Information Obligations (Consumer Contracts)
1. Subject matter and purpose of disclosure duties
The consumer (consumers and consumer protection law) can be protected in various ways from disadvantage at the conclusion of a contract. Informing the consumer about the subject matter of the contract and his contractual rights is an essential instrument of protection. This protection by information offers major advantages. Its guiding principle is that the consumer’s position is inferior to that of the trader due to a lower level of information on the part of the consumer. Contractual fairness is re-established through reducing the differences in power between the contractual parties by informing the consumer. The now equally (or, at least, similarly) strong parties are thus positioned to negotiate a fair contract. Such protection by information does not pose the risk of restricting the freedom of contract of the parties to any great extent. The negotiation of the contract is left entirely up to them and private autonomy prevails. Unfortunately, serious disadvantages must be weighed against these advantages. In particular, it is generally acknowledged that the consumer’s reception and processing of information is limited. For one thing, particularly vulnerable consumers (those with a low level of education, the very old, the very young, etc) are not in a position to draw great support through improved information. However, even those consumers who are receptive to information are not always strengthened by disclosure duties to the point where they are able to negotiate a fair contract with the trader.
In addition, there is another aspect concerning EU law which restricts the use of the instrument of information requirements. The intent of European consumer contract law is that the consumer should be able to move easily and freely within the single market. The consumer is intended to adopt an unworried, optimistic consumerism, having been placed in a favourable legal position. Given this background, information duties can only be imposed on the consumer in a limited way, as they may easily amount to barriers and overstrain many consumers. Consequently, protection by information is strengthened by further instruments of protection. Partly, they contain remnants of the information dogma, as can be seen in the right of withdrawal. It provides the consumer with an opportunity to decide at a later date if he wants to keep the contract he has entered into. It is assumed that, subsequent to concluding the contract, he should have the opportunity to collect and process information that can form a basis upon which to make an autonomous decision. In contrast, the test of reasonableness of contents of standard business terms, which is provided for in Directive 93/13 on unfair consumer contracts, is justified for opposite reasons. It is here assumed that there are areas in which informing the consumer cannot, and should not, be expected for reasons of efficiency and practicality. The court reviews pre-formulated contract terms because it is assumed that the consumer typically accepts them without knowing their content. Indeed, there is an interesting duplication, which cannot easily be justified, since Dir 93/13 demands that the standard business terms have to be in plain, intelligible language for the consumer, so that he can inform himself about the content.
The disclosure duties stipulated in the directives are frequently very detailed, in which case they can be a considerable burden on the trader. In the directives this is barely considered, and is globally justified, due to the directives’ purpose of improving the market and thus being finally advantageous for the trader as well. The literature partly argues in favour of the theory of ‘contractual solidarity’ as a basis for the burdens that are placed on the trader. This, however, is not entirely persuasive because private law in a free market economy—particularly European consumer contract law—does not recognize such altruistic, one-sided motivations.
However, the idea of contractual solidarity is, in part, recognized in the European Member States, and information requirements are based on it. This is particularly notable in French law, where a contractual solidarity (so-called fraternité contractuelle) which imposes information requirements is also assumed outside of consumer protection law. In contrast, English law applies the caveat emptor doctrine, under which no-one is obliged to disclose detrimental information to the other party.
2. Implementation of the information requirements in the European directives
The information requirements of the EU directives do not follow a consistent model. Overall, there is a distinction between information requirements that have to be fulfilled prior to the conclusion of the contract, and information requirements that have to be fulfilled thereafter. In part, the pre-contractual information demands are that a brochure (eg for timesharing or a package holiday) or at least printed information material (consumer credit) is provided. In other cases oral information will suffice. In contrast, post-contractual information should always be in writing. Its purpose is not to provide additional essential information—something which would, in any case, be too late once the contract has been concluded—but to document and, if necessary, to reinforce the provided information.
Moreover, there is another distinction: that between those disclosure duties that refer to the subject matter of the contract, or the surrounding circumstances, and those that refer to the consumer’s right of withdrawal.
