Sale of Consumer Goods
1. Concept and purpose
In order to strengthen European consumers’ trust in the internal market, the Consumer Sales Directive (Dir 1999/44) harmonizes the purchase of goods from commercial sellers for private use. The directive, which had a transposition period that ended on 1 January 2002, shapes the seller liability within the Member States by establishing a common minimum standard to the benefit of the consumers (principle of minimum harmonization, Art 8(2)). The consumer should be able to profit from the increasing diversity of supply generated by open markets, improved long-distance traffic and communication. The paradigm of the directive is the informed consumer who acts within the Union using his fundamental freedoms and thus requires appropriate protection—irrespective of the Member State in which the sale takes place. Following the consistent practice with regard to consumer law directives, even purely national contracts are within the scope of application.
The objective of Dir 99/44 on certain aspects of the sale of consumer goods and associated guarantees is not just to protect economic interests concerning the most significant consumer contracts. In addition, product quality and safety are improved by safeguarding legitimate consumer expectations. Unlike Dir 93/13 on unfair terms in consumer contracts, the Consumer Sales Directive is not weakened by a merely indicative ‘grey’ annexed list. As the most important directive in private law so far, Dir 99/44 contains largely mandatory rules and is groundbreaking with respect to European private law. As this is also true for the Convention of International Sales of Goods (CISG), the parallels, which are surprising due to the different areas of application, will be highlighted in the following sections.
2. Content of the directive on certain aspects of the sale of consumer goods (in comparison to the CISG)
a) Area of application
The personal scope of application is defined by the terms of the consumer and commercial seller. These terms are consistent with the general definitions of consumer and his counterpart (Art 1(2)(a) and (c) Dir 99/44; consumers and consumer protection law). The factual scope comprises sales contracts and contracts for the supply of consumer goods to be manufactured or produced (see Arts 1(4), 2(3) alt 3; similarly equating the two contracts: Art 3(1) CISG). Concerning the subject matter of the contract, ie ‘consumer goods’, Art 1(2)(b) merely speaks broadly of tangible movables (like § 90 Bürgerliches Gesetzbuch (BGB)). Excluded are goods sold by way of execution or otherwise by authority of law as well as water and gas where they are not put up for sale in a limited volume or a set quantity (again in conformity with Art 2(c) and (f) CISG).
b) The term ‘conformity with the contract’
The key concept for the seller’s liability is the ‘conformity with the contract’ of the consumer goods. Recital 7 specifically states that contract conformity serves as a common basic element for different legal traditions. In more detail, the green paper on guarantees for consumer goods and after-sales services (COM(93) 509 final) clarifies the special attention paid to Dutch (Art 7:17 Burgerlijk Wetboek (BW)), Nordic and English law. Moreover, the parallels to the CISG are deliberately intended. This is not only true for a uniform concept of the ‘breach of contract’ (that does not differentiate on the grounds of the type of breach), but also for the details.
To assess contract conformity, the explicit party agreement has priority over the generally required condition of the goods. If there is no such agreement, the conformity of the goods in question is presumed, facilitating its proof in court, if the following cumulative conditions of Art 2(2) are fulfilled. This is the case if the goods comply with the description given by the seller or with any given sample or model (lit a) or if it is fit for any particular purpose which the consumer requires and which he made known to the seller who has accepted (lit b). (The exception in Art 35(2)(b) for lack of reliance or unreasonableness in relying on the seller’s skill and judgment has not been adopted.) Objectively, the goods’ conformity is presumed if it is fit for the purposes which goods of the same type are normally used (lit c) or if it shows the quality and performance which are normal regarding goods of the same type and which the consumer can reasonably expect (lit d).
This is virtually identical to Art 35(2) CISG. The CISG, however, makes reference to the time of passing of the risk whereas the directive refers to the time of ‘delivery’ of the goods. Additionally, the directive contains two new provisions. First, conformity can also be determined by advertising or labelling by the producer or his representative (Art 2(2)(d) and (4) Dir 99/44), where the advertisement is meant seriously and is issue-related. Secondly, the buyer is entitled to claims for lack of conformity resulting from incorrect installation or an omission in the installation instructions (the so-called ‘IKEA clause’ in Art 2(5) Dir 99/44). The directive lacks a provision on inadequate packaging as in Art 35(2)(d) CISG.
