months starts with effective delivery, and also with the consumer taking control over the item. Even if the consumer was late in taking the goods from the place of performance, this will not cause an earlier start of this period. The lack of conformity needs to become apparent within this period, i.e. the defect in the item needs to emerge and become visible. It does not matter whether the consumer actually learned of the lack of conformity within the six-month period.

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Article 8:B-03 Presumption

Art 8:B-03 8, 9

Even if the lack of conformity has become apparent within the six-month period this does not establish a presumption where this would be incompatible with the nature of the goods or the nature of the lack of conformity. If, however, a lack of conformity appears within a period of time which is short enough to make a presumption in the sense of the present Article compatible with the nature of the goods or the nature of the lack of conformity, such a presumption will arise. In those cases, the burden of proving that the presumption is not, in fact, compatible with the nature of the goods or the nature of the lack of conformity will be on the seller. To give an example for a presumption which is incompatible in the abovementioned sense, one may point to contracts for the sale of food which has a period of consumption of less than six months. In such cases, the fact that the food deteriorated within the sixmonth period cannot usually be taken to establish the presumption that a lack of conformity existed at the time of delivery. The appearance of diseases with a period of incubation of less than six months in animals that a business has sold to a consumer provides a similar example of the said kind of incompatibility. If the presumption of the present Article does not apply, the consumer needs to prove that the lack of conformity existed at the time of delivery. The Article does not preclude certain factual presumptions from arising under national civil procedural rules.

4.

Examples

Example 1 Consumer A bought an oven in spring but uses it first in mid-winter, when the six-month 8 period after delivery has already lapsed. The oven does not work at all. A needs to prove that the lack of conformity existed at the time of delivery. The argument that the consumer has never used the item before does not help, since Art. 8:B-03 is an exception to the general rule and should thus not be extended. Example 2 Consumer A buys a car and soon afterwards leaves the country. The car is being used by 9 A’s friends. Three months after delivery they discover defects in the engine of the car. A, who was never informed of this, returns after a period of six months. If she can prove that the defect became apparent prior to the lapse of the six-month period, the presumption will apply even though A did not know about the defect at the relevant time.

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Art 8:B-04 1–3

Chapter 8: Remedies Specific Provisions . Part B: Contracts for the Delivery of Goods

Article 8:B-04: Choice of cure In a contract under which a business sells goods to a consumer, including goods to be manufactured or produced, the consumer may choose between repair and replacement as cure of non-performance in the sense of Art. 8:202 (Non-monetary obligations) paragraphs (2) and (3).

A. Foundation in the Acquis 1.

Sources

1 The source for the present Article is Art. 3(3) of the Consumer Sales D., which states that “in the first place, the consumer may require the seller to repair the goods or he may require the seller to replace them, in either case free of charge, unless this is impossible or disproportionate [...]”. The meaning of this provision is not entirely clear. It can be interpreted as stating that the consumer has a right to specific performance in the form of a right to repair or replacement of the goods. Alternatively, the provision can be understood merely as a barrier to a premature termination of the contract, or a premature price reduction. If the provision were to be interpreted in the latter sense, a consumer would primarily be entitled to obtain repair or replacement, and would be authorized to resort to secondary remedies (termination and price reduction) only if the seller failed to repair or replace the goods.

2.

Development

2 The Article at hand is an exception to the general rule of Art. 8:301 ACQP. By providing a choice of cure (between repair and replacement) the ACQP maintain the standard of the Consumer Sales D. According to the general system of the ACQP the right to choose the method of cure belongs to the debtor (Art. 8:301(1) ACQP).

3.

Political Issues

3 There was some debate among the members of the Acquis Group about whether the approach of the directive should have been adopted at all, even with respect to cases of a lack of conformity in consumer contracts for the sale of goods. The system of the directive is arguably highly ineffective because the buyer does not know which way of cure is the most effective. This consideration influenced the modelling of a general rule in Art. 8:301 ACQP. However, while offering a more effective solution, the provision which is reproduced above could be considered controversial as well because it lifts the specific system of the Consumer Sales D. to the level of general law on non-performance. Ultimately, it was decided to adopt a provision which would reproduce the approach of the directive, but only with respect to consumer contracts for the sale of goods. This decision is justified not only by the need to find sufficient legitimacy for the present provision in the current acquis. More importantly, the directive tries to ensure that the method of

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Article 8:B-04 Choice of cure

Art 8:B-04 4, 5

cure employed in a particular case will be that which is most convenient to the consumer. If the choice of cure had been left to the business, that business would mostly tend to apply a method of cure which is inconvenient for the consumer. Repairing the goods is often not very promising in terms of achieving conformity with the contract, but the consumer is hardly able to prove this. The consumer’s right to choose may thus allow him or her to avoid a prolonged dispute with the seller. In the light of these considerations, a provision which closely follows the text of the directive was adopted. To sum up, the Acquis Principles contain both the abovementioned general rule, which has the merit of being more effective, and the provision at hand, i.e. a special rule of limited application that has the advantage of being more consumer friendly, while probably also being less effective.

B.

Commentary

1.

Meaning and Purpose

The present Article is a mere modification of the system of Art. 8:301 ACQP. The con- 4 sumer’s right to choose the method of cure is a limitation to the seller’s right to cure the non-performance. As the reference to the provisions on specific performance show (Art. 8:202(2) and (3) ACQP), this means that the conditions of the consumer’s right to enforce repair or replacement are the same conditions which also apply the debtor’s right to obtain specific performance. While this provision limits the debtor’s choice of the method of cure, it still upholds the basic assumption that, even when a lack of conformity has occurred, the debtor should get the chance to cure it and thus to prevent termination of the contract or reduction of the price.

2.

Context

The Article applies to consumer contracts for the sale of goods to be manufactured or 5 produced. Within this sphere of application the provision constitutes a deviation from the general principle that the debtor is entitled to choose the method of cure, which is stated in Art. 8:301(1) ACQP. The present Article refers to paragraphs (2) and (3) of Art. 8:202 ACQP. This means that the repair or replacement must be performed free of charge in accordance with (Art. 8:202(2) ACQP). The consumer may not choose a particular method of cure where that cure would be unlawful or impossible (cf. Art. 8:202(2) (a) ACQP), or unreasonably burdensome or expensive (cf. Art. 8:202(2)(b) ACQP), or where it would imply an activity of such a personal character that it would be unreasonable to compel specific enforcement (Art. 8:202(2)(c) ACQP). The consumer may reduce his or her own performance or terminate the contract (in cases of Art. 8:301(2) ACQP it may only do the latter) right away, i.e. without first having to request cure, if both repair and replacement of the goods meet the aforementioned negative conditions of Art. 8:202(2) and (3) ACQP, or if Art. 8:301(2) ACQP applies.

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Art 8:B-04 6–9

3.

Chapter 8: Remedies Specific Provisions . Part B: Contracts for the Delivery of Goods

Explanation

6 In case of a lack of conformity of the goods sold, the consumer may resort to all the general remedies available for non-performance (Art. 8:101 et seq. ACQP). In contrast to the general rule of Art. 8:301(1) ACQP, the consumer may choose the method of cure, that is whether the goods must be repaired or replaced. This right to choose the method of cure is confined to a lack of conformity of the goods sold. It does not extend to other kinds of non-performance, where the right to select the method of cure lies with the debtor. Where the debtor fails to apply the method of cure chosen by the creditor, with the effect that the lack of conformity persists, Art. 8:301(1) ACQP becomes relevant. The consumer’s right to choose is limited to the alternative between repair and replacement. If the consumer has opted for repair, he or she cannot specify how exactly the goods must be repaired. It is for seller to determine the details of the method of repair, provided that the method chosen is suitable to establish conformity with the contract. The seller cannot claim any kind of compensation, even if the consumer acquired some additional value as a result of the cure, cf. the ECJ Quelle judgment (18 April 2008, C-404/ 06 – Quelle AG v Bundesverband der Verbraucherzentralen und Verbraucherverbände). 7 The consumer must not select a method of cure which is unlawful or impossible (Art. 8:202(3)(a) ACQP). It seems difficult to imagine a method of cure that would be “unlawful”. If it was possible to trade the goods in the first place, only very exceptional circumstances would render a subsequent cure unlawful. This might be the case only where trading in certain goods is subsequently prohibited so that replacing one of these goods would be unlawful. The impossibility of a certain method of cure is much more likely to arise. The defect can be so serious that repair cannot achieve conformity with the contract. As far as replacement is concerned, there is, however, no impossibility even if the goods sold went out of production, as long as a follow-up generation of these goods, serving exactly the same function, is available on the market. However, the replacement of used goods will usually be impossible. 8 The consumer is prevented from choosing a method which is unreasonably burdensome or expensive (Art. 8:202(2)(b) ACQP). Such a restriction of the consumer’s choice may result from a comparison between repair and replacement. If repair is substantially cheaper than replacement, while both are suited to establish conformity with the contract, the consumer cannot require a replacement. A method of cure will also be unreasonably burdensome or expensive if the loss of value caused by the lack of conformity is substantially below the costs of curing the lack of conformity. 9 The consumer is also prevented from choosing a particular method of cure that would be unreasonable to enforce since it would involve a performance of a personal character (Art. 8:202(2)(c) ACQP). An example in point could be the repair of a piece of art to be undertaken by the seller. Usually, however, a duty to repair will not be strictly personal.

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Art 8:B-04, 10, 11 Art 8:B-05, 1, 2

Article 8:B-05 Return of replaced goods

Where one method of cure cannot be requested, the consumer must first resort to the 10 alternative method before resorting to the remedies of termination or price reduction. The consumer may enforce whatever method of cure is available to him or her if the requirements of Art. 8:202 ACQP on specific performance are met.

4.

Example

The monitor of a laptop sold to a consumer has an irreparable defect. These laptops are 11 no longer produced, yet there is a new, more expensive version of the same model on the market. The consumer may still require replacement by way of the delivery of a new laptop, namely one of a kind which is closest to that which was originally sold, and he or she may enforce this remedy in court.

Article 8:B-05: Return of replaced goods (1) Where the supplier has replaced non-conforming goods, the supplier has both the right and the obligation to take back the replaced goods at the supplier’s expense. (2) If the supplier is a business and the recipient a consumer, the recipient is not liable to pay for any use made of the replaced goods prior to the replacement.

A. Foundation in the Acquis 1.

Sources

The present Article is based on Art. 3(3) sent. 1 of the Consumer Sales D. and on the 1 judgment of the ECJ in the Quelle case (judgement of 18 April 2008, C-404/06 – Quelle AG v Bundesverband der Verbraucherzentralen und Verbraucherverbände). Art. 3(3) sent. 1 Consumer Sales D.

2.

“In the first place, the consumer may require the seller to repair the goods or he may require the seller to replace them, in either case free of charge, unless this is impossible or disproportionate.”

Development

Art. 3(3) of the Consumer Sales D. states that the consumer may require the seller to 2 repair or to replace the goods sold. However, the Directive is silent on whether the consumer has to return the replaced goods. Nevertheless, some Member States explicitly require the consumer to return the replaced item. In Austria, for example, the seller can request the consumer to send back the replaced goods (§ 8(2) of the Consumer Protection Act). In Germany, CC § 439(4) provides that, if the seller supplies a thing free of

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Art 8:B-05 3, 4

Chapter 8: Remedies Specific Provisions . Part B: Contracts for the Delivery of Goods

defects for the purpose of cure, the seller may demand to return the defective thing. The German provision is not restricted to B2C cases. Under Estonian law, if a seller replaces non-conforming goods with conforming goods, the seller may require the return of the non-conforming goods from the purchaser (§ 222(3) of the Law of Obligations Act). For reasons of clarity, the Acquis Group decided to follow this model and to similarly introduce both a right and an obligation to take back replaced goods. In its present wording, Art. 8:B-05 does not decide whether the obligation to take back the replaced goods requires the supplier to actually remove the replaced goods or install the replacing goods. It also does not regulate whether the supplier has to bear the costs of removal or installation. With regard to consumer sales, the German BGH recently referred to the ECJ the question whether Art. 3(2) and (3) of the Consumer Sales D. require the supplier to bear the costs of removing the non-conforming consumer goods from a thing into which they were incorporated by the consumer (Decision of 14 January 2009 – VIII ZR 70/08). The judgment of the ECJ on this point will have to be taken into consideration in the revised version of the present Article. 3 With regard to compensation, Art. 3(3) of the Consumer Sales D. only states that the consumer is entitled to require the seller to repair the goods or to replace them – in either case free of charge – unless that is impossible or disproportionate. The expression “free of charge” is defined in Art. 3(4) of the Consumer Sales D. as referring to “the necessary costs incurred to bring the goods into conformity, particularly the cost of postage, labour and materials”. In its judgment in the Quelle case (Quelle AG v. Bundesverband der Verbraucherzentralen und Verbraucherverbände, ECJ 17 April 2008, C-404/06), the ECJ held that “free of charge” in this context means that the seller cannot make any financial claim in connection with the performance of the obligation to bring into conformity the goods to be delivered under the contract. Thus, a seller who sold goods which are not in conformity cannot require the consumer to pay compensation for the use of those goods until they are replaced with new goods. Paragraph (2) of the present Article reproduces the rule expressed in this judgment.

3.

