Tutorial 1. European Private Law Ms. Monika Prusinowska

Transcription

1 Tutorial 1 European Private Law Ms. Monika Prusinowska

2 Compulsory Reading Communication from the Commission to the European Parliament, the Council, The European Committee of the Regions - A Common European Sales Law to facilitate Cross Border Transaction in the Single Market (11 October 2011); Directive 1999/44/EC of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees; Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts.

3 The creation of European Contract Law Q: Why do we need a European Contract Law? Q: Who is going to benefit from the unified sources of law in the area discussed?

4 A1: Single market: reducing differences Existing difficulties: burdens for both sellers and buyers, 28 legal orders - lack of understanding, problem of applicable law, transaction costs A2: Sellers, buyers, SMEs

5 Which problems do companies face when selling to other EU Member States? From 2011: - Consumers and businesses especially small companies are not using the full potential of a Single Market of 500 million people. - 44% of Europeans said they do not buy abroad because they are uncertain of their rights. The Eurobarometer survey found that 55% of exporting businesses said that differences between contract laws are one of the major obstacles for trading across borders to consumers.

6 In business-consumer transactions, 55% of companies active or interested in selling to consumers outside their national market said they were held back by a range of contract-law related obstacles. The main contract law-related obstacles for business-consumer transactions are: Finding out about foreign contract law 40% Complying with different consumer protection rules abroad 38% Obtaining legal advice on foreign contract law 35% Solving cross-border contractual disputes 34% In business-business transactions, 49% of companies active or interested in selling to consumers outside their national market said they were held back by a range of contract-law related obstacles. The main contract law-related obstacles for business-to-business transactions are: Finding out about foreign contract law 35% Solving cross-border contractual disputes 32% Obtaining legal advice on foreign contract law 31% Agreeing on which contract law should apply 30% 44% of consumers said that uncertainty about their rights discourages them from buying from other EU countries.

7 Small and medium-sized enterprises (SMEs) which make up 99% of all companies in the EU are disproportionately affected because they lack the in-house legal and other expertise needed to work with different national contract law systems. The cost to trade in several foreign markets is particularly high when compared to SMEs turnover.

8 Only 9.3% of businesses that trade in goods sell across EU borders. The reality is that businesses wishing to carry out cross-border transactions may have to adapt different national contract laws, translate them and hire lawyers, costing an average 10,000 for each additional export market. Adapting their websites can cost a further 3,000 on average. This is a problem both for companies selling crossborder to consumers and for those doing business with other firms.

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10 Q: Think about various, typical provisions of sale contracts that can create difficulties in the crossborder sale? What are these?

11 Q: How should a European Contract Law be developed? What are the main challenges in achieving this? Who should take the lead in this process? The EU Commission? Academic associations?

12 Q: To what extent, do we have a European Contract Law? What is the stage of harmonization at the moment? Where should the harmonization reach?

13 Stage of harmonization In progress So far: Different laws in different states; no set of uniform rules; Some common rules tackling some of the problems (limited); o Rome I (conflict law rules - not removing differences between substantive laws); o B2C: Consumer Rights Directive; B2B: Directive on Combating Late Payments And

14 What is the Common European Sales Law (CESL) about? The Common European Sales Law aims to break down the barriers. It will open markets for businesses and give consumers more choice and a high level of protection. It will facilitate trade by offering a single set of rules for cross-border contracts in all 28 EU countries.

15 Q: What are the benefits of the CESL?

16 The Common European Sales Law (CESL) would give trading parties the option of doing business within a new, additional legal framework, rather than within the national laws. Consumers will have the same high level of protection for their rights across all Member States. Consumers will be able to rely on the Common European Sales Law as a mark of quality. This high level of consumer protection will give consumers the confidence to buy products in other EU countries.

17 For example Cosmetic Laboratory - Dr Irena Eris, a medium-sized Polish company trading in cosmetics, feels that differences in contract laws create considerable costs and are an important barrier for its sales to Romania. The company is particularly affected by the differences in the rules on delayed payment by retailers. The Common European Sales Law, available in all EU languages, will provide one complete set of rules dealing with late payments (interest rate, due date, damages etc). The Polish company could use it for all its contracts with businesses in Romania or in any other EU country, without having to take national laws into account.

18 A German beekeeper which produces and sells honey has bought a machine from a French company. The machine turns out to be faulty. The French supplier agrees to repair the defect, but refuses to pay for the transportation of the machine from Germany to France. The German company wants to clarify who should pay and whether the contract can be terminated, but would need to pay for costly legal advice. The Common European Sales Law would provide a clear and complete set of rights and obligations for both parties if the product turned out to be defective. In particular, the Common European Sales Law clearly states that the costs of transportation are to be borne by the seller.

