wien.arbeiterkammer.at The Proposal for a Regulation on a Common European Sales Law: Focus on the remedies provisions Alice Wagner, Austrian Chamber of Labour

wien.arbeiterkammer.at General Comments on CESL (1) The demand analysis in the Commission impact assessment is to a large extent lacking in conclusiveness:  For example, it is not only uncertainty in respect to applicable law, which prevents consumers from concluding a cross-border contract.  Array of different consumers concerns: Uncertainty in respect of unknown providers, language barriers, data security problems, the fact that not all parts of the population have access to the internet, the more difficult out-of-court settlement and judicial enforcement across the border as well as the fear of fraud based on the increase of dubious online offers. Concerns of principle against a unification of laws by way of an optional instrument: Structure and design of an optional instrument provide businesses with the opportunity of indulging in “cherry picking”.

wien.arbeiterkammer.at General Comments on CESL (2) The introduction of the CESL would lead to a complicated mix of several legal systems, which, combined with the fact that the CESL is new legal territory (overload of EUCJ), will entail significant legal uncertainty. A free, well-informed choice by consumers of the 28 th contract law regime under the Regulation cannot take place: they are only left with the option of deciding against a purchase or accepting the possibly unfavourable CESL. The legal basis of Article 114 TFEU and the compliance with the principles of subsidiarity and proportionality should be questioned. Which impact respectively negative consequences the CESL project might have on other contract types, such as employment or rental agreements, has not been considered or included at all.

wien.arbeiterkammer.at CESL: Level of Consumer Protection (1) The CESL is lacking a consistently high level of consumer protection. In particular in respect of the unfair terms, the CESL is far less favourable for Austrian consumers than the current legal situation:  Duty of transparency: Broad understanding specified by the Austrian Supreme Court of Justice. Lack of transparency renders a clause unfair per se.  Validity control: Unusual provisions in pre-formulated General Terms and Conditions will not become part of the contract, when they are unfavourable and cannot be anticipated (§ 864a ABGB).  Individually negotiated terms: Large number of banned terms, independent of these terms having been pre-formulated or individually negotiated (§ 6 (1) KSchG).  Content control: In comparison to the CESL black list, significantly more per se ineffective terms, which are highly relevant in practice (e.g. automatic contract renewals, subsequent price changes).

wien.arbeiterkammer.at CESL: Level of Consumer Protection (2) Other significant deteriorations of current level of consumer protection:  Prescription period concerning damages: 3 years (CESL: 2 years), long prescription period 30 years (CESL: 10 years).  Unexpected or uneconomic costs: No differentiation between a binding and not-binding estimate of costs in CESL (Art. 152). A previous warning, enables seller to pass such cost overruns on to the consumers. Renders § 5 (2) KSchG obsolete, which stipulates that an estimate of costs is binding, unless there is express provision to the contrary.  Modified acceptance: In contrast to Austrian law, under CESL (Art. 38) a contract will also be concluded when the acceptance includes additional or deviating terms (provided that these do not materially alter the terms of the offer).

wien.arbeiterkammer.at Provisions on Remedies (1) An effort has been made to provide an improved level of consumer protection concerning legal guarantee rights. Commission did not opt for setting a notification period within which the consumer must inform the seller of any lack of conformity, as prescribed in Directive 44/1999 (Art. 5 Sec. 2). Implementing an obligation to notify defects within a certain period always penalises the consumers’ inexperience/unawareness. The free choice between remedies is welcomed:  There may be many reasons in practice, where consumers prefer improvement or exchange to being back to square one and being provided with a completely new product.  Particularly in case of cross-border contracts it might be more sensible for consumers to immediately ask for a price reduction or a new product when a defect occurs (remedies are far less complicated/ easier to handle/large distance between seller and buyer).  Choice should be left to the consumer!

wien.arbeiterkammer.at Provisions on Remedies (2) However, there is need for clarification and improvement:  Commencement of the prescription period: No clear definition, when prescription period begins (“could be expected to have become aware”). – Is there an obligation of the consumer to test the item as soon as it has been purchased for its good working order?  Relevant time for establishing conformity: The presumption period for the existence of a defect provided for in the CESL (Art. 105 Sec. 2) is fully oriented towards the minimum standard of Directive 44/1999 (6 months, beginning on the date of purchase). It might easily happen that – despite a flexible commencement of the prescription period – the consumer is no longer in a position to prove that the defect is covered by legal guarantee.  Conformity of the goods (Art 100): Inaccuracies and ambiguities compared to Directive 44/1999.

wien.arbeiterkammer.at Provisions on Remedies (3) The different level of protection in respect of associated service contracts presents a problem:  The same favourable legal guarantee terms apply if the service contract concerns the incorrect installation as defined in Art. 101, but not if it concerns other service contracts.  Other service contracts: Trader shall be given the opportunity to “cure” the situation within a “reasonable period” (Art. 155 Sec. 4 lit. a).  These different levels of protection are incomprehensible. Why are consumers not deemed to be worthy of protection in the same way, in particular where purchase and service contract are closely linked?

wien.arbeiterkammer.at Provisions on Remedies (4) Other legal remedies of the buyer reveal significant gaps:  Laesio enormis: CESL lacks a legal remedy as “laesio enormis” (reduction of the real value by half), which can be applied if price and performance are grossly disproportionate and requires no other subjective elements on the side of the disputing party. The provision concerning unfair exploitation in CESL (Art. 51) involves a number of additional requirements.  Avoidance on grounds of error: Under CESL consumers have to notify their error to the trader, whereas Austrian law does not provide for a “notification”. As, well the differentiation between a significant and an insignificant error under Austrian law seems more accurate than the reference to “individual contract terms” in CESL.  Right of to withhold performance: CESL (Art. 113 Sec. 3) entitles the buyer to “withhold performance only in relation to that part which has not been performed”. Under Austrian law consumers may – for example, in case of inadequate service or defect products – always retain the entire amount.

wien.arbeiterkammer.at Thank you for your attention!