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17 Oct 2008

Directive proposed to enhance uniformity of consumer contractual rights both for online and more traditional shopping

On 8 October 2008, the Commission launched a proposal for a Directive on consumer contractual rights. The proposal comes about as a result of the Commission's review of the EU's "Consumer Acquis", i.e., the body of consumer law at EU level. The review concluded that there is a fragmented regulatory framework of consumer protection rules operating in the EU, and therefore a need for greater harmonisation. The proposed Directive (COM(2008)614), while certainly applicable to ordinary high street shopping for all kinds of consumer goods, also aims to give EU citizens more confidence to shop over the internet. Hong Kong sellers will therefore be directly affected by the proposed provisions, once they enter into effect in the Member States.

The proposal aims to revise Directive 85/577/EEC on contracts negotiated away from business premises, Directive 93/13/EEC on unfair terms in consumer contracts, Directive 97/7/EC on distance contracts, and Directive 99/44/EC on consumer guarantees. The proposal moves away from the minimum harmonisation approach of the aforementioned four Directives, in order to embrace a full harmonisation approach. In consequence, Member States will not be allowed to maintain or adopt provisions which diverge from, or are more stringent than, the provisions of the proposed Directive, in order to ensure a harmonised and non-fragmented body of consumer protection law.

The scope of the proposed Directive comprises sales and service contracts concluded between a trader and a consumer. There is a general information requirement, which must be respected prior to the conclusion of a contract (if not already apparent from the context). This includes furnishing the consumer with information on the main characteristics of the product, details of the trader, the price, delivery arrangements, existence of the right to withdraw where applicable, and details of any after-sales services or commercial warranties where applicable.

The proposed Directive contains new provisions on (a) consumer information and withdrawal rights for distance and off-premises contracts, and on (b) other consumer rights specific to sales contracts.

In the abovementioned latter category, only contracts for the sale of goods are covered. In this category, there are provisions on, among others, delivery, passing of risk, and conformity with the contract. The principles of conformity reflect, to a large extent, those of Directive 99/44/EC on the sale of consumer goods and associated guarantees. Thus, for example, the trader shall deliver goods in conformity with the sales contract.

The remedies for lack of conformity are likewise, similar: where the goods do not conform, the consumer is entitled to repair or replacement, a reduction in the price or to have the contract rescinded. The trader shall remedy the lack of conformity by either repair or replacement. Where these are not possible or disproportionate for the trader, the consumer may choose to have the price reduced or the contract rescinded (he can have the contract rescinded only where the lack of conformity is not minor). There are also situations where the consumer may resort to any of the remedies to which he is entitled. These are: where the trader has refused to remedy the lack of conformity; he has failed to remedy it in a reasonable time; the attempt to remedy has caused significant inconvenience to the consumer; or the same defect has appeared more than once within a short period of time.

The consumer will be entitled to have the lack of conformity remedied free of any cost, and he may claim damages for any loss not remedied as specified above.

As for time limits, the trader will be held liable for any lack of conformity if this becomes apparent within two years. Where the trader has remedied the lack of conformity with replacement, he will be held liable where the lack of conformity becomes apparent within two years from the time of possession by the consumer (or a third party indicated by the consumer) of the replaced goods.

The provision governing commercial guarantees states that the guarantee statement must be legible and drafted in plain intelligible language, and include the following: legal rights of the consumer (which entitle him to a repair or a replacement, reduction of price or rescission of the contract) and a clear statement that those rights are not affected by the commercial guarantee; the contents of the commercial guarantee and conditions for making claims (notably the duration, territorial scope and name and address of the guarantor); and, where applicable, that the commercial guarantee cannot be transferred to a subsequent buyer.

As for consumer rights concerning contractual terms, the relevant provisions apply to contract terms drafted in advance by the trader or a third party, to which the consumer agreed without having the possibility of influencing their content, in particular where the contract terms are part of a pre-formulated contract. Provisions here include transparency requirements and a set of general principles. There are also terms which shall be considered unfair in all circumstances, including the exclusion or limitation of the liability of the trader for death or personal injury caused to the consumer through an act or omission of the trader; and excluding or hindering the consumer's right to take legal action.

The proposed Directive will be examined by the European Parliament and the Council under the EU's usual co-decision procedure. The proposed Directive will repeal the abovementioned four Directives it intends to revise, at the time of its entry into effect.

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