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Univ.-Prof. Andreas Schwartze, LL.M. (EUI) Contract Law: Warranties and associated guarantees

Univ.-Prof. Andreas Schwartze, LL.M. (EUI) Contract Law: Warranties and associated guarantees – Course: Consumer Protection Law in the EU ( Sveučilište u Zagrebu 17.12.2014 ). Introduction. Directive 1999/44/EC of 25 May 1999 on the Sale of Consumer Goods and Associated Guarantees.

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Univ.-Prof. Andreas Schwartze, LL.M. (EUI) Contract Law: Warranties and associated guarantees

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  1. Univ.-Prof. Andreas Schwartze, LL.M. (EUI) Contract Law: Warranties and associated guarantees – Course: Consumer Protection Law in the EU (Sveučilište u Zagrebu17.12.2014)

  2. Introduction Directive 1999/44/EC of 25 May 1999 on the Sale of Consumer Goods and Associated Guarantees • Directive covering the most important type of contract (others mostly on minor types of contract, eg package tours, time sharing) and regulating most practical area -> parts of breach of contract ! no comprehensive regulation of sale (compare Art 4 CISG; but IV.A.DCFR / CESL) • based on Art 95 ECT (now: Art 114 TFEU) -> goals: functioning of internal market (and: consumer protection) • legislative history: Comparative study 1993 (FR); Green paper 1993; Conference 1994; academic draft 1995 (unpublished); proposal 1996 -> adaptation of Part III of the UN-Sales Law (CISG) from 1980 • minimum harmonisation: Art.8 (2) Dir99/44 – option for MS to adopt or retain more stringent provisions in favour of consumer protection Univ.-Prof. Dr. Andreas Schwartze, LL.M. (EUI) - University of Zagreb (17.12.2014)

  3. 1. Scope of Application Material Scope I: Sales Contracts (1) • Directive 99/44 to be applied on contracts of sale (Art 1 (4) Dir99/44) Art 1 (1) Dir99/44: “sale of … goods” ( = Rec. 3 Dir99/44) -> onlygoods = tangiblemovableobjects - withexceptionsforwater, gas andelectricity(Art.1 (2) lit b Dir99/44) – but Art 3 lit f CISG: onlyelectricityexcluded / Art. IV.A-1:101 (a) DCFR: applies with appropriate adaptations eganimals, medicalandfarmingproducts, standardsoftware, shipsandaircraft (these not underCISG, Art 2 lit e) NOT: saleof real estate / saleofrights, like intellectualproperty, orclaims – compare Art 2 lit d CISG: nostocks, sharesetcandmoney/ Art. IV.A-1:101 (b), (c) DCFR: appr. Adaptations -> included: „goods to be manufactured or produced” (Art.1 (4) Dir99/44 =Art. IV.A-1:101 (b), (c) DCFR) – but seeArt 3 (1) CISG: onlyifbuyeris not supplying substantial partofthe material Univ.-Prof. Dr. Andreas Schwartze, LL.M. (EUI) - University of Zagreb (17.12.2014)

  4. 1. Scope of Application Material Scope I: Sales Contracts (2) • Directive 99/44 to be applied on sales contracts Art 1 (1) Dir99/44: “sale of … goods” ( = Rec. 3 Dir99/44) -> „forced“ salesexcluded: „sold by way of execution or otherwise by authority of law” =Art 2 lit c CISG -> MS-option: excluding „second-hand goods sold at public auction where consumers have the opportunity of attending the sale in person” = not online-”auctions” like ebay therefore: basically second-hand goods are covered – but seeArt 2 lit b CISG: auctionsgenerallyexcluded Univ.-Prof. Dr. Andreas Schwartze, LL.M. (EUI) - University of Zagreb (17.12.2014)

  5. 1. Scope of Application Personal scope: Consumer contracts of sale • Directive 99/44 to be applied only to B2C-contracts • Consumer: a “natural person who … is acting [+ primarily]*/[not predominant]** for purposes which are not relatedtohis[or her]*trade, business[craft]**orprofession“ (Art. 1 (2) lit a Dir99/44) -> usual definition(but compareDCFR Art. I.-1:105 (1)*; CESL Art. 2 lit f **) seeECJ Gruber C-464/01: dual use - noconsumerifmorethan marginal businessaspect compare Art 2 lit a CISG: not extended to goods which are “bought for personal, family or household use” • Seller: any “natural or legal person who … sells consumer goods in the course of his trade, business or profession” (Art 1 (2) lit c Dir99/44) no application to reversed consumer purchase (private seller / professional buyer) Univ.-Prof. Dr. Andreas Schwartze, LL.M. (EUI) - University of Zagreb (17.12.2014)