Political Issues

4 Paragraph (2) is applicable only to B2C contracts. In contrast, the equivalent Art. III. – 3:205(2) DCFR applies to contracts regardless of whether the seller is a business, or the buyer a consumer. Since the judgment of the ECJ in the Quelle case was limited to B2C contracts, the present text restricts the exclusion of compensation to the cases where the supplier is a business and the recipient a consumer. This seems to be in line with, for example, German law, where §§ 439(4), 346(1) and (2) no. 1 of the Civil Code remain applicable to both B2B and C2C contracts. Under these provisions, where the seller remedies a breach of contract by sending replacement goods, the buyer has to compensate the seller for the value of the benefits that the buyer obtained from the (defective) goods. Following the judgment of the ECJ in Quelle, the BGH, ruled only with respect to consumer contracts that the consumer cannot be requested to pay for the use of replaced goods pending their return or replacement (26 November 2008, NJW 2009, 427

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Article 8:B-05 Return of replaced goods

Art 8:B-05 5–8

et seq.). The new § 474(2) sent. 1 of the German Civil Code, which provides that no compensation is to be paid by the buyer, applies as well only in B2C relations.

B.

Commentary

1.

Meaning and Purpose

Whereas the preceding Article gives the supplier who is a business a right to cure a non- 5 conforming performance, the present Article regulates the obligation of the supplier with regard to the replaced item. The Article applies regardless of whether the supplier replaced the non-conforming item voluntarily.

2.

Context

The present Article is mandatory for B2C contracts (cf. Art. 8:B-01 ACQP).

3.

6

Explanation

Paragraph (1) allows a supplier who has replaced items which were not in conformity 7 with the contract to take back these items. At the same time, paragraph (1) also obliges the supplier to take back these items. A supplier who does not perform this obligation may be liable under Chapter 8 (Remedies). Paragraph (1) makes clear that the supplier has to bear the costs of taking back the replaced item. The Article deals only with this question. It does not purport to regulate the costs of actual replacement or installation (cf. No. 2 to the present Article). Paragraph (2) applies only for B2C contracts. It states that the business may not require the consumer to pay compensation for the use of the replaced items until their replacement with new items. This provision thus clarifies that the consumer cannot be obliged to pay any additional amount in order to obtain what he or she has been entitled to obtain (i.e. goods that are in conformity with the contract).

4.

Examples

Example 1 Business A sells and delivers 10 lorry loads of flower potting compost to business B. The 8 compost turns out to be polluted with diesel oil and has to be replaced. A delivers the compost a second time but is not willing to take back the polluted compost. Since A has failed to perform his obligation under Art. 8:B-05(1), B can claim damages for storage costs incurred (cf. Art. 8:401(1) ACQP).

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Art 8:B-05, 9 Art 8:E-01, 1

Chapter 8: Remedies Specific Provisions . Part E: Package Travel Contracts

Example 2 9 Business A sells a lawnmower to business B who uses it for 8 months. Due to a short circuit caused by a faulty component the mower flares off. A replaces the mower and asks for compensation for the use of the tool from the time of delivery. Since Art. 8:B-05(2) is only applicable in B2C relations, A can also claim monetary compensation for the value that B has received by making use of the mower for that period (cf. Art. 8:303 ACQP).

Article 8:B-06: Right of redress

Article 8:B-07: Time limit

Placeholder

Placeholder

Part E: Package Travel Contracts Article 8:E-01: Mandatory nature (1) Contract terms which are prejudicial to the customer and which deviate from the provisions of Chapter 8 are not binding on the customer. (2) The contract can reasonably limit damages for non-performance, except for damages due for personal injuries.

A. Foundation in the Acquis 1.

Sources

1 The present Article is based on Art. 5 and 8 of the Package Travel D.: Art. 5(2) and (3) Package Travel D.

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(2) (...) In the matter of damages arising from the non-performance or improper performance of the services involved in the package, the Member States may allow compensation to be limited in accordance with the international conventions governing such services. In the matter of damage other than personal injury resulting from the non-performance or improper performance of the services involved in the package, the Member States may allow compensation to be limited under the contract. Such limitation shall not be unreasonable. (3) Without prejudice to the fourth subparagraph of paragraph 2, there may be no exclusion by means of a contractual clause from the provisions of paragraphs 1 and 2.

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Art 8:E-01 2– 4

Article 8:E-01 Mandatory nature

Art. 8 Package Travel D.

2.

Member States may adopt or return more stringent provisions in the field covered by this Directive to protect the consumer.

Development

The Package Travel D. does not have a rule which clearly expresses the imperative nature 2 of all of its provisions or prevents consumers from waiving the rights conferred on them by the directive. It is only with regard to the right to damages that Art. 5(2) and (3) of the Directive grant mandatory nature to the rules of the Directive. Article 8 of the Directive, which states that the standard of protection provided by the directive is a minimal one, may, however, allow the conclusion that the directive’s protective provisions are of a mandatory nature. As previously explained in the comments to Art. 7:E-02 ACQP, the Package Travel D. uses the term “consumer” in a broad sense, so much so that for the purposes of the Acquis Principles that term has been replaced by the term “customer”. This has the effect of giving the articles commented on in the following a very broad scope of protection. That in turn means that any reference to Art. 1:203 ACQP would be misleading and that a special provision is needed to express the mandatory nature of the provisions commented on below. Unlike the directive, the Acquis Principles do not contain a rule referring to limitations of damages imposed by international conventions. Any such convention will apply to package travel contracts anyway, and there is no need to refer to it by means of a particular provision.

B.

Commentary

1.

Meaning and Purpose

The present Article aims to make all the rules on non-performance of the package travel 3 contract mandatory in favour of customers and travellers.

2.

Context

The Article refers to all the provisions of Chapter 8 when applied to package travel con- 4 tracts.

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Art 8:E-01, 5–8 Art 8:E-02

3.

Chapter 8: Remedies Specific Provisions . Part E: Package Travel Contracts

Explanation

5 The customer may not waive the rights conferred on him or her by the following provisions of this Part or by the general rules on remedies for non-performance. Any contractual term aimed at depriving the customer of any of his or her rights, or limiting the protection granted to him by the law, would be ineffective. The only exception to this is that the contract can limit damages for non-performance. However, such limitation must comply with two conditions. Firstly, the restriction of liability must not be unreasonable. Secondly, it may not concern damages due for personal injuries. The exception in question is practically important only with regard to individually negotiated contractual terms. In most cases (i.e. those cases where the customer is a consumer) a non-negotiated term limiting liability will be considered as an unfair term under the rules of Chapter 6, and will thus not be binding in the first place.

4.

Examples

Example 1 6 Business B and customer C conclude a package travel contract which contains a provision stating that if the business does not perform any part of its obligation, the customer is obliged to pay any extra charges made for substitute services. The provision is invalid as it violates mandatory law, namely Art. 8:E-02 ACQP. Example 2 7 A travel agency offers tours to Colombia. The contract contains a clause stating that the customer is aware of the risks involved in travelling to South America, and that the travel agency will not provide any assistance in case of an unexpected event which is not attributable to the agency itself. Such a contractual provision is ineffective because it is contrary to the mandatory rule of Art. 8:E-03 ACQP. Example 3 8 A package travel contract limits the amount of possible damages to 10.000 Euro. Even if such a limitation is reasonable, it is ineffective to the extent that it makes no exception for personal injuriy claims.

Article 8:E-02: Alternative arrangements in case of partial non-performance (1) After departure, if non-performance of a significant proportion of the obligations of the business has occurred, or if the business realises that such non-performance will occur, the business must make suitable alternative arrangements for the continuation of the package which are to be provided at no extra costs. Where appropriate, the business must compensate the customer for the difference in value between the services owed and those supplied. The customer or the traveller may reject the alternative arrangements for good reasons.

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Article 8:E-02 Alternative arrangements in case of partial non-performance

Art 8:E-02 1–3

(2) If alternative arrangements are impossible, or are rejected for good reasons, the organiser must, where appropriate, provide the traveller with an equivalent return transport to the place of departure, or to another return point agreed with the traveller, at no extra cost. This does not affect the customer’s right to claim damages.

A. Foundation in the Acquis 1.

Sources

Art. 4(7) Package Travel D.

2.

Where, after departure, a significant proportion of the services 1 contracted for is not provided or the organiser perceives that he will be unable to procure a significant proportion of the services to be provided, the organiser shall make suitable alternative arrangements, at no extra cost to the consumer, for the continuation of the package, and where appropriate compensate the consumer for the difference between the services offered and those supplied. If it is impossible to make such arrangements or these are not accepted by the consumer for good reasons, the organiser shall, where appropriate, provide the consumer, at no extra cost, with equivalent transport back to the place of departure, or to another return-point to which the consumer has agreed and shall, where appropriate, compensate the consumer.

Development

In terms of content, the Article fully corresponds with Art. 4(7) of the Package Travel 2 D., the latter having undergone only some stylistic changes. As previously explained (see comments to Art. 7:E-02 ACQP), the directive uses the term “consumer” to denote both the party to the contract and any other beneficiaries. In contrast, the Acquis Principles call the purchaser of the package “customer”, while the travelling person, who may be different from the person that has concluded the contract, is called “traveller”. The present Article thus distinguishes between the “customer” and the “traveller”.

B.

Commentary

1.

Meaning and Purpose

The present Article determines the consequences of non-performance of a significant 3 part of the obligations of the business.

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Art 8:E-02 4, 5

2.

Chapter 8: Remedies Specific Provisions . Part E: Package Travel Contracts

Context

4 The rights granted to the customer by this provision constitute a set of remedies for nonperformance. Non-performance is defined in Art. 8:101 ACQP. The remedies set forth in the Article at hand differ from the general remedies of Chapter 8 Sections 2 and 3 because of the characteristics of the package travel contract. Consequently, some of the general provisions on remedies (namely Art. 8:202, 8:301 and 8:303 ACQP) will not apply in the case of partial non-performance of a package travel obligation. The application of the general provisions on damages (Chapter 8 Section 4) is not excluded.

3.

Explanation

5 The present Article governs the liability of the business after the beginning of performance. The provision applies only when after departure the business cannot perform its obligations properly or realizes that it will not be able to perform them properly. In other words: the business has started to perform and the non-performance is limited to part of the obligation. It is a precondition for the application of the rule that the unfulfilled duty constitutes an important part of the service which is due. If the above-mentioned conditions are met, the customer is not entitled to specific performance of the obligation, as this would be rather impractical. Equally, the customer’s right to reduce the price or to terminate the contract are adjusted to suit the specific circumstances of a package travel. The first consequence of partial non-performance is that the business is under a duty to modify its performance in such a way that the trip can continue, provided such modification is possible. If the modified services are of a lower value than those promised originally, the business is obliged to compensate the customer for the difference in value. If the modified services are of a higher value than those agreed, the business has to bear the relevant additional costs. The customer may only reject the proposed alternative arrangements for good reasons (i.e. if the proposed modifications are objectively improper or do not meet the customer’s subjective yet important needs). If the travelling person is not identical with the customer, the decision rests with both the customer and the traveller – both of them can object for good reasons. Neither a rejection of alternative arrangements nor the unfeasibility of such arrangements will entirely exempt the business from its duties. If the traveller has already left the place of departure, the business has to provide adequate return transport or transport to another place as agreed with the traveller. Moreover, the customer may claim damages if the requirements of Art. 8:401 ACQP are met.

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Art 8:E-02, 6, 7 Art 8:E-03, 1

Article 8:E-03 Duty of assistance

4.

Examples

Example 1 A group of travellers is transferred to the hotel named in the package description and 6 there discovers that the hotel is fully booked. The travel agent arranges rooms in a different hotel of a higher standard. At the end of the stay, the travel agent demands an additional charge for the accommodation. The travellers are not obliged to pay such a charge because the business is under an obligation to arrange other suitable accommodation at no extra cost. Example 2 The facts are the same as above, except that only one other hotel at this place has va- 7 cancies, and all of the available rooms are for smokers. Traveller A refuses to move in because she is allergic to cigarette smoke, and demands that the travel agent should bring her back home. The business must accede to this request, as the traveller has good reasons to reject the alternative arrangement.

Article 8:E-03: Duty of assistance If it becomes apparent that the package travel contract will not be performed properly, the business must provide prompt assistance to a traveller in difficulty.

A. Foundation in the Acquis 1.

Sources

Art. 5(2) Package Travel D.

Piotr Machnikowski

With regard to the damage resulting for the consumer from the 1 failure to perform or the improper performance of the contract, Member States shall take the necessary steps to ensure that the organiser and/or retailer is /are liable unless such failure to perform or improper performance is attributable neither to any fault of theirs nor to that of another supplier of services, because: – the failures which occur in the performance of the contract are attributable to the consumer, – such failures are attributable to a third party unconnected with the provision of the services contracted for, and are unforeseeable or unavoidable, – such failures are due to a case of force majeure such as that defined in Article 4 (6), second subparagraph (ii), or to an event which the organiser and/or retailer or the supplier of services, even with all due care, could not foresee or forestall.

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Art 8:E-03 2– 4

Chapter 8: Remedies Specific Provisions . Part E: Package Travel Contracts

In the cases referred to in the second and third indents, the organiser and/or retailer party to the contract shall be required to give prompt assistance to a consumer in difficulty.

2.

Development

2 The prerequisites for liability of the business for damage caused to the customer are established in Art. 8:401 ACQP, and there is no need for a special rule concerning package travel contracts. What has, by contrast, served as a source for a specific provision is that part of the directive’s Art. 5(2) which states that the organiser and/or retailer is obliged to give assistance to the consumer in difficulty even if there is no liability for non-performance of the obligation. The duty to assist the traveller in difficulty should be imposed on the business in every case of non-performance of the obligation, regardless of whether the non-performance is attributable to the business or not. Therefore, two instances specified in the directive were generalised into one general principle for the ACQP. This way of reasoning is supported by an argumentum a minori ad maius: if the business is obliged to give assistance where the non-performance is excused, it has to be even more so obliged when the nonperformance is not excused. The one instance where the duty of assistance is excluded by the directive, namely in cases where the non-performance is attributable to the consumer, is subject to the general rule of Art. 8:102 ACQP.

