The proposed new digital single market contract law Directives

Introduction

I would expect an honest EUphobe (pronounced You phobe) to be prepared to admit that there were merits in an EU proposal which had merits. Similarly an honest EUphile should be prepared to admit that there are demerits in an EU proposal which has demerits. So I must reluctantly confess that I find the proposed new digital single market contract law Directives to be disappointing, problematic and badly drafted.

Disappointing

When the proposal for an optional Common European Sales Law (CESL) was abandoned in late 2014 some slight hope was held out that a replacement would be re-introduced in modified form under the umbrella of the digital single market strategy. The proposed new Directives are nothing like an adequate replacement.

The CESL had provisions on general contract law – formation, validity, interpretation, obligations of the parties, remedies for non-performance, prescription and so on. The proposed new Directives have nothing like that. They are more or less confined to the questions of conformity with the contract and the consumer’s remedies for non-conformity. In addition the digital content Directive has rules on the right to terminate a long term contract and the modification of the digital content and the distance sales Directive has rules on commercial guarantees. They are both extremely limited in scope.

The proposed Directive on certain aspects concerning contracts for the supply of digital content (COM/2015/0634) aims to introduce standard rules, via maximum harmonisation, on the rights and remedies of consumers when, in a B2C contract, digital content fails to conform to contract. An innovative feature in the rules on conformity is that when the digital content is supplied over a period of time, it must be in conformity with the contract throughout the duration of the contract (art. 6(3)). Another is that the version of digital content supplied to the consumer must be the most recent version available at the time of the conclusion of contract (art. 6(4). Another is that the burden of proof of conformity rests with the supplier (art. 9). The provisions giving the supplier a right to modify the contract, on certain sensible conditions, and giving the consumer the right to terminate a long-term contract, on certain sensible conditions, are also interesting (arts 15 and 16). This Directive could be very useful but it is highly specific and in no sense a substitute for CESL.

The proposed Directive on certain aspects concerning contracts for the online and distance sales of goods ((COM/2015/0635), which is also a maximum harmonisation Directive, could have been a vehicle for something more like the CESL. It contains some provisions derived from the CESL but, as noted above, it is virtually confined to conformity and the remedies for lack of conformity.

From the point of view of anyone interested in the development of a more principled and coherent European contract law these proposed Directives are profoundly disappointing. It is back to the bad old days of itsy-bitsy rules on particular topics.

Whether the proposals are disappointing from the point of view of those who deplore any Europeanisation of contract law, and who hoped to see nothing at all derived from the CESL ever resurfacing, is for them to say. What is clear is that the proposals are in one respect more invasive than the CESL would have been. The CESL would have been an optional instrument, applying only where the parties opted to use it. It would have left Member States’ general contract laws otherwise untouched. The proposed Directives will require changes to Member States’ laws (not a very appealing prospect in the UK where a new and complicated Consumer Rights Act has only recently come into force) and, because they go for full harmonisation, will restrict the powers of Member States to provide different remedies for non-conformity.

Problematic

There are various points of difficulty in these proposed Directives. For example, must replacement under the distance sales Directive be “new for old” or could it, as would seem reasonable, be “old for old” so that a one-year old computer could be replaced by a reconditioned one-year old computer? What is meant by the underlined words in the following passage in article 4 of the Directive:

fit for any particular purpose for which the consumer requires them and which the consumer made known to the seller at the time of conclusion of the contract and which the seller has accepted”?

It is not clear what the seller must have accepted, and what is meant by “accepted”. Such doubts can be sorted out in discussions. They are not fundamental. The most fundamentally problematic feature of the new proposals is the nature of the consumer’s remedies for non-conformity coupled with the decision to go for maximum harmonisation. It is worth setting out article 9 of the distance sales Directive in full.

Article 9

Consumer’s remedies for the lack of conformity with the contract

  1. In the case of a lack of conformity with the contract, the consumer shall be entitled to have the goods brought into conformity by the seller, free of charge, by repair or replacement in accordance with Article 11.

  2. A 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.

  3. The consumer shall be entitled to a proportionate reduction of the price in accordance with Article 12 or to terminate the contract in accordance with Article 13 where:

        1. a repair or replacement are impossible or unlawful;
        2. the seller has not completed repair or replacement within a reasonable time;
        3. a repair or replacement would cause significant inconvenience to the consumer; or
        4. the seller has declared, or it is equally clear from the circumstances, that the seller will not bring the goods in conformity with the contract within a reasonable time.The consumer shall be entitled to withhold the payment of any outstanding part of the price, until the seller has brought the goods into conformity with the contract.
  1. The consumer shall not be entitled to a remedy to the extent that the consumer has contributed to the lack of conformity with the contract or its effects.

These remedies are available where the lack of conformity becomes apparent within two years from (normally) the time of delivery of the goods (art. 14). There is a presumption that a non-conformity which becomes apparent within the two year period existed at the time of delivery (art. 8).

What will immediately strike the UK reader is that there is no mention of damages and no immediate right to termination plus money back (the famous but ineptly named “right to reject” of UK law). Instead the Directive provides a sort of 2 year “legal guarantee” which corresponds to the sort of manufacturer’s guarantee which offers repair or replacement in the first instance. Such a 2 year legal guarantee for all consumers buying goods online under the law of any Member State would be great for consumers as a minimum, and might go a long way towards realising the objective of boosting consumer confidence in online shopping across the EU, but as a maximum it seems fundamentally problematic.

The remedies under the digital content Directive are similar but there is a right to damages for any economic loss caused by damage to the consumer’s hardware or software caused by the defective digital content (art. 14). The very limited nature of this right merely points up the absence of any more general right to damages.

Badly drafted

The English version of these proposed Directives is rather badly drafted. The use of definite and indefinite articles is not always correct. In article 1 of the distance sales Directive, for example, we have a reference to “the consumer” although no consumer has yet been mentioned. The language is often old-fashioned and of a type not used in modern legislatures (“therein”, “thereof” and so on). There is a pervasive use of the pompous “shall”, which does not correspond to ordinary usage and can be potentially misleading. Why, for example, say “the following definitions shall apply” when it would be normal and sufficient to say “the following definitions apply”? Why say “The consumer shall exercise the right to terminate” (suggestive of an obligation) in a provision setting out how the right to terminate is exercised. Although the drafting is largely gender-neutral we still have a reference to a legal person and those acting on “his behalf, for purposes relating to his trade” (art. 2(c) of the distance sales Directive). Definitions are not always followed through in the later text. For example, in the distance sales Directive, “contract” is defined as “an agreement intended to give rise to obligations or other legal effects”. That is fine but why then refer in article 18 to any “contractual agreement”? Why not just “contract”? And what is meant by “termination of the contract” (art. 9)? Is an agreement terminated? Or is it the contractual relationship, or the main obligations under the contract, which is or are terminated? And what is meant by “terminated”? In reality a contractual relationship is not always wholly terminated: winding-up aspects of it may survive. In the digital content Directive, “durable medium” is defined as a type of “instrument” but seems to be used later to cover things like discs which would not normally be regarded as instruments.

Why two Directives?

There is overlap and duplication in these two proposed Directives? Why have two? The cynic in me wonders whether it is so that one of them can be more easily thrown to the wolves. And that one would be the distance sales Directive.

 

 

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