  6. 2. Sellers obligation: The duty to deliver conforming goods • Conformity with the contract (1) • Art 2 (1) Dir99/44: “The seller must deliver goods to the consumer which are in conformity with the contract of sale” -> compare Art 2 lit a CISG: seller must deliver goods like required by the contract = legal obligationprotectedbysanctions(see Art.3 Dir99/44) following a uniform conceptofbreachofcontract(no Roman lawbasedspecialwarrantyanymore) -> compare DCFR Art. IV.A-2:101 (d): “The seller must … ensure that the goods conform to the contract” = CESL Art. 91 (c): „ … ensure that the goods or the digital content are in conformity with the contract” Univ.-Prof. Dr. Andreas Schwartze, LL.M. (EUI) - University of Zagreb (17.12.2014)

  7. 2. Sellers obligation: The duty to deliver conforming goods • Conformity with the contract (2) • Art 2 (1) Dir99/44: “The seller must deliver goods to the consumer which are in conformity with the contract of sale” = primacyofpartyautonomy(but see Art.7 Dir99/44) - agreementnecessary on theobject(whatisbought) -> anotherkindofgood (aliud) constitutes non-conformity (seeArt IV.A.-2:301 (a) DCFR =Art 99 (1) (a) CESL: description) - agreementnecessary on thenumber(howmuchisbought) -> moreorlessconstitutes non-conformity (seeArt IV.A.-2:301 (a) DCFR =Art 99 (1) (a) CESL : quantity) ! agreements of specific qualities of the goods may reduce sellers obligation ! Univ.-Prof. Dr. Andreas Schwartze, LL.M. (EUI) - University of Zagreb (17.12.2014)

  8. 2. Sellers obligation: The duty to deliver conforming goods II. Presumption of conformity (1) • Art 2 (2) Dir99/44:“Consumer goods are presumed to be in conformity with the contract if they …” = rebuttable(burdenofproofwiththebuyer) presumptionofconformitywiththecontract if 4 requirements(Art 2 (2) (a) – (d) Dir99/44)arecumulativelymet (exceptfor (b) noagreementnecessary): (a) description(ormodel, sample)givenbytheseller(seeArt.IV.A.-2:302(c) DCFR/ Art 35 (2) (c) CISG) (b) fitnessfor a consented– evenbyimpliedagreements –particularpurpose(seeArt.IV.A.-2:302(a) DCFR/ Art 35 (2) (b) CISG) (c) fitnessfornormal use(seeArt.IV.A.-2:302(b) DCFR/ Art 35 (2) (a) CISG (d) normal qualitystandardsunderreasonableconsumerexpectations(seeArt.IV.A.-2:302 (f) DCFR) (espifinducedbypublicstatementsevenofproducers-> but expts Art 2 (4) Dir99/44) (seeArt.IV.A.-2:303 DCFR) Univ.-Prof. Dr. Andreas Schwartze, LL.M. (EUI) - University of Zagreb (17.12.2014)

  9. 2. Sellers obligation: The duty to deliver conforming goods II. Presumption of conformity (2) • Art 2 (2) Dir99/44:“Consumer goods are presumed to be in conformity with the contract if they …” -… areincorrectlyinstalledbytheseller(Art 2 (5) s.1 Dir99/44)(seeArt.IV.A.-2:304 (a) DCFR) -> nodefinitionof „installation“ or areincorrectlyinstalledbytheconsumer/buyerusing an incorrectinstruction(Art 2 (5) s.2 Dir99/44) -> sellersliabillityforinstructionsordinarilyprovidedbytheproducer (seeArt.IV.A.-2:304 (b) DCFR) In anyeventliabilityofthesellerisexcludediftheconsumer „was aware, or could not reasonably be unaware of, the lack of conformity” (Art 2 (3) Dir99/44, simArt.IV.A.-2:307 (1) DCFR / Art 104 CESL-EP: only if buyer knew, between traders also if he could not been unaware) Univ.-Prof. Dr. Andreas Schwartze, LL.M. (EUI) - University of Zagreb (17.12.2014)