B.

Commentary

1.

Meaning and Purpose

3 Throughout the performance of the package travel contract the traveller is particularly dependent on the business. The traveller will be in unfamiliar surroundings, will often face a language barrier or may have problems meeting his or her basic needs for other reasons. By contrast, the business has special skills in solving these kinds of problems that tourists usually encounter because of the scope of its activity. Given the customer’s dependency and the business’ ability to help, it is justified to impose an extended duty of assistance on the business. The Article at hand expresses such a duty.

2.

Context

4 The duty of assistance is a specific example of the general duty of loyalty which is established in Art. 7:103 ACQP, in this instance for a situation where there is non-performance of the obligation. Further duties which may arise as a result of non-performance are regulated by other provisions of this Chapter.

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Article 8:E-03 Duty of assistance

3.

Art 8:E-03 5, 6

Explanation

The present Article imposes a specific duty on the business. The duty arises in a situation 5 of anticipated non-performance of the obligation, and a fortiori in a situation of actual non-performance. A further precondition for the duty to arise is that the traveller finds himself or herself, or is about to get into, some sort of difficulty as a result of the nonperformance. The business is then obliged to promptly assist the traveller in such manner as is appropriate to the circumstances. A particular measure is appropriate if it solves the problem in question and if the business can reasonably be expected to undertake that measure. Generally, the duty of assistance arises irrespective of the grounds for non-performance of the obligation. However, as the duty in question is a remedy for non-performance, Art. 8:102 ACQP applies, and the traveller may be precluded from demanding assistance if non-performance is attributable to him or her. Such preclusion of the right to assistance will depend on the circumstances, most of all on the degree of the traveller’s contribution to the non-performance, the gravity of the situation in which the traveller finds himself or herself, as well as the costs and efforts that are necessary to provide assistance. The right to assistance conferred on the traveller by the present Article is without prejudice to other remedies for non-performance.

4.

Example

Having spent two weeks in Mallorca on an all-inclusive travel package, traveller T is 6 waiting for the bus that is scheduled to take him to the airport from which T is to take the return flight. The bus never arrives and T misses the flight. The business is obliged not only to again arrange transport for the traveller, but also to provide him with meals and, if necessary, accommodation, health care, etc.

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Art 8:E-04 1–3

Chapter 8: Remedies Specific Provisions . Part E: Package Travel Contracts

Article 8:E-04: Duty to inform about non-performance Any non-performance which the traveller perceives on the spot must be communicated at the earliest opportunity to the supplier of the services concerned or to the business.

A. Foundation in the Acquis 1.

Sources

1 Art. 5(4) Package Travel D.

2.

The consumer must communicate any failure in the performance of a contract which he perceives on the spot to the supplier of the services concerned and to the organiser and/or retailer in writing or any other appropriate form at the earliest opportunity. This obligation must be stated clearly and explicitly in the contract.

Development

2 Article 5(4) of the Package Travel D. has been slightly reformulated, mostly in order to make it shorter and consistent with ACQP terminology. There are also three adaptations, of which the first two may affect the content of the rule. Firstly, as has been explained above, the Acquis Principles do not use the term “consumer” in the sense the directive uses them, but chose to differentiate between the “customer” (the party to the contract) and the “traveller” (the one who takes part in the trip). Accordingly, the ACQP could not simply impose the duty to inform on “the consumer” (see B.3. below for details of the approach taken by the Acquis Group). Secondly, the directive’s approach to the question of who should be informed about the non-performance was found inadequate. There are not enough grounds for burdening the customer with the task of communicating the non-performance to both the organiser and the supplier of a particular service. Since the two are co-operating, and thus communicating with each other, any information given to either one of them seems sufficient. Thirdly, the Article at hand need not repeat the directive’s requirement as to the form of the information (“in writing or any other appropriate form”) since Art. 1:301 ACQP states that any notice has to be given by means which are appropriate to the circumstances.

3.

Political Issues

3 Art. 5(4) of the Package Travel D. provides that the obligation to inform about the nonperformance must be stated clearly and explicitly in the contract. However, the directive may be interpreted in two ways. One possible interpretation is that the duty to inform the

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Article 8:E-04 Duty to inform about non-performance

Art 8:E-04 4–6

business about the non-performance is conditional on being expressly mentioned in the contract. The alternative interpretation is that the duty to inform about the non-performance is imposed by law, but that it is mandatory that this duty be mentioned in the contract. The second interpretation has been given preference, as it is in the interest of both business and traveller that any problems are addressed at the earliest opportunity. For this reason, the present Article does not refer to the content of the contract, while the list of information duties related to package travel contracts contains the duty to inform about the customer’s “duty to inform about non-performance”.

B.

Commentary

1.

Meaning and Purpose

This Article determines the scope of the customer’s (or traveller’s, see Note 6 below) duty 4 to mitigate the loss resulting from the non-performance. It creates an obligation on the part of the creditor to notify the debtor that the services which the latter is to provide are not properly performed.

2.

Context

The Article is directly linked with Art. 8:403 ACQP, which establishes the consequences 5 of contributory negligence. It sets the standard of behaviour that has to be met by the customer (or traveller) in order to prevent a reduction of damages. The duty to inform about the non-performance is supplemented by an information duty – this time on the business – in Chapter 2, with remedies under Art. 2:208 ACQP.

3.

Explanation

The present Article pertains to the creditor’s duty to cooperate with the debtor in order 6 to minimize the scale of damage suffered by the creditor as a result of non-performance of the obligation and thus to minimize the amount of damages owed by the debtor. According to Art. 8:403 ACQP, damages are reduced or excluded to the extent that the creditor wilfully or negligently contributed to the effects of the non-performance or could have reduced the loss by taking reasonable steps. The present Article specifies what kind of contribution from the part of the creditor may lead to a reduction of the damages. Under this provision, the creditor’s duty to mitigate consists above all in an obligation to inform the debtor that the services are provided improperly. Such an obligation arises only if the traveller perceives the non-performance, which will regularly be the case. This information about an observed non-performance should be given at the earliest opportunity. This means that the traveller is not obliged to give the information immediately. The traveller does not normally have to change his or her plans in order to inform

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Art 8:E-04 7, 8

Chapter 8: Remedies Specific Provisions . Part E: Package Travel Contracts

the other party about the non-performance. However, the traveller must give the information when the first opportunity to do so arises. If the defective service is performed by a person other than the business (which will usually be the case), the notice about the non-performance may be given either to the supplier of the service or to the business. 7 The Article does not explain who is required to give the notice – the traveller or the customer – since that will depend on the circumstances. As the duty to mitigate lies with the creditor of the damages claim, the duty to inform the debtor about the non-performance is primarly imposed on the person who suffers the damage in a particular case. The business must inform the customer of this duty before the conclusion of the contract (Art. 2:E-01 ACQP). As discussed above, the customer’s duty is not conditional on this information having been provided. However, the duty may effectively be excluded under Art. 2:208(2) ACQP if the business has failed to informt he customer of this duty. If the customer could reasonably expect that he or she will not be obliged to inform about any non-performance (which is not entirely out of question given that in some national legal systems there is no general duty to give such information), then he is in fact not obliged to do so.

4.

Example

8 Traveller A arrives at the hotel at 2:00 a. m. and discovers that the room does not comply with the description in the brochure. He needs to inform the travel agent or hotel owner at the earliest opportunity about this non-performance of the obligation if he wants to avoid his right to damages being proportionally reduced. This earliest opportunity is not immediately (at 2:00 a. m.), but during the course of the day.

Part G: Payment Services6 Part H: Commercial Agency Contracts Article 8:H-01: Immediate termination of agency contract 6

474

Placeholder

The rules on Payment Services are not repeated here. They are presented on pp. 45-48.

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Annexes

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Table of Derivations ACQP Volume II

ACQP Volume I

Changes to the content

1:101 (Scope and purpose of these Principles)

1:101

No changes

1:201 (Consumer)

1:201

No changes

1:202 (Business)

1:202

No changes

1:203 (Mandatory nature of consumer rules)

1:203

No changes

1:301 (Means of notice)

1:301

No changes

1:302 (Effectiveness of notice)

–

New provision

1:303 (Electronic notice)

1:302

No changes

1:304 (Freedom of form) 1:305 (Textual Form)

1:303 1:304

No changes No changes

1:306 (Durable Medium)

1:305

Wording slightly changed

1:307 (In writing)

1:306

Wording slightly changed

1:308 (Signatures)

1:307

No changes

2:101 (Good faith)

2:101

No changes

2:102 (Legitimate Expectations)

2:102

No changes

2:103 (Negotiations contrary to good faith)

2:103

No changes

2:201 (Duty to inform about goods or services) 2:202 (Information duties towards consumers)

2:201 2:202

No changes Major reformulation

2:203 (Information duties towards disadvantaged consumers)

2:203

Wording slightly changed

2:204 (Clarity and form of information)

2:206

No changes

2:205 (Information about address and identity)

–

New provision

2:206 (Information about price)

–

New provision

2:207 (Burden of proof)

–

New provision

2:208 (Remedies for breach of information duties)

2:207

Major reformulation

2:E-01 (Specific pre-contractual duties for package travel contracts)

–

New provision

2:G-01 to 2:G-03 (Payment services)

–

New provisions

3:101 to 3:203 (Non-discrimination)

3:101 to 3:203

No changes

4:101 (Agreement between parties) 4:102 (Conclusion of contract)

4:101 4:102

No changes No changes

4:103 (Offer; public statements)

4:103

No changes

4:104 (Information duties in real time communication)

2:204

Major reformulation

4:105 (Formation by electronic means)

2:205 and 2:301

Wording slightly changed

4:106 (Unsolicited goods or services)

4:104

No changes

4:107 (Pre-contractual statements by a contract party)

4:105

Wording slightly changed

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Annexes

ACQP Volume II

ACQP Volume I

Changes to the content

4:108 (Pre-contractual statements by third parties)

4:106

Wording slightly changed

4:109 (Binding force of unilateral promises) 4:110 (Acknowledgement of receipt)

4:107 4:108

No changes Major reformulation

4:C-01 (Timeshare contracts)

–

New provision

4:E-01 (Package travel contracts)

–

New provision

5:101 (Mandatory nature)

5:101

No changes

5:102 (Exercise of a right of withdrawal)

5:102

Wording slightly changed

5:103 (Withdrawal period)

5:103

No changes

5:104 (Notice of the right of withdrawal)

5:104

Wording slightly changed

5:105 (Effects of withdrawal)

5:105

Wording slightly changed

5:106 (Linked contracts) 5:A-01 (Right to withdraw from contracts negotiated away from business premises) 5:A-02 (Effects of withdrawal in case of supply of equivalent goods or services) 5:C-01 (Right to withdraw from timeshare contracts)

5:106 5:201

No changes No changes

–

New provision

5:202(1) and (3)

Wording slightly changed

5:C-02 (Effects of withdrawal from timeshare contracts)

5:202(2)

Wording slightly changed

6:101 (Subject matter)

6:101

Wording slightly changed

6:201 (Acquaintance with terms not individually negotiated)

6:201

No changes

6:202 (Preference to negotiated terms)

6:202

No changes

6:203 (Interpretation of terms)

6:203

No changes

6:204 (Conflicting standard contract terms)

6:204

Wording slightly changed

6:301 (Unfairness of terms)

6:301

Wording slightly changed

6:302 (Transparency of terms)

6:302

No changes

6:303 (Scope of the unfairness test) 6:304 (List of unfair terms)

6:303 6:304

No changes No changes

6:305 (Indicative list of unfair terms)

6:305

No changes

6:306 (Effects of unfair terms)

6:306

No changes

7:101 (Duty to perform)

7:101

No changes

7:102 (Good faith in the exercise of rights)

7:102

No changes

7:103 (Duty of loyalty)

7.103

No changes

7:104 (Duty to co-operate)

7:104

No changes

7:105 (Language of communications) 7:201 (Time of performance)

– 7:201

New provision No changes

7:202 (Place of performance)

7:202

No changes

7:A-01 (Goods or services of equivalent quality)

–

New provision

7:B-01 and 7:B-02 (Contracts fort he delivery of goods)

–

New provisions

7:E-01 to 7:E-06 (Package travel contracts)

–

New provisions

7:G-01 to 7:G-25 (Payment services)

–

New provisions

7:H-01 to 7:H-16 (Commercial agency contracts)

–

New provisions

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Table of Derivations

ACQP Volume II

ACQP Volume I

Changes to the content

8:101 to 8:407 (Remedies – General provisions)

–

New provisions

8:A-01 (Goods or services ordered are unavailable) 8:B-01 to 8:B-05 (Contracts for the delivery of goods)

– –

New provision New provisions

8:E-01 to 8:E-04 (Package travel contracts)

–

New provisions

8G-01 to 8:G-12 (Payment services)

–

New provisions

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List of “grey rules” taken from the Draft CFR (DCFR) The analysis of the existing EC law has shown that there are several gaps in the acquis, e.g. in the areas of formation, form or performance of obligations. However, in some of those cases it was considered necessary to fill the gaps in order to clarify the context in which the genuine acquis provisions can operate (cf. the Introduction to the Acquis Principles and the comments to Article 1:101 ACQP). Such gaps have been filled in the current draft of the Acquis Principles by provisions referred to as “grey rules”, because they are indicated in grey print. These “grey rules” have been taken from the Draft Common Frame of Reference (DCFR). The final version of the DCFR has been delivered to the European Commission in December 2008. The Outline Edition from which the “grey rules” have been taken was published in 2009 under the title “Principles, Definitions and Model Rules on European Contract Law – Draft Common Frame of Reference (DCFR)”. The table below provides a list of the “grey rules” included in the current version of the Acquis Principles:

ACQP

DCFR

Article 1:301: Means of notice Article 1:302: Effectiveness of notice Article 4:103: Offer; public statements Article 4:109: Binding force of unilateral promises Article 6:204: Conflicting standard contract terms Article 7:201: Time of performance Article 7:202: Place of performance Article 8:201: Monetary obligations Article 8:202: Non-monetary obligations Article 8:302: Notice of termination Article 8:304: Right to withhold performance of reciprocal obligation Article 8:404: Interest on delayed payment

Article II. – 1:109(2) Article I. – 1:109(3) and (4) Article II. – 4:201 Article II. – 1:103 Article II. – 4:209 Article III. – 2:104 Article III. – 2:101 Article III. – 3:301 Article III. – 3:302 Article III. – 3:507(1) Article III. – 3:401 Article III. – 3:708

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Table of Legislation and other Sources Treaties and Conventions European Convention for the Protection of Human Rights and Fundamental Freedoms Art. 14

3:101 1

ECSC-Treaty (Treaty constituting the European Coal and Steel Community and Annexes I-III, Paris, 18 April 1951) Art. 60

7:101 3

EC-Treaty (Treaty establishing the European Community – Consolidated Version) Art. 3 Art. 10 Art. 12 Art. 13 Art. 23 Art. 28 Art. 39 Art. 43 Art. 49 Art. 50 Art. 56 Art. 86 Art. 88 Art. 141 Art. 226 Art. 234 Art. 249 Art. 288

4:101 3 7:101 3, 7:104 2 3:101 1, 4, 6, 10, 16 3:101 1, 4, 5, 10 3:201 11, 2:202 2, 4:101 3 4:101 3 4:101 3 4:101 3 3:201 11 4:101 3 2:103 5 7:102 2 3:101 1 7:101 3 2:101 6 6:306 2 2:103 4

Brussels Convention (Convention of 27 September 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters) In general Art. 13 Art. 13-15

1:201 1, 16 1:201 20, 1:201 6

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Annexes

Art. 17 Art. 23

1:307 9, 6:201 2 1:307 1

Rome Convention (Convention on the law applicable to contractual obligations opened for signature in Rome on 19 June 1980) Art. 1 Art. 4 Art. 5 Art. 6

1:101 11, 14 6:303 8 1:201 1 1:101 14

CISG also referred to as the Vienna Sales Convention (United Nations Convention on Contracts for the International Sale of Goods (1980)) In general Art. 1 Art. 2 Art. 6 Art. 7 Art. 8 Art. 9 Art. 11 Art. 15 Art. 16 Art. 25 Art. 26 Art. 31 Art. 35 Art. 45 Art. 49 Art. 57 Art. 61 Art. 64 Art. 77 Art. 78 Art. 79 Art. 80 Art. 81 Art. 84

1:101 1, 2:208 1, 2, 6:201 3, 7, 8:101 2, 8:301 9, 10, 8:402 2, 7, 8:406 3, 8:407 1 1:101 14 1:201 20 1:101 14 6:201 3 7:105 4 2:102 6 1:304 4 1:303 3 5:101 5 8:301 15 8:302 1 7:202 19 2:102 6, 2:201 1, 5, 7 8:101 1, 8:401 3, 9, 13 5:101 5, 8:302 1 7:202 19 8:101 1, 8:401 3, 9 8:302 1 8:403 1 8:406 1 8:401 3, 12 8:102 1, 8:403 1 8:303 2 8:406 1

Treaty on the European Union (Treaty on the European Union (92 /C 191/01)) Art. 6

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Table of Legislation and other Sources

Regulations Regulation 1182/1971 also referred to as Computation of Time Reg. 1182/71 (Regulation (EEC, Euratom) 1182/71 of the Council of 3 June 1971 determining the rules applicable to periods, dates and time limits) In general

1:101 2, 5:103 12, 15, 5:105 13

Regulation 1408/1971 (Council Regulation (EEC) 1408/71 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community) In general

7:104 2

Regulation 44/2001 also referred to as the Brussels I Reg. (Council Regulation (EC) 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters) Art. 15 Art. 15-17 Art. 18-21 Art. 23 Annex II

1:201 1, 16 1:201 6, 6:304 6 1:101 14 1:304 3, 6, 1:307 2, 6:201 2 1:304 8

Regulation 2157/2001 also referred to as the Regulation on the European Company (Council Regulation (EC) 2157/2001 of 8 October 2001 on the Statute for a European company (SE)) Art. 25

1:304 8

Regulation 2560/2001 (Regulation (EC) No 2560/2001 of the European Parliament and of the Council of 19 December 2001 on cross-border payments in euro) Art. 4 Art. 7

1:306 1 8:401 1, 5

Regulation 889/2002 also referred to as the Air Carrier Liability Regulation (Regulation (EC) No 889/2002 of the European Parliament and of the Council of 13 May 2002 amending Council Regulation (EC) No 2027/97 on air carrier liability in the event of accidents (Text with EEA relevance) In general Art. 3(3)

8:401 1, 8:402 1, 7 8:102 3, 8:401 1, 8:403 1, 3

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Regulation 1435/2003 also referred to as the Regulation on the Statute of the European Cooperative Society (Council Regulation (EC) 1435/2003 of 22 July 2003 on the Statute for a European Cooperative Society (SCE)) Art. 29

1:304 8

Regulation 261/2004 also referred to as the Denied Boarding Regulation (Regulation (EC) No 261/2004 of the European Parliament and of the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, and repealing Regulation (EEC) No 295/91 – Commission Statement) Recital 17

8:301 9, 8:402 8 2:101 6, 7:103 2

Recital 19 Art. 2 Art. 5 Art. 6 Art. 7 Art. 8 Art. 9 Art. 11 Art. 12 Art. 15 Art. 16

7:103 2 8:301 10 8:101 1 8:101 1 8:101 1 8:301 6, 13 2:101 6, 7:103 2 7:103 2 8:301 7 1:203 5 8:401 1, 5

Regulation 1107/2006 (Regulation (EC) 1107/2006 of the European Parliament and of the Council of 5 July 2006 concerning the rights of disabled persons and persons with reduced mobility when travelling by air) Recital 4

7:103 2

Regulation 1371/2007 also referred to as the Rail Passengers’ Rights Regulation (Regulation (EC) No 1371/2007 of the European Parliament and of the Council of 23 October 2007 on rail passengers’ rights and obligations) Art. 16

8:301 13

Regulation 593/2008 also referred to as Rome I (Regulation (EC) 593/ 2008 of the European Parliament and of the Council of 17 July 2008 on the law applicable to contractual obligations) Art. 4 Art. 6

486

6:303 8 1:201 1

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Table of Legislation and other Sources

Directives Directive 1968/151 (First Council Directive 68/151/ EEC of 9 March 1968 on co-ordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Art. 58 of the Treaty, with a view to making such safeguards equivalent throughout the Community) Art. 2

1:308 1

Directive 1969 /335 (Council Directive 69/335/ EEC of 17 July 1969 concerning indirect taxes on the raising of capital) Art. 10

1:304 4

Directive 1976/207 (Council Directive 76/207/ EEC of 9 February 1976 on the implementation of the principle of equal treatment for men and women as regards access to employment, vocational training and promotion, and working conditions) In general

3:201 22

Directive 1985/374 also referred to as the Product Liability Directive (Council Directive 1985/374 / EEC of 25 July 1985 on the approximation of the laws, regulations and administrative provisions of the Member States concerning liability for defective products) Recital 6 Art. 6 Art. 8 Art. 9

2:102 1, 2 2:102 1, 2, 2:201 3, 6 8:102 3, 8:403 1, 3 1:201 1, 5, 6, 8:402 1, 7

Directive 1985/577 also referred to as the Doorstep Selling Directive (Council Directive 85/577/ EEC of 20 December 1985 to protect the consumer in respect of contracts negotiated away from business premises) In general Preamble Art. 1 Art. 2 Art. 3 Art. 4 Art. 5

1:201 3, 11, 5:102 2, 5:103 6, 5:105 2, 4, 5:106 1, 2, 5:A-01 4 1:304 6, 1:307 2 4:102 1, 5:101 2, 12, 5:A-01 23 1:201 1, 1:202 1, 9 5:A-01 2, 15, 17, 18, 20, 24, 5:C-01 10 2:203 1, 2:204 1, 5:104 1, 2, 5:106 2, 5:A-01 18 1:304 6, 1:307 2, 2:208 1, 2:207 1, 5:101 1, 5:102 2, 3, 7, 5:103 1, 2, 3, 4, 5:105 1, 3, 5:A-01 1, 3

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Annexes

Art. 6 Art. 7 Art. 8

1:203 2, 5:101 3 5:A-02 1 5:A-02 1

Directive 1986/653 also referred to as the Commercial Agents Directive (Council Directive 86/653/ EEC of 18 December 1986 on the coordination of the laws of the Member State relating to self-employed commercial agents) In general Art. 3 Art. 4 Art. 11 Art. 13 Art. 15 Art. 16 Art. 17 Art. 18 Art. 20

7:101 11, 7:104 3 2:101 1, 2, 6, 7:101 6, 9, 7:103 1, 7:104 1 2:101 1, 2, 6, 7:102 1, 3, 7:104 1 8:102 1 1:304 1, 4 8:302 1 8:301 4 8:101 1, 8:401 1, 8:402 7, 9 8:101 1, 8:401 1 2:101 6

Directive 1987/102 also referred to as the Consumer Credit Directive 1987 (Council Directive 87/102 / EEC of 22 December 1986 for the approximation of the laws, regulations and administrative provisions of the Member States concerning consumer credit) In general Art. 1 Art. 4

1:201 3, 1:202 2 1:201 1, 1:202 1 1:304 6, 1:307 2

Directive 1989/665 (Council Directive 1989/665/ EEC of 21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts) Art. 2

2:103 1

Directive 1990/314 also referred to as the Package Travel Directive (Council Directive 90/314 / EEC of 13 June 1990 on package travel, package holidays and package tours) In general Art. 1 Art. 2 Art. 3

488

1:203 4, 1:306 6, 2:203 12, 2:E-01 2, 3, 4:107 2, 4:E-01 6, 7:104 3, 8:401 2, 12, 13, 8:402 7 8:301 10 1:201 2, 7:E-02 1, 2, 4, 5, 8 2:101 6, 2:102 1, 3, 2:203 1, 2:204 1, 2:206 1, 2:E-01 1, 3, 4, 4:107 1, 4:108 1

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Table of Legislation and other Sources

Art. 4

Art. 5 Art. 6 Art. 8 Annex

1:304 4, 6, 1:305 2, 1:306 1, 2:203 1, 2:204 1, 2:205 1, 2:E-01 1, 4, 4:E-01 1, 2, 3, 4, 5, 6:201 1, 8, 7:102 9, 7:E-03 1, 2, 3, 4, 7:E-04 1, 2, 7:E-05 1, 2, 8:301 1, 3, 6, 7, 13, 14, 15, 8:303 1, 8:402 1, 7, 9, 8:E-02 1, 2 2:101 6, 4:E-01 2, 7:104 1, 7, 9, 8:101 1, 3, 8:102 3, 8:401 1, 9, 10, 11, 8:403 1, 3, 8:E-01 1, 2, 8:E-03 1, 2, 8:E-04 1, 2 7:103 2 7:E-01 1, 2, 8:E-01 1, 2 4:E-01 5

Directive 1992/13 (Directive 92/13/ EEC of 25 February 1992 coordinating the laws, regulations and administrative provisions relating to the application of Community rules on the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors) Recital 10 Recital 11 Art. 1 Art. 2

2:103 1, 3 2:103 1, 3 2:103 1, 3 2:103 1, 3

Directive 1993/13 also referred to as the Unfair Terms Directive (Council Directive 93/13/ EEC of 5 April 1993 on unfair terms in consumer contracts) In general Recital 10 Recital 11 Recital 14 Recital 16 Recital 20 Art. 1 Art. 2 Art. 3 Art. 4 Art. 5 Art. 6

1:101 10, 1:201 2, 3, 14, 1:202 2, 4, 5, 6:101 5, 10, 6:204 1 1:101 10, 6:101 10 6:302 2 1:202 3 2:101 1, 2, 2:102 1, 2, 7:101 9 6:302 2 6:303 1 1:201 1, 13, 1:202 1 2:101 1, 2, 6, 2:207 1, 6:101 1, 2, 4, 7, 8, 14, 6:202 1, 2, 6:301 1, 4, 5, 12, 6:304 1, 7:101 6, 7:102 1, 3 6:301 1, 6:303 1, 6, 7:105 3 2:204 1, 6:203 1, 2, 3, 6:302 1, 2, 3, 7:105 3 1:203 3, 6:306 1, 2

Annex In general Sec. 1 lit. (b) Sec. 1 lit. (g) Sec. 1 lit. (i) Sec. 1 lit. (k) Sec. 1 lit. (o)

6:304 2, 6:305 1, 5 8:101 3 8:302 1 6:201 1, 4, 8, 6:305 2 7:101 2 7:201 5

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Directive 1994/47 also referred to as the Timeshare Directive 1994 (Directive 94/47/ EC of the European Parliament and the Council of 26 October 1994 on the protection of purchasers in respect of certain aspects of contracts relating to the purchase of the right to use immovable properties on a timeshare basis) In general Recital 10 Recital 11 Recital 12 Recital 14 Art. 2 Art. 3 Art. 4 Art. 5 Art. 6 Art. 7 Art. 8 Annex