c) Remedies and limitation period
In case the goods fail to conform, a two-step remedy system is available with each step containing two remedies. In the first place, Art 3(2), (3) only entitles the consumer to repair or replacement within a reasonable period without significant inconvenience (supplementary performance). (This is why English law had to allow for specific performance in s 48E(2) Sale of Goods Act 1979.) However, the consumer’s freedom of choice is limited by the possibility of the seller declining one of the two remedies because of disproportionality (costs) or impossibility (see Art 49 CISG). Yet this second step has a high threshold. It has to be impossible or unreasonable to make the goods conform by repair or replacement or the seller has to have failed to restore conformity within the reasonable period. If that is the case, the consumer is entitled to an appropriate reduction of the price (Art 3(5)). If the lack of conformity is not a minor one, he can only rescind the contract, resulting in a potentially complicated cancellation process (Art 3(6)). Like the Vienna Convention (Art 49), the directive is therefore based on the idea of cost reduction through perpetuation of the contract. However, the directive does not require the buyer to fix an additional period of time, marking a difference to Art 47 CISG and § 323 BGB (non-performance).
Furthermore, the directive sets out a two-year limitation period after delivery of the goods to the consumer, during which the seller is liable to the consumer for any lack of conformity (Art 5(1)). If the lack of conformity becomes apparent within six months after delivery, its existence at delivery is presumed. This rule, unknown to the CISG, takes account of the, in part, highly technological quality of consumer goods. For the other 18 months, the consumer has to prove the lack of conformity according to the national law in question. However, the initial six-month shift of the burden of proof is not afforded if the presumption is incompatible with the nature of the goods or the nature of the lack of conformity (Art 5(3)). Different from commercial law, there is no requirement that the consumer examine the goods. However, in case the consumer is, at the time of contracting, aware or could not reasonably be unaware of the lack of conformity, the seller is released from his liability (Art 2(3)—comparable to Art 35(3) CISG).
d) Guarantees
Furthermore, Art 6 of the directive provides transparency and liability rules for guarantees provided by the seller. These have to be distinguished from guarantees, which have been paid for or provided for by a third party (eg an insurer). Included are only those guarantees that, without extra charge, promise to reimburse the price paid or to replace, repair or handle consumer goods in any way (Art 1(2)(e)). The guarantee is binding on the guarantor in conformity with the guarantee statement and the associated advertising (Art 6(1)). The guarantee has to state the contents of the guarantee, its duration and territorial scope as well as the name and address of the guarantor in plain and intelligible language. Additionally, it has to be made clear that statutory rights are thereby not affected (Art 6(2)). The guarantee has to be made available in writing if the consumer requests so. To avoid evasion, guarantees are even binding when they fail to satisfy these requirements (Art 6(5)). Sanctions might be possible by other means than the directive provides—especially with respect to the law of unfair business-to-consumer commercial practices. Additionally, the transparency requirement of Art 5 of the directive on unfair terms in consumer contracts (Dir 93/13) has to be observed.
e) Other provisions
Contractual terms or agreements that conflict with the consumer privileges set out in the directive are not binding on the consumer (Art 7(1)1). Partly due to requests of the German government, the Member States may introduce a shorter liability period for second-hand goods. This period may not be shorter than one year (Art 7(1)2 and 3 as well as § 475(2) BGB). Hence, for second-hand goods, the directive introduces a minimum liability of one year for consumer contracts. Therefore, a ‘sold as seen’ sale, eg of used cars, is impossible. This unalterable minimum liability is subject to criticism especially from German scholars who call it excessive protectionism interfering with freedom of contract.
Ultimately, Art 4 of the directive even affects the commercial relationship between the seller and the producer, wholesaler or importer. The final seller may, if the lack of conformity results from an intermediary or the producer, pursue remedies against the person liable in the contractual chain. These remedies follow national law and recital 9 explicitly states the adherence to the freedom of contract in this respect. Article 4 remains from earlier drafts with a wider ambition. Among others, a so-called action directe, that would have enabled the consumer to file remedies directly against the producer following the French model, was not introduced into the directive (differing from the Green Paper, p 112). In addition, Art 7(2) Dir 99/44 contains the usual private international law clause that protects the consumer against disadvantages arising from the choice of law of a non-Member State (consumer contracts (PIL)). Finally, the directive falls within the scope of Dir 98/27 on injunctions for the protection of consumers’ interests.