  10. 3. Buyers remedies: The sanctions for delivering non-conforming goods I. Time of non-conformity • Art 2 (2) Dir99/44:“…for any lack of conformity which exists at the time the goods were delivered” - disputedifthisreferstothepassingofthepossessiontotheconsumer (handingover) or left open at what time (makingavailiable, sending, delivery) orwhichplace seeArt.IV.A.-2:308 (1) DCFR / Art.105 (1) CESL/ Art 36 (1) CISG: at the time whentheriskpassestothebuyer -> whenthebuyertakesoverthegoods, Art.IV.A.-5:102 (1) DCFR / Art 69 (1) CISG or whentheconsumerhas acquired the physical possession of the goods (Art.142 (1) CESL) Univ.-Prof. Dr. Andreas Schwartze, LL.M. (EUI) - University of Zagreb (17.12.2014)

  11. 3. Buyers remedies: The sanctions for delivering non-conforming goods II. The three remedies of non-conformity (1) • Art 3 (2) Dir99/44:- bring into conformity, by repair or replacement(-> Art 46 CISG) seeArt.III.-3:302 (2) DCFR: righttoenforceperformance / Art.106 (a) CESL freeofcharge: evennocompensationforthebenefits in usingthegoods (ECJ Quelle 2008) - reduction made in the price(-> Art 50 CISG:mayreducetheprice) seeArt.III.-3:601 (1) DCFR / Art.106 (d) CESL „appropriate“ = in proportionwiththedeminishedvalueofthegoods - rescind the contract (-> Art 49 CISG:declarethecontractavoided) seeArt.III.-3:502, IV.A.-4:201 DCFR: termination / Art.105 (c) CESL not ifthe lack ofconformityisonly minor (Art 3 (6) Dir99/44) =Art.III.-3:502, IV.A.-4:201 DCFR / but Art.114 (2) CESL: „insignificant“ Univ.-Prof. Dr. Andreas Schwartze, LL.M. (EUI) - University of Zagreb (17.12.2014)

  12. 3. Buyers remedies: The sanctions for delivering non-conforming goods II. The three remedies of non-conformity (2) • choice of consumer between repair and replacement (Art 3 (3) Dir99/44), if the remedy is not impossible -> like generally for second-hand goods (rec 16) or disproportionate because of unreasonable costs -> significantly higher costs of one remedy compared to the other remedy (rec 11) ECJ Weber/Putz (2011): if the non-conforming goods are to be replaced, it is for the seller to pay for the removal of the defective goods and installation of the replacement goods – not disproportionate • hirarchy of remedies: in the first place only repair or replacement (Art 3 (3) Dir99/44), onlyif not feasibleordoes not happen, Art 3 (5) Dir99/44, then in thesecondplacepricereductionorrescissionispossible but seeDCFR / CESL / CISG: nohirarchyofremedies ECJ Duarte Hueros (2013): no ex officio duty for the national courts to grant appropriate price reduction to consumers of their own motion when the consumer did not ask for price reduction – but procedural help Univ.-Prof. Dr. Andreas Schwartze, LL.M. (EUI) - University of Zagreb (17.12.2014)

  13. 3. Buyers remedies: The sanctions for delivering non-conforming goods II. The three remedies of non-conformity (3) • no remedy to claim damages -> left to national MS-law but see: - Art 45 (1) (b) CISG: non-fault liabilityunderArt 74 – 77 CISG - Art III.-3:701 DCFR: non-fault liabilityunderArt III.-3:702 – III.-3:707 DCFR ! Limitation ofdamagestobepayedby private sellerstothecontractprice (Art IV.A.-4:202 DCFR) - Art 106 CESL: non-fault liabilityunderArt 159 – 165 CESL includingforeseeablefutureloss, including lost profit, after terminationcalculated on thebasisof a substitutetransactionorthecurrentprice Univ.-Prof. Dr. Andreas Schwartze, LL.M. (EUI) - University of Zagreb (17.12.2014)

  14. 4. Associated guarantees Formal requirements for commercial guarantees • guarantee: “any undertaking by a seller or producer to the consumer, given without extra charge, to reimburse the price paid or to replace, repair or handle consumer goods in any way if they do not meet the specifications set out in the guarantee statement or in the relevant advertising”(Art 1 (2)(e) Dir99/44) see Art IV.A.-6:103 – 6:108 DCFR: Consumer goods guarantees • Art 6 (1) Dir99/44: guarantee is unilaterally binding the offeror(= Art IV.A.-6:102 DCFR) • Transparency rules: legislated remedies not affected / information on content / document on request(Art 6 (2), (3) Dir99/44, see (= Art IV.A.-6:103 DCFR) -> aim: guarantees should not mislead the consumer (rec 21) • if requirements are not met -> consumer can still rely on the guarantee - no other sanctions (Art 6 (5) Dir99/44) Univ.-Prof. Dr. Andreas Schwartze, LL.M. (EUI) - University of Zagreb (17.12.2014)

  15. Thank you for your attention!

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