1:101 10, 1:201 3, 1:304 8, 2:203 12, 4:C-01 9, 5:103 6, 5:C-01

3, 5, 10 7:105 2 5:101 1, 5:102 1, 5:C-01 1, 2 5:C-01 7 5:101 3, 5:C-01 1 1:201 1, 3, 1:202 1, 2, 5:C-01 4, 12 1:304 6, 5:104 1, 2 1:304 3, 4, 6, 2:204 1, 7:105 1, 2 2:208 1, 5:101 1, 5:102 1, 2, 3, 4, 5, 7, 5:103 1, 2, 3, 4, 5:C-01 1, 11, 12, 5:C-02 1, 4, 7, 8, 9 5:C-01 1, 7 5:106 1, 4, 8 1:203 3, 5:101 3 2:203 3, 4:C-01 2

Directive 1997/5 also referred to as the Cross Border Credit Transfer Directive (Directive 97/5/ EC of the European Parliament and of the Council of 27 January 1997 on cross-border credit transfers) Art. 3 Art. 4 Art. 6 Art. 7 Art. 8 Art. 9

1:306 1 1:306 1 7:101 2, 8:101 1, 8:102 3, 4, 8:401 1, 8:403 1, 3, 8:406 1 7:101 2, 8:101 1 7:103 2, 8:303 1 8:401 12

Directive 1997/7 also referred to as the Distance Selling Directive (Directive 97/7/ EC of the European Parliament and of the Council of 20 May 1997 on the protection of consumers in respect of distance contracts) In general Recital 5 Recital 11 Recital 13 Recital 14 Recital 23 Art. 1 Art. 2 Art. 3

490

1:201 3, 4, 1:202 2, 1:306 6, 2:203 8, 4:104 3, 4, 4:107 5, 5:A-01 4, 24, 7:101 6, 7:A-01 3 4:106 1 5:104 1 1:305 6 5:101 1 5:101 3 5:101 2 1:201 1, 1:202 1, 4:101 1, 5:A-01 19, 25, 26, 7:201 12 5:A-01 2, 17, 18, 20, 21, 6:201 16

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Art. 4 Art. 5 Art. 6

Art. 7 Art. 9 Art. 12

1:201 1, 2, 3, 1:305 6, 1:304 6, 2:101 1, 2, 3, 2:203 4, 2:204 1, 2, 2:205 1, 2:206 1, 4:104 1, 2, 5:104 1, 7:104 1 1:304 3, 6, 1:305 6, 1:306 2, 1:307 2, 2:204 2, 5:104 1, 2, 5:105 1 2:208 1, 5:101 1, 5:102 1, 4, 5:103 1, 2, 3, 5:105 3, 4, 8, 10, 11, 13, 5:106 1, 6, 8, 5:A-01 1, 2, 3, 27, 29, 30, 31, 5:A-02 3, 7:201 2, 4, 7:202 19, 8:303 1 4:102 1, 5:105 4, 5:A-02 1, 2, 3, 7:201 1, 4, 7:202 19, 7:A-01 1, 2, 3, 8:303 1, 8:A-01 1 4:101 1, 4, 4:106 2, 6, 5:A-02 3 1:203 2, 5:101 3

Directive 1998/6 also referred to as the Price Indication Directive (Directive 98/6 / EC of the European Parliament and of the Council of 16 February 1998 on consumer protection in the indication of the prices of products offered to consumers) In general Art. 2 Art. 4 Art. 8

1:201 3 1:201 1, 1:202 1 2:203 5, 2:204 1 8:401 1, 5

Directive 1998/48 (Directive 98/48 / EC of the European Parliament and of the Council of 20 July 1998 amending Directive 98/34 / EC laying down a procedure for the provision of information in the field of technical standards and regulations) In general Art. 1 Annex V

1:101 2 1:303 6, 1:308 3, 4 4:104 2

Directive 1999/44 also referred to as the Consumer Sales Directive (Directive 1999/44 / EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees) In general Recital 8 Art. 1 Art. 2 Art. 3 Art. 5 Art. 6

1:101 10, 1:201 11, 21, 1:202 2, 2:208 1, 2, 7:201 19, 8:301 1, 10, 13, 8:303 2, 3, 8:401 1, 13 2:101 6, 2:102 1, 2, 2:201 2, 7:101 9 1:201 1, 1:202 1, 7:B-01 2, 7 2:101 6, 2:102 1, 2, 2:201 1, 2, 5, 7, 10, 4:103 1, 4:107 1, 2, 4:108 1, 3, 6:101 2, 7:101 2, 7:B-01 1, 2, 8:101 3 5:101 5, 7:201 1, 8:101 1, 2, 3, 8:202 2, 8:301 1, 5, 14, 15, 8:302 1, 8:B-01 2, 8:B-02 1, 8:B-04 1, 2, 8:B-05 1, 2 2:207 1, 8:B-01 2, 8:B-03 1, 2 1:306 2, 1:307 2, 2:101 6, 2:203 6, 2:204 1, 4:103, 4:107 1, 3, 4:108 1, 4:109 1, 3, 5, 7:105 2

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Art. 7 Art. 8

1:203 3, 6, 7, 1:304 6, 2:201 2, 4:101 1, 4:107 1, 4, 4:108 1, 6:101 2, 7:B-02 1, 2, 8:B-01 1, 2 8:301 7

Directive 1999/93 also referred to as the E-Signatures Directive (Directive 1999/93/ EC of the European Parliament and of the Council of 13 December 1999 on a Community framework for electronic signatures) In general Recital 16 Recital 17 Art. 1 Art. 5 Annex II

1:308 8 1:308 8 1:308 2, 4 1:301 1 1:304 6

Directive 2000/31 also referred to as the E-Commerce Directive (Directive 2000/31/ EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market) In general Recital 7 Recital 11 Recital 36 Art. 1 Art. 2 Art. 6 Art. 9 Art. 10 Art. 11 Art. 20

1:101 10, 1:201 3, 4:104 4, 4:110 5, 5:A-01 8 4:110 6 1:301 1 1:304 8 1:304 8, 4:104 2 1:201 1, 1:202 1, 2 , 4:104 2, 4:105 2 4:104 1, 2 1:101 10, 1:301 1, 1:304 3 1:305 2, 1:306 5, 6, 2:203 7, 2:204 1, 4:105 1, 2, 3, 4, 5, 6, 9, 10, 13, 6:101 3, 6:201 1, 5, 7:105 1 1:203 4, 1:303 1, 2, 3, 4:105 1, 3, 6, 4:110 1, 2, 4, 8 4:104 1, 3, 4:110 1, 3, 8:401 1, 5

Directive 2000/35 also referred to as the Late Payment Directive (Directive 2000/35/ EC of the European Parliament and of the Council of 29 June 2000 on combating late payment in commercial transactions) In general Recital 1 Recital 7 Recital 9 Recital 16 Recital 19 Art. 2 Art. 3 Art. 5

492

7:201 6, 8:407 3 8:407 2 8:407 2 8:407 2 8:101 4 8:407 4 4:109 6, 8:201 1 6:101 1, 2, 6:301 1, 2, 7:201 2, 5, 6, 8:101 1, 8:304 1, 8:401 1, 8:402, 1, 8:405 1, 2, 8:406 1, 2, 4, 6, 7, 8, 8:407 1, 6, 7, 9 8:201 1

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Directive 2000/43 also referred to as the Antiracism Directive (Council Directive 2000/43/ EC of 29 June 2000 implementing the principle of equal treatment between persons irrespective of racial or ethnic origin) In general Recital 6 Recital 21 Art. 1 Art. 2 Art. 3 Art. 5 Art. 8 Art. 15

3:101 2, 3:103 1, 5, 3:201 5, 6 3:101 13 3:203 1 3:101 5 3:102 1, 2 3:101 2, 4, 3:201 2, 11 3:103 2 3:203 1, 2 3:202 1

Directive 2000/78 also referred to as the Directive on General Framework for Equal Treatment in Employment and Occupation (Council Directive 2000/78 / EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation) In general Recital 31 Art. 1 Art. 2 Art. 3 Art. 10 Art. 17

3:101 2, 6 3:203 1 3:101 5 3:102 2 3:101 4 3:203 1, 2 3:202 1, 8:401 1, 5

Directive 2001/95 also referred to as the General Product Safety Directive (Directive 2001/95/ EC of the European Parliament and of the Council of 3 December 2001 on general product safety) Art. 3

2:102 1, 2

Directive 2002/47 also referred to as the Financial Collateral Arrangements Directive (Directive 2002/47/ EC of the European Parliament and of the Council of 6 June 2002 on financial collateral arrangements) Art. 1 Art. 2 Art. 3

1:304 2, 1:307 5 1:306 2, 1:307 2, 5 1:304 2, 1:307 2, 5

Directive 2002/65 also referred to as the Financial Services Distance Selling Directive (Directive 2002/65/ EC of the European Parliament and of the Council of 23 September 2002 concerning the distance marketing of consumer financial services and amending Council Directive 90/619 / EEC and Directives 97/7/ EC and 98/27/ EC)

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In general Recital 20 Recital 23 Recital 29 Recital 31 Art. 2 Art. 3 Art. 5 Art. 6 Art. 7 Art. 9 Art. 11 Art. 12 Art. 15

1:201 3, 1:202 2, 4, 5, 2:203 12, 2:204 1, 4:104 4, 4:106 2, 7:101 6 5:104 1 5:101 1, 5:104 1 1:201 16 7:105 2 1:201 1, 3, 1:202 1, 3, 1:306 3, 4, 6, 7, 5:101 2, 5:A-01 14, 19 1:306 13, 2:101 1, 2, 3, 2:203 8, 2:205 1, 2:206 1, 4:104 1, 2, 5:104 1, 7:104 1, 7:105 1 1:304 3, 1:306 3, 1:307 2, 4, 5:104 1, 2, 6:201 1, 8 2:208 1,5:101 1, 5:102 1, 2, 4, 7, 5:103 1, 2, 3, 5:105 4, 5:106 1, 4, 8, 5:A-01 1, 2, 3, 20, 22, 27 5:105 1, 3, 7:201 1, 2, 4, 8:303 1 4:101 1, 4, 4:106 1 4:104 1, 2, 4:110 3, 8:401 1, 5 1:203 2, 5:101 3 2:207 1, 4:104 1, 2

Directive 2002/73 also referred to as the Directive on Equal Treatment for Men and Women as Regards Access to Employment (Directive 2002/73/ EC of the European Parliament and of the Council of 23 September 2002 on the implementation of the principle of equal treatment for men and women as regards access to employment, vocational training and promotion, and working conditions) In general Art. 2 Art. 6

3:101 2 3:102 2 3:201 1

Directive 2002/83 also referred to as the Life Assurance Directive (Directive 2002/83/ EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance) In general Recital 45 Art. 2 Art. 35 Art. 36 Art. 61 Annex III

5:103 2 5:101 1 5:101 2 5:101 1, 9, 5:103 1, 2, 3 5:104 1 1:304 8 7:105 1, 4

Directive 2002/92 also referred to as the Insurance Mediation Directive (Directive 2002/92 / EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation) In general Art. 2

494

6:305 1 1:306 4, 6

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Art. 12 Art. 13

1:304 3, 2:101 5, 1:305 6, 1:306 4, 1:307 2, 3, 2:204 1, 6:201 16

Directive 2003/58 (Directive 2003/58 / EC of the European Parliament and of the Council of 15 July 2003 amending Council Directive 68/151/ EEC, as regards disclosure requirements in respect of certain types of companies) Recital 6 Art. 3

1:306 1 1:308 1

Directive 2004/39 also referred to as the Markets in Financial Instruments Directive (Directive 2004/39 / EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/ EEC and 93/6 / EEC and Directive 2000/12 / EC of the European Parliament and of the Council and repealing Council Directive 93/22 / EEC) In general Recital 33 Art. 19 Art. 21

7:101 11 7:101 9 2:101 5, 6, 7:103 1, 7:104 1 2:101 6, 7:101 2, 9, 7:104 1

Directive 2004/113 also referred to as the General Sex Discrimination Directive (Council Directive 2004/113/ EC of 13 December 2004 implementing the principle of equal treatment between men and women in the access to and supply of goods and services) In general Recital 7 Recital 14 Recital 16 Recital 22 Art. 1 Art. 2 Art. 3 Art. 4 Art. 5 Art. 6 Art. 8 Art. 9

3:101 2, 3:201 5 3:101 8 3:103 3 3:101 8, 3:103 3, 10 3:203 1 3:201 11 3:101 5, 8, 3:102 1, 2 3:101 2, 3:201 2 3:102 1, 3:103 1, 3 3:201 6 3:103 2 3:201 1, 3:202 1 3:203 1, 2

Directive 2005/29 also referred to as the Unfair Commercial Practices Directive (Directive 2005/29 / EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450 / EEC, Directives 97/7/ EC, 98/27/ EC and 2002/65/ EC of the European Parliament and of the Council and Regulation (EC) 2006/2004 of the European Parliament and of the Council)

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In general Preamble Recital 18 Art. 2 Art. 3 Art. 5 Art. 6 Art. 7 Art. 8