3. Diverging implementation
The partial harmonization of such a core area as contractual liability has a substantial impact on the law of obligations. The fact that the directive came into existence despite the importance of its subject matter for the national legal cultures demonstrates the achieved degree of legal integration, which before had been limited to special contracts like doorstep sales or distance contracts. The impact of the directive is further underlined by the opinion of the German legislature, who saw itself unfit to implement the directive through special and piecemeal legislation. Together with the implementation of Dirs 2000/35 on combating late payment (delay in payment) and 2000/31 on electronic commerce (e-commerce), the Consumer Sales Directive has led to a far-reaching modernization of the law of obligations (Schuldrechtsmodernisierung).
It is true that the new §§ 474–479 BGB with their special rules on consumer sales contracts represent a ‘European island’ within the German code. However, a considerable number of provisions were extended to areas where the German legislation was not under an obligation to transpose (interpretation of EU law). This is especially true for contract conformity in Art 2 and the remedies in Art 3, following which § 433(1) BGB gave up the liability doctrine and now generally adheres to the doctrine that performance is owed. German sales law thus follows the model set by Art 2(1) of the directive, Art 35(1) CISG and the common law. In addition, the German law on the breach of sales contracts was widely integrated into the general breach of contract provisions. The rest of the Member States, however, opted in favour of a small-scale solution, introducing special consumer sales law provisions only applicable to certain contracts alongside the classical sales law (consumers and consumer protection law).
Even in the area of consumer sales, the Member States’ implementation diverges from the directive in many cases. As a compromise, four divergences were explicitly declared to be permitted. The majority of the implementations make use of the aforementioned Art 7(1)2 allowing a shortening of the limitation period for second-hand sales. (This has been made use of by Art 9(1)1 and 2 Austrian KSchG; Art 1649 quarter(1) Belgian Code civil; Art 134(2) Codice del consumo; § 475(2) BGB; Art 9(1)2 Spanish Ley 23/2003, de garantías en la venta de bienes de consumo; and Art 17 Swedish Konsumentköplag.) Likewise, more than half the Member States burden the consumer with the optional obligation to inform the seller of non-conformity in a shortened time-frame (notification requirement (commercial sales)). Denmark, Finland, Italy, the Netherlands, Poland and Sweden decided to introduce this feature which is set out in Art 5(2).
Equally popular seems to be the option in Art 6(4) (originating from food labelling law) that entitles the Member States to require the guarantees to be drafted in a certain language. For instance, this has become law in s 15(5) of the English Sale and Supply of Goods to Consumers Regulations 2002. Finally, a few legal systems have utilized Art 1(3), which was introduced during the British Council presidency, to exempt public auctions from the scope of the directive (see eg § 474(1) s 2 BGB, Art L211-2 Code de la consommation and § 12(2) Unfair Contract Terms Act 1977).
The minimum harmonization allowing for a higher national level of consumer protection leads to further implementation discrepancies. In Finland, the limitation period is three years, in England and Ireland it is six years. Considerable discrepancies can also be found with regard to contract conformity and the time of delivery (see Communication on the implementation COM (2007) 210 final).
4. Evaluation
The directive does not create an individual and complete consumer sales law, but rather concentrates on minimum protection against defects as well as information requirements concerning guarantees. As a result of the differing legal traditions, important areas have remained unharmonized. Contract formation was omitted (in contrast to Art 11-24 CISG). Equally unaddressed are the passing of risk, suspension or interruption of limitation periods and primary as well as secondary damages for defects and other damages. Missing rules on damages result in an important gap, especially when compared with Arts 74–77 CISG, which provide for a liability notably regardless of negligence or fault.
Overall therefore, the law of the EU citizen’s most common transaction is only partly harmonized. More specifically, legal fragmentation and the resulting insecurities have, to at least some degree, been increased. The price of harmonization is a new national legal category of European-determined consumer sales law—either running alongside general sales law (as in Italy or Great Britain), or limited to certain special cases (like in the BGB). Before the implementation, German law, for example, did not contain special provisions in this regard. This was in contrast to the Dutch (Art 7.1 Burgerlijk Wetboek (BW)), British (Sale of Goods Act 1979 as amended by the Sale and Supply of Goods Act 1994) and Irish law as well as the Nordic law.