19 CESL stage of development Q: What are the steps?

20 Oridinary legislative procedure On Feb 26, 2014, by 416 votes to 159, with about 65 abstentions, the European Parliament adopted a legislative resolution on an optional Common European Sales Law (CESL). The Council? o Opposition from some MS - UK, Germany Once adopted, the Regulation will enter into force 20 days after its publication in the EU s Official Journal. The legal basis for the proposal is Article 114 of the Treaty on the Functioning of the European Union (TFEU) on the internal market.

21 Q: What are the sources of law available to serve the cross-border sale at the moment (globally)?

22 A: Primarily CISG United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980) (CISG) The purpose of the CISG is to provide a modern, uniform and fair regime for contracts for the international sale of goods. Thus, the CISG contributes significantly to introducing certainty in commercial exchanges and decreasing transaction costs. Applicability?

23 Q: What are the issues related to the applicability of CISG for the cross-border transactions in the context of the EU?

24 A: Not applicable in a number of EU MS Portugal, Ireland, Malta, UK are NOT signatory parties to CISG; Sphere of application: B2B transactions only, commercial goods/products, computer software controversial applicabilty;

25 Q: Think about various roles (soft law? full replacement of existing national sales laws? compulsory/optional regulation? etc.) the Common European Sales Law (the CESL) could play. What are these? Which option is to be followed? Discuss advantages and disadvantages of particular proposals.

26 A: 7 options - binding/non-binding; compulsory/optional -

27 Q: Will the Common European Sales Law replace national contract laws?

28 A: No. The Common European Sales Law would exist as an option alongside national contract law. Sellers can voluntarily use a set of rules that is identical in all 28 Member States. Those who do not want to use the Common European Sales Law can simply continue using their national rules. Consumers will always be clearly informed, and will have to agree explicitly before using a contract based on the Common European Sales Law.

29 Q: What kind of transactions does the CESL intend to target?

30 A: The territorial scope is build to encompass (primary) crossborder transactions involving at least one party from a MS. Personal scope is limited to B2C transactions, or B2B transactions involving at least small and medium-sized enterprises (SME). However, MSs are allowed to extend the application of the instrument in two directions: to (purely) domestic transactions, and to all B2B transactions, irrespective of SME involvement. With respect towards the material scope, it is notable that the CESL is especially tailored towards electronic commercial activity, which, according to the Commission, has the potential to facilitate a considerable increase of transnational consumer activity. The operations covered by the instrument are limited to sale of (movable) goods, supply of digital content and the provision related services, with a few key exceptions.

31 Q: What are the particularities related to the distance selling (online selling focus)?

32 A: Mandatory rules for online sellers (Mandatory level of consumers protection website content) The Directive on the protection of consumers in respect of distance contracts has been repealed on the 13 June 2014, with the entry into force of the Directive on Consumer Rights, which incorporates the provisions of the Distance Selling Directive.

33 Sale of consumer goods

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35 The Directive on Consumer Rights (2011/83/EC) replaces, as of 13 June 2014, Directive 97/7/EC on the protection of consumers in respect of distance contracts and Directive 85/577/EEC to protect consumer in respect of contracts negotiated away from business premises. Directive 1999/44/EC on certain aspects of the sale of consumer goods and associated guarantees, as well as Directive 93/13/EEC on unfair terms in consumer contracts remain in force.

36 1. Why should certain aspects of the sale of consumer goods be regulated by the EU? Is this in line with the principle of subsidiarity?

37 2. What are the main difficulties encountered by the consumers in the EU?

38 A: Non-conformity of the product with the contract

39 3. What is a definition of consumer in Directive 1999/44/EC? Are there any practical difficulties you can think of?

40 A: consumer shall mean any natural person who, in the contracts covered by this Directive, is acting for purposes which are not related to his trade, business or profession; - Mixed contracts?

41 Q: Can a consumer be a legal person?

42 A: No.

43 4. What are consumer goods in Directive 1999/44/EC?

44 A: consumer goods shall mean any tangible movable item, with the exception of: goods sold by way of execution or otherwise by authority of law, water and gas where they are not put up for sale in a limited volume or set quantity, - electricity.

45 Q: Does the directive mention any time limits?

46 5. What are associated (commercial) guarantees? Are they compulsory? Are they binding upon offeror/seller?

47 The concept of legal guarantee relates to the legal protection of the purchaser in respect of defects in the goods acquired. This legal protection is rendered compulsory by the law and is not dependent upon the contract. The Directive hence establishes the principle of the conformity of the product with the contract. The concept of commercial guarantee, on the other hand, calls upon the demonstration of the willingness of one person, the guarantor, who assumes personal liability for certain defects. binding/non-compulsory

48 The Directive does not use the terminology of legal and commercial guarantee. Where the term "guarantee" is used, it covers only commercial guarantees, which are defined as follows: "any additional undertaking given by a seller or producer, over and above the legal rules governing the sale of consumer goods, to reimburse the price paid, to exchange, repair or handle a product in any way, in the case of nonconformity of the product with the contract".