1:201 3, 2:103 2, 2:203 18, 6:301 1, 7:101 6 2:202 2, 2:102 12, 2:202 2, 1:201 1, 2, 1:202 1, 2, 9, 2:101 1, 2, 3, 14, 2:102 1, 2, 2:202 3, 4, 7:101 9 2:101 3, 6, 2:202 4, 4:107 5 2:101 3, 2:102 13, 2:103 1 2:101 5, 2:206 1 2:101 5, 2:202 1, 4, 2:205 1, 2:206 1 2:101 5

Annex I Sec. 5 Sec. 6 Sec. 8

2:103 1, 2 2:103 1, 2 2:202 1, 4, 7:105 1

Directive 2006/54 also referred to as the Directive on Principle of Equal Opportunities and Equal Treatment of Men and Women (Directive 2006/54 / EC of the European Parliament and of the Council of 5 July 2006 on the implementation of the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation (recast)) In general Recital 30 Art. 2 Art. 18 Art. 19

3:101 2 3:203 1 3:101 8 3:201 1, 22, 3:202 1 3:203 2

Directive 2006/114 also referred to as the Misleading Advertising Directive (Directive 2006/114 / EC of the European Parliament and of the Council of 12 December 2006 concerning misleading and comparative advertising) In general

2:101 5, 6:301 1

Directive 2006/123 also referred to as the Services Directive (Directive 2006/123/ EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market) Recital 52 Recital 60 Art. 5 Art. 20 Art. 22

496

7:105 2 7:105 2 7:105 2 3:101 2, 4 7:105 3

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Directive 2007/64 also referred to as the Payment Services Directive (Directive 2007/64 / EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market amending Directives 97/7/ EC, 2002/65/ EC, 2005/60 / EC and 2006/48 / EC and repealing Directive 97/5/ EC) In general Recital 18 Recital 22 Recital 24 Recital 25 Recital 26 Recital 32 Art. 1 Art. 3 Art. 4 Art. 30 Art. 33 Art. 36 Art. 37 Art. 41 Art. 42 Art. 43 Art. 44 Art. 46 Art. 47 Art. 48 Art. 49 Art. 50 Art. 51 Art. 75

1:201 3 6:302 1 6:101 3 1:306 4, 1:307 2 1:305 6, 1:306 6, 1:307 2, 6:302 1 1:307 7, 6:302 1 6:101 3 6:302 1 1:304 3 1:201 1, 1:306 3 6:101 3 2:207 1 1:304 3, 1:306 2, 13, 1:307 2, 3, 2:204 1, 6:201 1, 7:105 1 1:306 13, 2:203 9, 2:206 1 1:306 13, 1:307 2, 6:201 1, 8, 7:105 1 1:306 13, 2:203 9, 2:205 1, 2:206 1 1:307 2 6:201 1, 8 2:203 9 1:306 5, 1:307 2 1:307 7 7:101 2 2:203 9 6:101 3 2:101 6, 7:103 2, 8:101 1, 8:102 3, 8:303 1

Directive 2008/48 / EC also referred to as the Consumer Credit Directive 2008 (Directive 2008/48 / EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102 / EEC) In general Art. 3 Art. 4 Art. 5 Art. 6 Art. 10 Art. 15 Art. 22 Annex II

1:201 3, 2:E-01 5, 5:106 3 1:201 1, 1:202 1, 2, 1:306 3, 5:106 1, 4, 11 2:203 10 2:203 10 1:307 2 1:304 3, 4, 6, 11 5:106 1 1:203 2 2:203 10, 7:105 1

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Directive 2008/122 / EC also referred to as the Timeshare Directive 2008 (Directive 2008/122 / EC of the European Parliament and of the Council of 14 January 2009 on the protection of consumers in respect of certain aspects of timeshare, long-term holiday product, resale and exchange contracts) In general Recital 11 Art. 2 Art. 3 Art. 4 Art. 5 Art. 6 Art. 7 Art. 8 Art. 9 Art. 11 Art. 12 Annex I Annex II Annex III Annex IV

1:101 10, 2:203 12, 2:203 18, 2:E-01 5, 5:102 3, 5:103 6, 7, 5:C-01 3 5: 101 1, 5:102 1 1:202 1 2:102 1, 3, 5:C-01 4 1:307 2; 4:C-01 2, 3, 4, 5, 8, 7:105 1 1:304 3, 6, 2:101 6, 2:204 1; 4:C-01 3, 4, 5, 7, 8, 5:104 1, 7:105 1 4:C-01 4, 5:101 1, 5: 102 1, 5:103 1, 2, 3, 5:C-01 1, 5, 12 5:102 2, 5:102 5, 5: 103 4 5:C-02 1, 2 5:106 1, 5:C-01 1, 7 5:106 4, 8 1:203 2, 5:101 3 2:203 1, 2:205 1, 2:206 1 2:205 1, 2:206 1 2:205 1 2:205 1

Other Sources Communication from the Commission to the Council and the European Parliament on European Contract Law of 11 July 2001, COM (2001) 398 final In general Annex III

1:101 2 1:304 3

Communication from the Commission to the European Parliament and the Council “European Contract Law and the revision of the Acquis: the way forward” of 11 October 2004, COM (2004) 651 final In general

6:201 7

Proposal for the Consumer Sales Directive of 18 June 1996, COM (1995) 520 final In general

1:201 11

Proposal for a Directive of the European Parliament and the Council on consumer rights (COM (2008) 614 final) Recital 24 Art. 10

498

1:306 4 1:304 4

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EU Charter of Fundamental Rights (Charter of Fundamental Rights of the European Union (2000 /C 364/01)) Art. 21 Art. 23

3:101 1 3:101 1

Principles of European Contract Law also referred to as PECL (Principles of European Contract Law, Parts I and II, Ole Lando/Hugh Beale [eds.], The Hague 1999; Part III, Ole Lando/Eric Clive/André Prüm/Reinhard Zimmermann [eds.], The Hague 2003) In general Art. 1:103 Art. 1:106 Art. 1:201 Art. 1:202 Art: 1:301 Art. 1:303 Art. 2:101 Art. 2:102 Art. 2:103 Art. 2:104 Art. 2:105 Art. 2:107 Art. 2:201 Art. 2:202 Art. 2:209 Art. 2:211 Art. 2:301 Art. 4:107 Art. 4:110 Art. 5:103 Art. 5:104 Art. 6:101 Art. 7:104 Art. 9:301 et seq. Art. 9:301 Art. 9:401 Art. 9:501 Art. 9:504 Art. 9:505 Art. 9:508

1:101 1, 4:102 5, 6:201 7, 7:201 5, 8:301 9, 8:401 12, 8:402 2, 8:407 1 2:102 6 2:101 1 1:203 9, 1:306 6 7:104 8 1:307 6 2:102 6, 5:101 5 1:304 4, 4:101 6 4:101 9 4:101 9 6:101 2 6:101 2 4:109 1, 5 4:101 8, 4:102 4, 4:103 1 5:101 5 6:101 2, 6:204 2, 4 4:102 6 2:103 1 5:101 15 6:101 2 6:101 2, 6:201 6 6:101 2, 6:202 2, 6:203 1, 6 4:107 3, 4:108 2, 8 7:201 5 5:101 5 8:301 10 8:301 12 8:401 3 8:403 1 8:403 1 8:406 1

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Proposal of the European Code of Contracts (prepared by the Gandolfi-Group) (Giuseppe Gandolfi (ed.), Code Européen des Contrats – Avant-Projet, Milano 2001) In general Art. 113.1 Art. 114

8:301 9 8:301 12 8:301 10

Draft Common Frame of Reference also referred to as the DCFR (Draft Common Frame of Reference, Outline Edition, Christian von Bar / Eric Clive/ Hans Schulte-Nölke/ Hugh Beale/ Johnny Herre/ Jérôme Huet / Matthias Storme/ Stephen Swann/ Paul Varul / Anna Veneziano/ Fryderyk Zoll, Munich 2009) In general I. – 1:102 I. – 1:105 I. – 1:106 II. – 1:106 II. – 1:109 II. – 1:109 II. – 1:301 III. – 3:101 III. – 3:301 III. – 3:302 III. – 3:509 III. – 3:511 III. – 3:205 III. – 3:511 III. – 3:515 IV.A. – 5:101

1:101 6, 8:301 9, 8:303 3, 8:304 1, 8:201 1, 8:202 1, 8:302 1 2:101 1 1:201 8 1:306 7 1:304 4, 1:307 6, 11 1:301 1 1:303 5 2:103 5 8:101 4 8:301 10 8:202 2 8:303 2 8:303 13 8:B-05 4 8:303 13 8:303 2 8:B-01 6

Recommendation 1997/489 concerning transactions by electronic payment instruments (Commission Recommendation of 30 July 1997 concerning transactions by electronic payment instruments and in particular the relationship between issuer and holder (97/489 / EC)) In general Art. 4

7:101 2 7:104 1

Amended proposal for a European Parliament and Council Directive on the sale of consumer goods and associated guarantees (COM (1998) 217 final) In general

1:201 11

Uncitral Model Law on Electronic Commerce Art. 6

500

1:307 6

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Uncitral Model Law on Electronic Signatures 2001 Art. 2

1:308 7

Art. 6

1:308 7

UNIDROIT Principles (UNIDROIT Principles of International Commercial Contracts 2004) In general Art. 1.2 Art. 1.11 Art. 7.3.1 Art. 9

8:301 12, 8:401 3, 8:407 1 1:304 4 1:307 6 8:301 10, 8:401 3, 8:402 2, 8:403 1, 8:406 1 2:102 6, 8:406 1

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Table of Cases European Court of Justice 7/56 and 3-7/57 – Algera v Common Assembly of the European Coal and Steel Community 7:101 10 43/59, 45/59 and 48/59 – Eva von Lachmüller, Bernard Peuvrier, Roger Ehrhardt v Commission of the European Economic Community 7:102 2 16/61 – Acciaierie Ferriere e Fonderie di Modena v High Authority of the European Coal and Steel Community 7:101 3 230/81 – Luxembourg v Parliament 7:104 2

C-14/83 – Von Colson and Kamann 3:201 22, 3:202 1, 7:104 2 C-221/84 – Berghoefer GmbH & Co. KG v. ASA SA 1:305 6

80/86 – Kolpinghuis Nijmegen 7:104 2 C-34/87 – Culin v Commission of the European Communities 8:401 10, 8:402 8 46/87 and 227/88 – Hoechst AG v Commission of the European Communities 7:104 2

C-308/87 – Grifoni II 8:402 1, 8:403 1 C-347/87 – Triveneta Zuccheri 2:101 7 C-382/87 – Buet 2:102 13

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C-2/88 – IMM Zwartveld and Others 7:104 2 C-104/89 and C-37/90 – Mulder a. o. v Council of the European Communities and Commission of the European Communities 8:406 1 C-251/89 – Nikolaos Athanasopoulos and others v Bundesanstalt für Arbeit 7:104 2

C-361/89 – Di Pinto 1:201 11, 12, 4:109 4 C-6/90 and C-9/90 – Andrea Francovich and Danila Bonifaci and others v Italian Republic 8:401 11

Case C-358/90 – Compagnia italiana alcool v Commission of the European Communities 4:109 4, 8:401 2

C-46/93 and C-48/93 – Brasserie du Pêcheur SA v Federal Republic of Germany and R v Secretary of State for Transport ex parte Factortame Ltd 4:109 4 C-128/93 – Geertruida Catharina Fisscher v Voorhuis Hengelo BV and Stichting Bedrijfspensioenfonds voor de Detailhandel 4:109 4 C-144/93 – Pfanni Werke Otto Eckart KG v Landeshauptstadt München 4:109 4 C-381/93 – Commission v France 2:101 7, 7:102 2 C-269/95 – Benincasa v Dentalkit Srl. 1:201 16, 4:101 2 C-210/96 – Gut Springenheide 2:102 4, 2:202 2 C-367/96 – Kefalas 2:101 7 C-370/96 – Covita AVE v Elliniko Dimosio 2:102 5

C-140/97 – W. Rechberger and others v Austria 8:401 2, 11

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C-159/97 – Trasporti Castelletti Spedizioni Internazionali SpA v Hugo Trumpy SpA 1:307 9, 1:308 7, 6:201 2 C-172/97 – SIVU du plan d'eau de la Vallée du Lot v Commission of the European Communities 8:301 8

C-215/97 – Bellone 1:304 1, 4

C-237/98 – AFS Intercultural Programs Finland ry 7:E-02 5, 8

C-373/97 – Diamantis 2:101 7 C-423/97 – Travel Vac 5:102 2, 5:105 12, 5:A-01 14, 36, 5:C-01 10

C-40/98 – Commission of the European Communities v Tecnologie Vetroresina SpA (TVR) 8:301 8 C-56/98 – Modelo SGPS SA v Director-Geral dos Registos e Notariado 1:304 4

C-220/98 – Estee Lauder Cosmetics GmbH & Co.OHG v Lancaster Group GmbH 2:202 2

C-240/98 to C-244/98 (joint cases) – Océano 2:101 6, 6:301 13, 6:304 1, 2, 6:306 1, 3

C-281/98 – Angonese 3:101 4 C-387/98 – Coreck Maritime GmbH v Handelsveem BV and Others 1:307 9

C-144/99 – Commission v Netherlands 6:302 3

C-299/99 – Philips 2:102 4 C-453/99 – Courage Ltd v Crehan 2:208 2 C-478/99 – Commission of the European Communities v Kingdom of Sweden 6:304 3

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C-481/99 – Heininger v Bayerische Hypotheken- und Wechselbank 2:207 1, 5:103 7 C-541/99 and C-542/99 – Idealservice 1:201 13

