Thursday, 16 January 2014

Testing significant imbalance in unfair contract terms - CJEU in Constructora Principado C-226/12

16 January 2014: CJEU judgment in Constructora Principado (case C-226/12)

Mr Álvarez purchased a dwelling and his contract put the responsibility of paying various surcharges on him: the municipality tax on the increase in value of urban land, price of connecting the property to various utilities, etc. Upon having paid these surcharges, the consumer claimed that he should be reimbursed since the clause in the contract that obliged him to pay this money was unfair, creating significant imbalance in the rights and obligations of the parties. The consumer claimed that by law it was the seller who was obligated to pay these surcharges and therefore the contract clause was unfair by switching that default. The seller claimed that there was no imbalance if the amount of surcharges were compared to the amount of the purchase price.

The CJEU was asked to determine here whether obliging consumers to pay for expenses that by law need to be borne by the sellers is sufficient to determine significant imbalance in the unfairness test or whether all circumstances of the case needed to be taken into account, i.e., whether 'such a term have a significant economic impact having regard to the value of the transaction in question'. (Par. 17) The CJEU reminds its test from the Aziz case: to determine significant imbalance the court needs to look as to what rules would apply in the absence of a parties' agreement and whether through that analysis consumer may be seen as having been placed in an unfavourable position in comparison. (Par. 21) The court should not, therefore, limit its assessment to the 'quantitative economic evaluation based on a comparison between the total value of the transaction which is the subject of the contract and the costs charged to the consumer under that clause'. (Par. 22) Moreover, the significant imbalance may solely result from a 'sufficiently serious impairment of the legal situation' of a consumer through the contractual provision denying him his legal rights or limiting their enforcement. (Par. 23) While the CJEU leaves it, as usual, to the national court to ascertain whether there was an unfair contract term in this situation, it points out pretty specific directions as to how to evaluate whether the consumer could be required to pay this tax and other surcharges:

"As regards, in particular, the first obligation imposed on the consumer by clause 13 of the contract, namely, payment of the capital gains tax, it is apparent from the documents submitted to the Court that that obligation has the effect of transferring to the consumer, in his capacity as a purchaser, a tax liability which, under the applicable national legislation, should be borne by the seller in its capacity as vendor and as the recipient of an economic advantage that is subject to taxation, namely, the capital gain made as a result of the increase in value of the property sold. Thus, it appears that, while the seller benefits from the increase in the value of the property it is selling, the consumer must pay not only a purchase price that includes the increase in value achieved by that property, but also a tax charged on that increase in value. Furthermore, according to the written observations submitted to the Court by Mr Menéndez Álvarez, the amount of that tax was unknown at the date on which the contract was concluded and is to be determined only ex post by the relevant authority; if that is the case, this could lead to uncertainty on the part of the consumer as to the extent of the commitment undertaken." (Par. 26)

"As regards the second obligation imposed on the consumer by clause 13 of the contract, namely, payment of the charges for individual connection to the various utilities, such as water, gas, electrical power, and drainage, it is for the referring court to ascertain whether those charges include the costs of connecting with the general facilities essential for ensuring that the dwelling is habitable, which charges should, according to the relevant national rules, be borne by the vendor as part of its contractual obligation to provide a dwelling that is fit for its intended purpose, that is to say, in a proper habitable state. If that is the case, it is for the referring court to assess whether that contractual term, in so far as it restricts the rights which, under the rules of national law, the consumer enjoys under the contract and imposes on him an additional obligation not envisaged by those rules, constitutes a sufficiently serious impairment of the legal situation which national law confers on that consumer as a party to the contract." (Par. 28)

Interestingly, the CJEU requires the courts to check whether in exchange for taking the responsibility to pay these surcharges the consumer may not have acquired a discount on the sale price. It is, however, not sufficient that a contractual provision that has not been individually negotiated indicates that. The seller needs to present additional proof thereof. (Par. 29)

1 comment:

  1. "that obligation has the effect of transferring to the consumer, in his capacity as a purchaser, a tax liability which, under the applicable national legislation, should be borne by the seller in its capacity as vendor"
    This is very relevant with regard to the Dutch practice by sellers of electronic devices with storage memory, to make the consumer pay the personal copy levy (http://www.consumentenbond.nl/actueel/nieuws/nieuwsoverzicht-2013/thuiskopieheffing-vaak-te-laat-in-beeld/), without telling them up front, by including it in the total price, which is in violation of DIRECTIVE 2005/29/EC article 7-4 sub c (implemented in 6:193e sub c Dutch Civil Code). This is a tax which according to Dutch law should be paid by the importer or producer of the good, and not the consumer (Article 16c-2 Auteurswet). Or maybe, it doesn't have to be paid at all by them (Distric Court of The Hague, 22 november 2013, Thuiskopie v Acer. (5.17), in that case the trader would get his money back, and it is uncertain if they will return it to the consumer.While in the past, traders enjoying the use of such misleading ommissions, have been fined €20.000 by the Dutch Consumer and Market Authority (ACM), nothing is being done about this. The problem is not merely contained to webshops, but also physical stores such as Bart Smit, Kijkshop and Expert have been seen charging customers this tax, and only at the registry is it made clear (when the amount shows up) what you are eventually paying for such a product.

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