The Doorstep Selling Directive (Dir 85/577) from 1985 already provides for information requirements referring to the right of withdrawal. The trader has to give written notice of the right of withdrawal, in which he has to mention the name and address of the person against whom that right can be exercised. The duty to inform about an existing right of withdrawal is also contained as an essential element in the later directives which provide a right of withdrawal. This information requirement is extended in the later directives. According to Art 5 Distance Selling Directive (Dir 97/7), the consumer has to be provided with ‘written information on the conditions and procedures for exercising the right of withdrawal’. According to Art 10(p) of the new Consumer Credit Directive (Dir 2008/48), the consumer must, in particular, be advised about the obligation that the credit has to be repaid after withdrawal and exactly how the interest is charged.
Information duties about the subject matter of the contract are stipulated when it is not self-explanatory. Thus, the consumer has to be advised about the subject matter of the contract in consumer credit, timesharing and financial services contracts. In a distance contract all goods, even basic ones, must be described in detail, because the consumer does not actually hold them in his hands when he enters into the contract (Art 4(1)(a) Distance Selling Directive). The above-mentioned problem of information overload becomes especially obvious in this area. The mandatory information is very extensive, and it cannot reasonably be assumed that the average consumer can process it.
With regard to contracts concluded over the internet, additional information duties can be found in the E-Commerce Directive (Dir 200/31). They concern, amongst other things, the identity of the offeror and also some technical instructions (see Arts 5, 6, 10 Dir 200/31).
The requirements for the fulfilment of the information duties are high, and it is not always clearly explained in the directives and the transformation laws as to what exactly has to be included in the provided information. The courts, therefore, regularly have to deal with questions regarding the correct fulfilment of the information requirements. In sum, the consumer must be informed in plain and intelligible language about his rights as well as his duties.
Only a few directives provide explicit rules regarding the legal consequences of a breach of information requirements. Even at best, there is merely a statement that the consequences for such a breach have to be ‘effective, proportionate and dissuasive’ (eg Art 23 Consumer Credit Directive (Dir 2008/34)). According to Art 11 of the Distance Marketing of Consumer Financial Services Directive (Dir 2002/65), it is suggested that Member States provide a right to cancel for the consumer. Because of the open-ended nature of the directives, the legal situation in the Member States is completely inconsistent. Penalties or similar payments are often found in competition or administrative law. Some Member States provide explicit rules that a contract is not enforceable against the consumer when an information requirement is breached—eg Ireland, reg 4 European Communities Regulations 2001 (Protection of Consumers in Respect of Contracts made by Means of Distance Communication).
The general rules of national civil law of the Member States remain applicable. At least in the case of negligent breach they often stipulate damages.
3. Tendencies in the development of the law
At this point in time, it is generally acknowledged that the provision of information may have counterproductive effects and, in particular, that information overload can be detrimental. The consumer’s position can, in fact, be made less secure through the provision of too much information. He may be left unable to distinguish between essential and inessential information and may even, in the end, make a less rational decision than he would have without the information. However, as yet these possible consequences have hardly influenced the drafting of directives. Thus, the proposal for the reform of the Timesharing Directive (Dir 94/47) does not reduce, but rather extends, the information requirements. In contrast, the new Consumer Credit Directive improves the handling of information requirements, if only coincidentally. Here, so-called ‘standard information’ must be highlighted (Art 4 Consumer Credit Directive) and, at the same time, a standard form (the ‘European standard information for consumer credits’) has to be used. This both helps consumers to a certain degree and considerably relieves traders at the same time.
Beyond this, however, the theoretical approach is diffuse. The Strategy of Consumer Policy 2007–13 still does not establish a clear hierarchy or impose a border between information and ‘effective protection as well as distinct rights’. It is also disappointing that Union law does not distinguish clearly between contractual disclosure duties and general disclosure duties, particularly so with regard to the information provided in product advertisements.