National disparities concerning consumer sales are not, however, solely the result of minimum harmonization, which the European Commission intended to abolish with the proposed Directive on Consumer Rights (COM (2008) 614 final). Primarily, the four implementation options are questionable. Consider, for example, the optional obligation to inform within a two-month limitation period starting with the knowledge of the non-conformity. This provision is meant to prevent the defaulting consumer from abusing his remedies. Nonetheless, such notification requirements, stipulated, for example, in Art 39(1) CISG and § 377 HGB, are hardly seen outside of commercial law. (The Commission withdrew plans to introduce an obligation to examine the goods as contained in both CISG and HGB.) The relatively small value of consumer claims do not justify this measure; the seller is burdened with the difficult proof of a failure to inform (and thereby the expiration of liability). Most importantly, the option, with its divergence effect, contradicts the purpose of harmonizing the internal market and raising consumer confidence.
All in all, the directive with its predominantly semi-mandatory rules and the shift of the burden of proof (for the first six months) has nonetheless raised the liability risk regardless of negligence or fraud. By these means, the legal position of the European consumer has not only been improved internationally. The new rules with respect to advertising, contractual guarantees, remedies in the contractual chain as well as primary repair or replacement create a modern, functional and well-balanced system of liability geared to market realities and the sale of industrial consumer goods.
Nevertheless, from an economic point of view, some criticize the fact that the consumer may be insufficiently encouraged to exercise diligence, care and maintenance of his goods by the relatively long limitation period. However, looking closely at Art 3(1), the lack of conformity has to already exist at the time of delivery. The durability of a product is therefore not guaranteed (see recital 14). In sum, the sophisticated directive, together with the CISG, forms an important basis for further development of European contract law. One can conclude that the successful convergences dominate over the disadvantages.
Courts will hopefully refer cases more frequently to the European Court of Justice (ECJ) than they have done with older directives. The ECJ (from a reference by the German Federal Supreme Court, BGH) has already decided that the German norms introducing a compensation for usage of the goods before replacement are not in line with the requirement that realizing contract conformity be free of charge according to Art 3(3)1 (ECJ Case C-404/06 – Quelle [2008] ECR I-2685); see now § 474(2)1 BGB.
5. Uniform law
The similarities with the CISG, shown above, were intended to highlight the attractiveness to the Member States of further Europeanization of contract law by following the model of the CISG. This became true, for example, in Germany (see above), Greece (Arts 534 ff CC), Austria (§§ 922 ff ABGB) and Hungary (especially §§ 305 ff CC). However, most states have opted for minimum implementation. Thus, the expectations for a generalization of the directive have only in part been met.
A striking difference between the directive and the CISG are the numerous semi-mandatory provisions of the directive, compared with the optional norms of the CISG (according to Art 6). This is relevant for the unsettled conflict question raised by Art 2(a)2 CISG. If goods were bought for personal use and the seller neither knew this nor ought to have known, the CISG may be applicable in principle (see consumers and consumer protection law for detail). Primacy of EU consumer law is partly inferred by Art 90 CISG since the directive formally equates to an international agreement. Conversely, one could argue that the CISG is a lex specialis. More convincing could be the solution that those EU Member States that are at the same time contracting parties of the CISG file a reservation according to Art 94 CISG.
Literature
Jürgen Basedow, ‘Codification of Private Law in the European Union: The Making of a Hybrid’ (2001) 9 ERPL 35; Cesare M Bianca and Stefan Grundmann (eds), EU Sales Directive—Commentary (2002); Stefan Grundmann, ‘Consumer Law, Commercial Law, Private Law: How can the Sales Directive and the Sales Convention be so Similar?’ (2003) 14 EBLR 237; Reinhard Zimmermann, The New German Law of Obligations—Historical and Comparative Perspectives (2005) 159 ff; Ministero dello Sviluppo Economico (ed), Le garanzie post-vendita sui beni Europa (2006) (Italian and English); Jürgen Basedow, ‘Freedom of Contract in the European Union’ (2008) 16 ERPL 901; Hans Schulte-Nölke, Christian Twigg-Flesner and Martin Ebers (eds), EC Consumer Law Compendium—The Consumer Acquis and its Transposition in the Member States (2008); Stefano Troiano, ‘The CISG’s Impact on EU Legislation’ [2008] Internationales Handelsrecht 221; Hans-W Micklitz, ‘Sale of Consumer Goods’ in Hans-W Micklitz, Norbert Reich and Peter Rott, Understanding EU Consumer Law (2009) 151; Hannes Rösler, ‘Europeanisation of Private Law through Directives—Determining Factors and Modalities of Implementation’ (2009) 11 EJLR 305.