C-30/00 – William Hinton & Sons Ltd v Fazenda Publica 2:102 5

C-94/00 – Roquette Frères SA v Directeur général de la concurrence, de la consommation et de la répression des fraudes, and Commission of the European Communities 7:104 2 C-96/00 – Rudolf Gabriel 4:101 2, 4:102 1 C-168/00 Leitner v TUI Deutschland 8:401 2, 8:402 1, 9, 13 C-253/00 – Antonio Munoz Cia SA v Frumar Limited 2:208 2 C-334/00 – Fonderie Officine Meccaniche Tacconia Spa v Heinrich Wagner Sinto Maschinenfabrik GmbH 2:208 2 C-336/00 – Republik Österreich v Martin Huber 7:102 2 C-400/00 – Club-Tour, Viagens e Turismo SA v Alberto Carlos Lobo Goncalves Garrido 7:E-02 8

C-44/01 – Pippig Augenoptik GmbH & Co. KG v Hartlauer Handelsgesellschaft GmbH 2:202 2 C-167/01 – Inspire Art 2:101 7

C-218/01 – Henkel 2:102 4

C-464/01 – Gruber 1:201 6, 20 C-237/02 – Freiburger Kommunalbauten 2:101 6, 6:304 2

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C-404/02 – Nichols plc v Registrar of Trade Marks 2:102 4 C-70/03 – Commission v Spain 6:203 5, 8 C-209/03 – The Queen v London Borough of Ealing and Secretary of State for Education and Skills 7:102 2 C- 336/03 – EasyCar 5:A-01 2, 26, 38

C-350/03 – Schulte 5:105 1, 2, 8, 5:106 2

C-402/03 – Skov Æg 2:101 12 C-144/04 – Mangold 3:101 6

C-299/04 – Crailsheimer 5:105 1, 2, 5, 8, 9, 5:106 2, 5:A-01 14, 37

C-302/04 – Ynos Kft v János Varga 6:306 7 C-407/04 P – Dalmine v Commission 1:304 4 C-411/04 P – Salzgitter Mannesmann GmbH v Commission 1:304 4

C-168/05 – Elisa María Mostaza Claro v Centro Móvil Milenium SL 6:304 2, 5, 6:306 1 C-306/06 – 01051 Telecom GmbH v Deutsche Telekom AG 7:201 2 C-404/06 – Quelle AG v Bundesverband der Verbraucherzentralen und Verbraucherverbände 8:B-04 6, 8:B-05 1, 3, 4

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Court of First Instance T-47/93 – C v Commission of the European Communities 8:401 2 T-450/93 – Lisrestal v Commission of the European Communities 7:101 10 T-572/93 – Odigitria v Council of the European Communities and Commission of the European Communities 8:401 11 T-230/94 – Farrugia v Commission of the European Communities 8:401 2

T-168/94 – Blackspur DIY v Council of the European Communities and Commission of the European Communities 8:401 2 T-203/96 – Embassy Limousines 2:103 4, 9, 10

T-231/97 – New Europe Consulting Ltd. a. o. v Commission of the European Communities 8:406 1 T-307/01 – Jean-Paul François v Commission of the European Communities 2:102 5

T-271/ 04 – Citymo 2:101 7, 2:103 4

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Abbreviations Art. ACQP

Antiracism D.

Article Acquis Principles Council Directive 2000/43/ EC of 29 June 2000 implementing the principle of equal treatment between persons irrespective of racial or ethnic origin

B2B B2C Brussels I Reg.

Business to business Business to consumer Council Regulation (EC) 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters

C2C Cass. Civ.

Consumer to consumer Cour de Cassation (chambre civile) Civil Code Court of First Instance Common Frame of Reference United Nations Convention on Contracts for the International Sale of Goods (1980) Council Directive 86/653/ EEC of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents Schulte-Nölke/Twigg-Flesner/Ebers [eds.], EC Consumer Law Compendium – Comparative Analysis Prepared for the European Commission under Service Contract No. 17.020100/04/389299: “Annotated Compendium including a comparative analysis of the Community consumer acquis”, (Version of 1 December 2006) Council Directive 87/102 / EEC of 22 December 1986 for the approximation of the laws, regulations and administrative provisions of the Member States concerning consumer credit Directive 2008/48 / EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102 / EEC Directive 1999/44 / EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees Directive 97/5/ EC of the European Parliament and of the Council of 27 January 1997 on cross-border credit transfers

CC CFI CFR CISG

Commercial Agents D. ConsLC

Consumer Credit D. 1987 Consumer Credit D. 2008 Consumer Sales D.

Cross Border Credit Transfer D.

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D. DCFR

Distance Selling D.

Doorstep Selling D.

ECJ

E-Commerce D.

E-Signatures D.

Directive Draft Common Frame of Reference, Outline Edition, 2009, prepared by the Study Group on a European Civil Code and the Acquis Group, edited by Christian von Bar, Eric Clive and Hans Schulte-Nölke Directive 97/7/ EC of the European Parliament and of the Council of 20 May 1997 on the protection of consumers in respect of distance contracts Council Directive 85/577/ EEC of 20 December 1985 to protect the consumer in respect of contracts negotiated away from business premises European Court of Justice Directive 2000/31/ EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market Directive 1999/93/ EC of the European Parliament and of the Council of 13 December 1999 on a Community framework for electronic signatures

Financial Collateral Arrangements D. Financial Services Distance Selling D.

Directive 2002/47/ EC of the European Parliament and of the Council of 6 June 2002 on financial collateral arrangements Directive 2002/65/ EC of the European Parliament and of the Council of 23 September 2002 concerning the distance marketing of consumer financial services and amending Council Directive 1990/619 / EEC and Directives 1997/7/ EC and 1998/27/ EC

General Product Safety D. General Sex Discrimination D.

Directive 2001/95/ EC of the European Parliament and of the Council of 3 December 2001 on general product safety Council Directive 2004/113/ EC of 13 December 2004 implementing the principle of equal treatment between men and women in the access to and supply of goods and services

Insurance Mediation D.

Directive 2002/92 / EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation

Late Payment D.

Directive 2000/35/ EC of the European Parliament and of the Council of 29 June 2000 on combating late payment in commercial transactions Directive 2002/83/ EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance

Life Assurance D.

Markets in Financial Instruments D.

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Directive 2004/39 / EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/ EEC and 93/6 / EEC and Directive 2000/12 / EC of the European Parliament and of the Council and repealing Council Directive 93/22 / EEC

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Abbreviations

Misleading Advertising D.

Directive 2006/114 / EC of the European Parliament and of the Council of 12 December 2006 concerning misleading and comparative advertising

OJ

Official Journal

p. P2P

Page Private to private, i.e. covering all contracts irrespective whether B2B, B2C or C2C Council Directive 90/314 / EEC of 13 June 1990 on package travel, package holidays and package tours Paragraph Directive 2007/64 / EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market amending Directives 97/7/ EC, 2002/65/ EC, 2005/60 / EC and 2006/48 / EC and repealing Directive 97/5/ EC Principles of European Contract Law – Parts I and II, Lando/Beale [eds.], The Hague 1999 – Part III, Lando/Clive/Prüm/Zimmermann [eds.], The Hague 2003 Directive 98/6 / EC of the European Parliament and of the Council of 16 February 1998 on consumer protection in the indication of the prices of products offered to consumers Council Directive 85/374 / EEC of 25 July 1985 on the approximation of the laws, regulations and administrative provisions of the Member States concerning liability for defective products

Package Travel D. para. Payment Services D.

PECL

Price Indication D.

Product Liability D.

Reg.

Regulation

sec. sent. Services D.

Section Sentence Directive 2006/123/ EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market

Timeshare D. 1994

Directive 94/47/ EC of the European Parliament and the Council of 26 October 1994 on the protection of purchasers in respect of certain aspects of contracts relating to the purchase of the right to use immovable properties on a timeshare basis Directive 2008/122 / EC of the European Parliament and of the Council of 14 January 2009 on the protection of consumers in respect of certain aspects of timeshare, long-term holiday product, resale and exchange contracts

Timeshare D. 2008

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Unfair Commercial Practices D.

Unfair Contract Terms D.

Directive 2005/29 / EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450 / EEC, Directives 97/7/ EC, 98/27/ EC and 2002/65/ EC of the European Parliament and of the Council and Regulation (EC) 2006/2004 of the European Parliament and of the Council Council Directive 93/13/ EEC of 5 April 1993 on unfair terms in consumer contracts

vol.

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Glossary This glossary lists legal terms which have been used for drafting the Acquis Principles contained in the present volume. The Terminology Group, which was responsible for choosing those terms (see ‘Consolidating European Contract Law Terminology: the Contribution of the Terminology Group’, p. l et seq.), gratefully acknowledges the assistance provided by Irene Maier, who compiled the first draft for this list from the Acquis Principles. Terms indicated below in ‘bold print’ have been used for the Acquis Principles. Terms indicated in ‘italics' have not been used within the Acquis Principles. They are listed below in order to guide the reader towards the appropriate terms used by the Acquis Principles. ‘acceptance’ – see Art. 4:102 and Art. 6:204(1). ‘adequate information’ – Art. 5:104 (information of withdrawal right), Art. 5:105. ‘advanced > electronic signature’ – defined in Art. 1:307(4). ‘agreement’ – see Art. 2:103 paras (1) and (3); Art. 4:101. ‘Agreement’ is understood as a necessary component of a contract as defined Art. 4:101 and is not used synonymously with ‘contract’. ‘arbitration proceedings’ – see Art. 6:305(1)(p). ‘avoidance' – see either ‘rescission’ or ‘termination’ ‘breach’ ‘Breach’ is used to indicate a violation of a duty or right. ‘breach of contract' – see ‘non-performance’. ‘breach of information duties’ – see Art. 2:204 and Art. 2:208. ‘breach of the principle of nondiscrimination’ – see Art. 3:203(1). ‘burden of proof’ – see Art. 3:203, Art. 6:101(4), Art. 6:305(1)(p) and Art. 8:G-03. ‘business’ – defined in Art. 1:202. See also Art. 2:202, and the entire Chapter 6. The Acquis Principles use ‘business” for

consolidating the use of various related terms which have been used in EC legislation to describe a certain type of contract party, including “professional”, “professional supplier”, or “trader”. ‘business supplying goods or services’ – see ‘contract for the supply of goods or services by a business’. ‘cheques’ – see ‘travellers cheques’. ‘choice of > cure’ – Art. 8:B-04. See also ‘> repair and replacement’. ‘collective proceedings’ – see Art. 6:203(2) and Art. 6:301(1). ‘commercial > communication’ – see Art. 2:202(2). ‘commercial practice’ – see Art. 6:301(2). ‘communication’ – see also ‘real time distance communication’, ‘commercial communication’. ‘communication medium’ – see Art. 2:202(1). ‘company law’ – see Art. 1:101. ‘consumer’ – defined in Art. 1:201. See also Art. 2:102 and several following provisions, as well as Chapter 6. ‘contract’ – see Art. 2:201 and several following articles, see also specific types of contracts listed below.

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‘contract between > businesses’ – see Art. 6:301(2). ‘contract concluded at a distance’ – see Art. 2:204(2) (information duties), Art. 5:A-01 (right of withdrawal) and Art. 7:201 (time of performance). Such contracts will be defined in a future instalment of Acquis Principles. ‘contract negotiated away from business premises’ – see Art. 5:A-01. ‘contract for sale of > foreign currency’ – see Art. 6:305(2). ‘contract for the supply of > goods or > services by a > business’ – see Art. 5:106. ‘contract law’ – see Art. 1:101(1). See also Art. 4:109(2). ‘contract of fixed duration’ – see Art. 6:305(1)(h). ‘contract of indeterminate duration’ – see Art. 6:305(1) paras (g) and (i). ‘contract term’ – see: ‘contract term based on statutory provisions’ – see Art. 6:303(1); ‘contract term[s] drafted by a third person’ – see Art. 6:101(2); ‘contract term[s] drafted in advance [for several transactions]’ – see Art. 6:101 paras (2) and (3); ‘contract term not individually negotiated’ – see Art. 6:101(2) and generally Chapter 6. ‘credit contract’ – see Art. 5:106(3). ‘creditor’ – see entire Chapter 7. ‘cure’ – see Art. 8:301(1) and Chapter 8 sec. 2 more generally. See also ‘choice of cure’. ‘customer’ – see ‘ultimate customer’. ‘damage [to goods received]’ – see Art. 5:105(2). ‘damages’ – see Art. 6:305(1)(e), Art. 8 sec. 4 more generally. See also ‘damages for nonpecuniary losses’, ‘damages for pecuniary losses’ and ‘reliance damages’ and ‘right to damages’ below. ‘damages for non-pecuniary losses’ – see Art. 3:202. Art. 8:402(4). ‘damages for pecuniary losses’ – see Art. 3:202(1).