49 Case no 1. Article 3 of 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 is to be interpreted as precluding national legislation under which a seller who has sold consumer goods which are not in conformity may require the consumer to pay compensation for the use of those defective goods until their replacement with new goods.

50 Case no Article 3(2) and (3) of Directive 1999/44/EC [ ]on certain aspects of the sale of consumer goods and associated guarantees must be interpreted as meaning that, where consumer goods not in conformity with the contract which were installed in good faith by the consumer in a manner consistent with their nature and purpose, before the defect became apparent, are restored to conformity by way of replacement, the seller is obliged either to remove the goods from where they were installed and to install the replacement goods there or else to bear the cost of that removal and installation of the replacement goods. That obligation on the seller exists regardless of whether he was obliged under the contract of sale to install the consumer goods originally purchased.

51 2. Article 3(3) of Directive 1999/44 must be interpreted as precluding national legislation from granting the seller the right to refuse to replace goods not in conformity, as the only remedy possible, on the ground that, because of the obligation to remove the goods from where they were installed and to install the replacement goods there, replacement imposes costs on him which are disproportionate with regard to the value that the goods would have if there were no lack of conformity and the significance of the lack of conformity. That provision does not, however, preclude the consumer s right to reimbursement of the cost of removing the defective goods and of installing the replacement goods from being limited, in such a case, to the payment by the seller of a proportionate amount.

52 Unfair terms

53 1. What is the nature of standard contract terms? What could you say about the balance of rights and obligations between the seller or supplier and the consumer?

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56 2. What are unfair contract terms within the meaning of Directive 93/13? What is the notion of good faith?

57 A: Article 3 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 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. 3. The Annex shall contain an indicative and non-exhaustive list of the terms which may be regarded as unfair.

58 A: The Directive on unfair terms in consumer contracts introduces a notion of "good faith" in order to prevent significant imbalances in the rights and obligations of consumers on the one hand and sellers and suppliers on the other hand. [ ] 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;

59 3. Does the directive apply to both natural and legal persons?

60 A: Article 2 For the purposes of this Directive: (a) 'unfair terms' means the contractual terms defined in Article 3; (b) 'consumer' means any natural person who, in contracts covered by this Directive, is acting for purposes which are outside his trade, business or profession; (c) 'seller or supplier' means any natural or legal person who, in contracts covered by this Directive, is acting for purposes relating to his trade, business or profession, whether publicly owned or privately owned. + Case 2: The term consumer, as defined in Article 2(b) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, must be interpreted as referring solely to natural persons.

61 4. What are the consequences if the seller uses unfair terms when contracting with a consumer?

62 A: Article 6 1. 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. YOU CAN COMPLAIN!

63 The Directive also requires contract terms to be drafted in plain and intelligible language and states that ambiguities will be interpreted in favour of consumers.

64 5. What are the possibilities to prevent the continued use of unfair terms in contracts concluded with consumers by sellers or suppliers?

65 Article 7 1. Member States shall ensure that, in the interests of consumers and of competitors, adequate and effective means exist to prevent the continued use of unfair terms in contracts concluded with consumers by sellers or suppliers. 2. The means referred to in paragraph 1 shall include provisions whereby persons or organizations, having a legitimate interest under national law in protecting consumers, may take action according to the national law concerned before the courts or before competent administrative bodies for a decision as to whether contractual terms drawn up for general use are unfair, so that they can apply appropriate and effective means to prevent the continued use of such terms. 3. With due regard for national laws, the legal remedies referred to in paragraph 2 may be directed separately or jointly against a number of sellers or suppliers from the same economic sector or their associations which use or recommend the use of the same general contractual terms or similar terms.

66 6. Do national courts have the power to determine of their own motion whether a contract term of a contract is unfair? Why?

67 A: Case [ ] National court is able to determine of its own motion whether a term of a contract before it is unfair when making its preliminary assessment as to whether a claim should be allowed to proceed before the national courts.

68 7. What is the importance of the Annex to Directive 93/13?

69 A: This general requirement is supplemented by a list of examples of terms that may be regarded as unfair.

70 Case 1 1. The protection provided for consumers by Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts entails the national court being able to determine of its own motion whether a term of a contract before it is unfair when making its preliminary assessment as to whether a claim should be allowed to proceed before the national courts. 2. The national court is obliged, when it applies national law provisions predating or postdating the said Directive, to interpret those provisions, so far as possible, in the light of the wording and purpose of the Directive. The requirement for an interpretation in conformity with the Directive requires the national court, in particular, to favour the interpretation that would allow it to decline of its own motion the jurisdiction conferred on it by virtue of an unfair term.

71 Case 2 The term consumer, as defined in Article 2(b) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, must be interpreted as referring solely to natural persons.

72 Part of information has been taken from: ection_of_consumers * Materials used for the educational purpose only.