Further development of the information concept is clearly recognizable in the Draft Common Frame of Reference (DCFR), wherein the information requirements are classified as a preferable instrument compared to other interventions (Introduction 27, 28). A breach of information requirements leads to clear consequences. However, invalidity or an ex parte unenforceability of the contract, as is seen in some Member States, is not provided for should an important information requirement be breached (Art II-3:107 DCFR).
At the same time, the DCFR assigns a high priority to information requirements outside of consumer contracts. On the one hand, this becomes clear because basic disclosure duties in Art II.-3:101 DCFR are not only applicable in consumer contracts, but also in contracts between two traders. On the other hand, the DCFR contains a considerable amount of explicit information requirements for various types of contract (leasing, franchising, distribution).
At the end of 2008, the Commission published a proposal for a new directive on consumer rights which incorporates four important existing directives. Its goal is to improve consistency, especially in the field of information requirements. Article 5 of the draft sums up the general information requirements in a catalogue. However, little progress has been achieved. This applies not just to the structure of the disclosure duties, but also to the consequences of failure to inform. Even in the original draft, the directive, to a great extent, leaves the consequences of any breach of information requirements up to the individual Member States. Currently it seems likely that the directive will be adopted even without these basic rules.
4. Harmonized law
The harmonized law of Principles of European Contract Law (PECL), UNIDROIT Principles of International Commercial Contracts (PICC) and the Convention on Contracts for the Sale of International Goods (CISG) does not provide rules on information requirements towards the consumer because it does not cover consumer contract law.
However, the information principle goes beyond consumer contract law. Some information belongs in every contract. The contractual rights depend directly on the information available to the other party when reaching the agreement. This is evident in the rules on conformity in the CISG. According to Art 35(1) CISG, the contractual conformity of goods depends on the contractual agreement, in particular the description of the goods given by the seller. According to Art 35(2) CISG, a sample or model which the seller has provided to the buyer can also be used to determine the contractual conformity. Lastly, according to Art 35(3) CISG, the seller is not liable for contractual lack of conformities which the buyer knew about or could not have been unaware of. The general information requirement, as such, is explicitly provided for in the preliminary draft for a European Civil Code by the academy of European private law scientists (Giuseppe Gandolfi and others) (Art 7).
Finally, the information principle has attracted a good deal of attention in the law of E‑Commerce. Here the protection concept has not been developed further in the international field. In contrast to the E-Commerce Directive, the UNCITRAL Model Law on Electronic Commerce solely concerns itself with ensuring the technical possibility of providing information in electronic form.
The United Nations Convention on the Use of Electronic Communications in International Contracts from 2005 also omits the field of information and refers to national law instead (Art 7).
Barbara Dauner-Lieb, Verbraucherschutz durch Ausbildung eines Sonderprivatrechts für Verbraucher (1983); Holger Fleischer, Informationsasymmetrien im Vertragsrecht (2001); Reiner Schulze, Martin Ebers and Hans Christoph Grigoleit (eds) Informationspflichten und Vertragsschluss im Acquis communautaire (2003); Geraint Howells, Andre Janssen and Reiner Schulze (eds) Information Rights and Obligations—A Challenge for Party Autonomy and Transactional Fairness (2005); Sandra Vigneron-Maggio-Aprile, L’information des consommateurs en droit européen et en droit suisse de la consommation (2006); Thomas Wilhelmsson, ‘European Rules on Pre-contractual Information Duties?’ 2006 6(1) ERA-Forum—Special Issue on European Contract Law 16; Annett Nordhausen Scholes, ‘Information Requirements’ in Geraint Howells and Reiner Schulze (eds), Modernising and Harmonising Consumer Contract Law (2009) 213; Christian Twigg-Flesner, ‘Pre-contractual Duties—From the Acquis to the Common Frame of Reference’ in Reiner Schulze (ed), Common Frame of Reference and Existing EC Contract Law (2nd edn, 2009) 95.