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‘death’ – see ‘liability of a business for death or personal injury’. ‘debtor’ – see entire Chapter 7. ‘declaration' – see ‘notice’. ‘defective > performance’ – Art. 8:101. ‘delay’ – see undue delay. ‘delayed > performance’ – Art. 8:101. ‘delivery’ – see Art. 2:202(2), Art. 2:203(1), Art. 2:206(1); Art. 5:103(1), and Art. 6:305(1)(k). ‘discrimination’ – defined in Art. 3:102; see also ‘non-discrimination’. ‘distance selling contract’ – see ‘contracts concluded at a distance’. ‘durable medium’ – defined in Art. 1:306, see also ‘textual form on a durable medium’. ‘duty’ – see Art. 2:201 and several following articles, in particular Chapter 7 sec. 1. See also various composite entries below. ‘duty of loyalty’ – see Art. 7:103. ‘duty to co-operate’ – see Art. 7:104. ‘duty to inform’ – see ‘pre-contractual information duties’. See also Art. 8:A-01 (about inability to perform) and Art. 8:E-04 (about > non-performance). ‘duty to perform’ – see Art. 7:101. ‘duty to prevent input errors’ – see Art. 4:105(2) and (3). ‘duty to provide information’ – see ‘pre-contractual information duties’. ‘effects of unfair terms’ – see ‘unfairness of terms’. ‘effects of > withdrawal’ – see Art 5:105, Art. 5:106 and ‘right of withdrawal’. ‘electronic’ – defined in Art. 1:308(3), see also Art. 1:308 more generally. ‘electronic means’ – see Art. 1:303 (notice), Art. 4:104 (real time distance communication), Art. 4:105 (formation), Art. 4:105(2) and (3) (correction of input errors), Art. 4:110 (acknowledgment of receipt) and Art. 6:201 (terms not individually negotiated). ‘electronic > signature’ – defined in Art. 1:308(2), see also Art. 1:308(4). ‘exclusive jurisdiction’ – see ‘jurisdiction’.

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Glossary

‘failure to perform an > obligation’ – see ‘non-performance’. ‘financial instruments’ – see Art. 6:305(2). ‘financial services contracts’ – see Art. 6:305(1)(g). ‘fixed duration’ – see ‘contract of fixed duration’. ‘foreign currency’ – see ‘contract for the sale of foreign currency’ and ‘international money orders denominated in foreign currency’. ‘form’ – see Art. 2:204. ‘formation’ – see Chapter 4. ‘forum' – see ‘jurisdiction’: ‘freedom of > form’ – see Art. 1:304. ‘good faith’ – see Art 2:101, Art. 2:103 and Art. 6:301(1). See also Art. 7:101(1) and Art. 7:102. ‘goods’ – see Arts. 2:201-203 (information duties); Art. 2:204 (clarity of information); Art. 3:201 (remedies for discrimination), Art. 4:106 (unsolicited goods); Arts. 4:107-108 (statements on characteristics); Art. 5:103 (withdrawal period); Art. 5:105 (withdrawal, liability for damage); Art. 5:106 (withdrawal, linked contracts); Art. 5:A-01 (contracts negotiated away from business premises); Art. 6:301 (unfairness of terms) and Art. 6:305 (list of unfair terms). ‘guarantees [available to the consumer]’ – see Art. 6:305(1)(o). ‘handwritten > signature’ – defined in Art. 1:308. ‘harassment’ – defined in Art. 3:102(2)(1). ‘inclusion of terms’ – see Chapter 6 sec. 2. ‘inertia selling' – see ‘unsolicited goods or services’. ‘information’ < see ‘adequate information’. ‘information duties’ – see ‘pre-contractual information duties’. ‘inheritance law’ – see Art. 1:101(3). ‘interest’ – Art. 8:404 (on delayed payment), Art. 8:405 (in case of creditor’s nonperformance), Art. 8:406 (in commercial contracts), Art. 8:407 (> Unfair terms relating to interest).

‘international conventions [to which the Member States are parties, or to which the European Union is a party]’ – see Art. 6:303(1). ‘international money orders denominated in foreign currency’ – see Art. 6:305(2). ‘interpretation of terms’ – see Art. 6:203 and Chapter 6 sec. 2 more generally. ‘in writing’ – Arts. 1:307 and 2:204(2). ‘jurisdiction’ – see Art. 6:304. ‘labour law’ – see Art. 1:101(3). ‘language’ – see: ‘language of communications’ – see Art. 7:105; ‘languages offered for the conclusion of the contract’ – see Art. 4:105; ‘plain and intelligible language’ – see Art. 2:204 (clarity of information); Art. 5:104 (information on the right of withdrawal); Art. 6:302 (transparency of terms) and Art. 6:303 (unfairness test). ‘legal person’ – see Art. 1:202. ‘legitimate expectations’ – see Art. 2:102 and Art. 7:101(2). ‘liability of a business for death or personal injury’ – see Art. 6:305(1)(a). ‘linked contract[s]’ – see Art. 5:106. ‘loss [caused to the other party]’ – see Art. 2:103(2). See also ‘damages for non-pecuniary losses’ and ‘damages for pecuniary losses’. See also: ‘loss of profits’ – Art. 8:402 (2). ‘loyalty’ – see ‘duty of loyalty’. ‘mandatory rules’ – see Art. 1:203; Art. 1:303; Art. 4:105 (2, 3); Art. 4:110(3) and Art. 5:101. See also Art. 8:B-01 (for consumer contracts), Art. 8:E-01 and Art. 8:G-01. ‘medium’ – see ‘communication medium’, ‘durable medium’ and ‘technical medium used for contracting’. ‘modalities of > performance’ – see Chapter 7 sec. 2. ‘natural person’ – see Art. 1:201 and Art. 1:202. ‘negotiated terms’ – see Art. 6:202. ‘non-discrimination’ – see Chapter 3.

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‘non-pecuniary damages' – see ‘damages for non-pecuniary losses’. ‘non-pecuniary loss[es]’ – see ‘damages for non-pecuniary losses’. ‘non-performance’ – see Art. 2:208, Art. 6:305(1)(b), Art. 7:102, Art. 8:101. ‘notice’ – see Art. 1:302 (electronic notice), Art. 5:102 (notice of withdrawal), Art. 6:305 (1)(g) (reasonable notice); Art. 6:305(1)(i) (of change of the rate of interest in financial services contract), Art. 8:302 (notice of termination). See also ‘reasonable notice’. ‘notification' – see ‘notice’. ‘obligation’ – see Art. 2:203(1) and Art. 2:204(2). See also Art. 5:105(1). See also Art. 6:301(1), and Art. 6:305(1) lit. (e), (m), (n), (o); and see Art. 2:208, Art. 8:201(monetary obligations); Art. 8:202 (non-monetary obligations). See also entire Chapter 7 and ‘reciprocal obligation’ below. ‘offer’ – see Art. 4:102. ‘party’ – see Chapters 1 to 7. ‘pecuniary damages' – see ‘damages for pecuniary losses’. ‘pecuniary loss[es]’ – see ‘damages for pecuniary losses’. ‘performance’ – see Art. 2:201 and Art. 2:202(2) and the entire Chapter 7. See also ‘delayed performance’, ‘defective performance’, ‘specific performance’ and ‘right to performance’. ‘personal injury’ – see ‘liability of a business for death or personal injury’. ‘pre-contractual dealings’ – see Art. 2:101 and Art. 2:102. ‘pre-contractual information duties’ – see Chapter 2 sec. 2. ‘pre-contractual duties’ – see Chapter 2. ‘pre-contractual statement[s]’ – see Art. 4:107-108. ‘pre-formulated > standard contract’ – see Art. 6:101(2). ‘preference [of individually negotiated terms]’ – see Art. 6:202.

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‘price’ – see Art. 2:202-203 (information duties); Art. 2:204 (clarity of information); Art. 6:303(2) (adequacy) and Art. 6:305 (list of unfair terms). ‘price-indexation clause[s]’ – see Art. 6:305(1)(k). ‘producer’ – see Art. 4:108. ‘profession’ – see Arts. 1:201-1:202. See also ‘professional diligence’ below. ‘professional' – see ‘busines’ ‘professional diligence’ – see Art. 2:202(2). ‘professional > supplier' – see ‘business’. ‘promise’ – see ‘unilateral promise’. ‘proof’ – see ‘burden of proof’. ‘property’ – see Art. 5:A-01; Art. 5:C-01 (timeshare contracts). ‘public statements’ – see Art. 4:108. ‘real time distance communication’ – see Art. 4:104. ‘reasonable care’ – see Art. 5:105. ‘reasonable > notice’ – see Art. 6:305(1)(g) and (i). ‘reciprocal obligation’ – see Art. 7:201(4), Art. 8:201; Art. 8:304. ‘reimbursement [of money]’ – see Art. 7:201(3). ‘reliance > damages’ – see Art. 2:208(3). ‘remedies’ – in general see Chapter 8, see also Art. 7:102 and 7:H-15. ‘remedies [available to discriminated person]’ – see Chapter 3 sec. 2. ‘remedies [available to the > consumer – in > contracts between a > business and a consumer – against the business or a third party for > non-performance by the business]’ – see Art. 6:305(1)(b). ‘remedies [for breach of > information duties]’ – see Art. 2:208. ‘repair and replacement’ – see Art. 8:B-04. See also > choice of cure and > cure. ‘rescission’ – reserved for notices which make a contract void ab initio (e.g., on the grounds of mistake or duress). ‘right of > withdrawal’ – see Art. 2:202; Arts. 5:101-5:C-02 and Art. 6:305(1)(k). ‘right to > damages’ – Art. 8:401. ‘right to > performance’ – see Art. 7:102.

Compiled by Gerhard Dannemann, Silvia Ferreri, Michele Graziadei and Irene Maier

fidus Publikations-Service {Sellier}Princ_Acquis_Group_Contract II/daten_3b2/Princ_Acquis_Group_Contract_2_Text.3d Insgesamt 518 Seiten 2. AK

Glossary

‘right to set-off’ – see Art. 6:305(1)(b). ‘services’ – see Art. 2:201-203 (information duties); Art. 2:204 (clarity of information); Art. 3:201 (remedies for discrimination), Art. 4:106 (unsolicited goods); Art. 4:107-108 (statements on characteristics); Art. 5:106 (withdrawal, linked contracts); Art. 5:A-01 (contracts negotiated away from business premises); Art. 6:301 (unfairness of terms); Art. 6:305 (list of unfair terms); 7:A-01 (equivalent quality); 8:A-01 (unavailability). ‘scope of the unfairness test’ – see ‘unfairness of terms’. ‘self-employed trade’ – see Art. 1:202. ‘set-off’ – see ‘right to set-off’. ‘sexual > harassment’ – defined in Art. 3:102(2)(b). ‘signature[s]’ – see Art. 1:308. ‘specific > perfromance’ – Art. 8:202. ‘standard > contract’ – see ‘standard contract terms’. ‘standard > contract terms’ – defined in Art. 6:101(3), see also the entire Chapter 6. ‘statement[s]’ – see Art. 1:307 (form). See also ‘communication’, ‘notice’, ‘pre-contractual statements’ and ‘public statements’. ‘statutory provisions’ – see ‘contract term[s] based on statutory provisions’. ‘supplier’ Note: this term is not used on its own (see ‘business’), but only in combination (with goods or services) in order to identify a particular party to a contract, such as in Art. 5:106, or a particular type of contract. ‘supplier of credit’ – see Art. 5:106(3). ‘supplier of financial services’ – see Art. 6:305(1) lit. (g) and (i). ‘supplier of goods or services’ – see ‘contract for the supply of goods or services by a business’. ‘technical medium used for contracting’ – see Art. 2:203(1). ‘term[s] conferring exclusive jurisdiction’ – see ‘jurisdiction’.

‘term[s] drafted by a third person’ – see ‘contract term[s] drafted by a third person’. ‘term[s] drafted in advance [for several transactions]’ – see ‘contract term[s] drafted in advance [for several transactions]’. ‘termination’ – see Art. 6:305(1) lit. (f), (g) and (i) (unfair terms regulating a right of termination). See also: ‘termination of performance’ – Chapter 8 sec. 3 in general. ‘term[s] not individually negotiated’ – see ‘contract term[s] not individually negotiated’. ‘textual form’ – defined in Art. 1:305, see Art. 6:201(3); see also ‘textual form on a durable medium’. ‘textual form on a > durable medium’ – see Art. 1:307, Art. 2:204(3) and Art. 5:104. ‘third person’ – see ‘contract term[s] drafted by a third person’. ‘time of > performance’ – see Art. 7:201. ‘trade’ – see Art. 1:202. See also ‘self-employed trade’. ‘trader' – see ‘business’. ‘transaction’ – see Art. 2:203, Art. 6:101(3). ‘transactions in transferable securities’ – see Art. 6:305(2). ‘transferable securities’ – see ‘transactions in transferable securities’. ‘transparency of terms’ – see Art. 6:302. ‘travellers cheques’ – see Art. 6:305(2). ‘ultimate customer’ – see Art. 4:108. ‘undue delay [concerning > time of > performance]’ – see Art. 7:201. ‘unfair terms’ – see ‘unfairness of terms’. ‘unfairness of terms’ – see Art. 6:301 (unfairness of terms), Art. 6:303 (scope of the unfairness test), Art. 6:304 (list of unfair terms), Art. 6:305 (indicative list of unfair terms) and Art. 6:306 (effects of unfair terms). See also Art. 8:407 (Unfair terms relating to > interest). ‘unfairness test’ – see ‘unfairness of terms’. ‘unilateral promise’ – see Art. 4:109(2).

Compiled by Gerhard Dannemann, Silvia Ferreri, Michele Graziadei and Irene Maier

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Annexes

‘unsolicited > goods or > services’ – see Art. 4:106. ‘user [of > term not individually negotiated]’ – see Art. 6:101 paras (2) and (4), and Art. 6:201(1). ‘validity of > terms [not individually negotiated]’ – see Arts. 6:301-6:306. ‘violation' – see ‘breach’.

‘withdrawal’ – see ‘effects of withdrawal’, ‘right of withdrawal’, ‘tacit withdrawal’ and ‘withdrawal period’. ‘withdrawal period’ – see Art. 2:208(1), Art. 5:103, and Art. 5:104. See also ‘right of withdrawal’. ‘work’ – see Art. 1:202. ‘writing’ – see ‘in writing’. ‘written form' – see ‘in writing’.