Agris Repšs Partner agris.repss@sorainen.com

Technological development allows businesses and consumers to choose ever more ways to sell and buy services and goods. In the meanwhile, new forms of goods and services appear that clearly result from development of new technologies. Choosing and ordering goods and services over the internet or the web has become the norm. Likewise, ordering goods and services over the phone, e-mail or TV is still topical. In all these cases when a buyer and a seller who are not at the same location agree on buying a product or service and they use these various means of distance communication, a distance contract is concluded. When these deals are made with consumers, this field is regulated by laws and regulations based on European Union (EU) law and that introduce   the   requirements   of   an   EU   directive.   Thus on 13 June this year, amendments to the Consumer Right Protection Law and new Cabinet Regulations of 20 May 2014 regulating distance contracts came into force.

The new regulations¹ impose new legal obligations on sellers and service providers, including giving additional information to the consumer before entering into a contract. Likewise the new regulation adds to the scope of consumer rights, eg, to receive information before entering into a contract.

1. DEFINITION OF DISTANCE CONTRACT AND SCOPE OF THE NEW REGULATION
2. CONTENTS OF CONTRACT AND PROVISION OF INFORMATION TO THE CONSUMER BEFORE CONCLUSION OF CONTRACT
3. MOST IMPORTANT CHANGES IN CONSUMER RIGHT OF WITHDRAWAL FROM CONTRACT

DEFINITION OF DISTANCE CONTRACT AND SCOPE OF THE NEW REGULATION

The definition of distance contract in the new wording of the Consumer Right Protection Law has been specified and made more neutral technology-wise. Namely: “A distance contract is an agreement between a consumer and a seller or service provider made without their being located in one and the same place, by using one or several means of distance communication until and during conclusion of the contract, as well as by using an organised scheme to sell goods or provide services.” The law goes on to explain the presently available and known means of distance communication, listing means of distance communication as telephones, web, electronic mail, television, fax, catalogue, published advertising with an attached order voucher. At the same time, the definition is “open” because it allows other distance means to transfer and transmit information. The definition in the previous wording of the law did not stress the circumstances that the parties were not at one and the same place upon or until final conclusion of the contract.

The new law excludes the requirement that the means of distance communication (telephones and the like) allowing individual contact with the consumer can only be used by the producer, seller or service provider where clear consent is received from the consumer. Likewise excluded is the requirement to perform a distance contract within 30 days if the contracting parties have not agreed on a specific performance period.

The regulations now clearly indicate what contracts are excluded from this requirement. These are:

1. package tourism services;
2. leisure time services;
3. transportation services (except car rentals);
4. services of regular supplies of food or products intended for immediate consumption;
5. financial services;
6. purchases from vending machines;
7. orders performed on the consumer’s initiative through a communication operator;
8. contracts on purchase or transfer of immovable property or related rights;
9. contracts on construction of new buildings or reconstruction of existing buildings;
10. tenancy agreements for residential premises.

The new regulations are more detailed and refer to new services and goods created as a result of technological development. For example, the regulations specify requirements for contracts on delivery of digital content. Under the new definition introduced in the Consumer Right Protection Law, the regulations also apply to distance contracts made for data created and supplied in digital form (for example, applications and computer games).

The new regulation aims to increase consumer rights protection by setting requirements for concluding distance contracts. The new regulations on distance contracts cover three main sections:

1. Provision of information to consumers before conclusion of contract.
2. Information to be included in the contract.
3. Implementation of the right of withdrawal (duration, procedure, exceptions).

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CONTENTS OF CONTRACT AND PROVISION OF INFORMATION TO THE CONSUMER BEFORE CONCLUSION OF CONTRACT

More and more distance contracts are made via, eg, smartphones, tablets and even TV with limited rights to provide information; therefore the new regulations have improved the requirements to inform consumers. Traders and service providers should verify their systems and procedure for concluding distance contracts, especially taking into account the requirement for the seller or service provider to prove that the consumer has received the information indicated in the new regulations. For example, by including the required clauses in the sales terms available to consumers before concluding a contract (approval of order on-line) or by including specific information in the order approval (unless it must be provided before conclusion of the contract) to clearly prove that the information has been provided. In case of doubt, if a seller or service provider cannot prove that specific information has been provided, the presumption will be that this information has not been provided. In addition, this burden of proof must be taken into account together with the rule that the information required in the regulations must be provided by the seller or service provider in plain and intelligible language and in a manner that corresponds to the means of distance communication used. In addition, if the information is provided on a durable medium, it must be legible. If the information is not intelligible or readable, then the risk is that in case of a dispute the Consumer Rights Protection Centre will consider that the information was not provided. This, in turn, could cause legal consequences in certain cases in that the consumer would have no obligation, eg, to cover additional payments for supply or costs of returning the goods if it is considered that information about these costs was not provided or it was not provided plainly and intelligibly.

The range of aspects of information to be provided to the consumer is very broad. However, not all apply in every case, so that the specifics of the service or goods provided are, of course, important.

Traders and service providers have new obligations in the new regulations to provide information on:

1. the main specifics of the goods or services, to the extent suitable for the durable medium used and the respective goods or services;
2. the identity of the seller or service provider, for example, their name;
3. the registered address of the seller or service provider (or the actual address, if different from the registered address) plus how the consumer can quickly and efficiently contact the seller or service provider;
4. the final price of the goods or services, including taxes and duties; if the specifics of the goods or services do not allow reasonable calculation of the price in advance, the method of calculation must be indicated;
5. costs of delivery, postal or other costs; if the costs cannot be reasonably calculated in advance, information must be indicated that these costs can be expected;
6. payment for one billing period if a contract is for an unlimited period or subscription contracts have been concluded; if a fixed sum is paid under these contracts, the total monthly payment must be indicated; if the total monthly payment cannot be reasonably calculated in advance, the method of calculation must be indicated;
7. payment for use of the means of distance communication used to conclude the contract, unless concluded in compliance with the base rate;
8. conditions, deadlines for payment, delivery of goods or performance of services, where the seller or service provider undertakes to deliver goods or services, and the procedure for settling complaints;
9. conditions for use of the right of withdrawal, their duration and procedure must be given to the consumer, as well as a withdrawal form approved by the Cabinet;
10.  if the right of withdrawal is used and the goods cannot be normally returned by mail due to their specifics, the consumer covers the costs related to returning the goods;
11.  that the consumer pays the seller or service provider a proportional amount of full performance of the contract that corresponds to the part of the contact completed at the moment when the consumer informs the service provider about use of the right of withdrawal;
12.  when the right of withdrawal is not applied under the regulations, as well as information that the consumer cannot use the right of withdrawal or information about circumstances when the consumer loses the right of withdrawal;
13.  the consumer's lawful rights if the goods or services do not comply with the contract provisions;
14.  warranty, post-sale assistance and services, and their conditions;
15.  a developed code of good business practice in compliance with the Unfair Commercial Practice Prohibition Law and how to get a copy if it applies to the trader;
16. contract duration, if the contract was for a specific period, or contract termination conditions if the contract duration is indeterminate or is to be extended automatically;
17.  minimal contract duration specified in the contract;
18.  deposit or other financial guarantee that the consumer must pay or provide on the seller's or service provider's demand, as well as the conditions;
19.  digital content and specifics of its use (functionality), including measures of technical protection;
20.  interoperability of digital content with devices and applications if the seller or service provider has this information or should reasonably have known it;
21. options to review complaints and receive compensation out-of-court and methods for accessing these options.

As mentioned, this information must be given to consumers plainly and intelligibly in compliance with the functionality of the means of communication used, as well as no later than before the moment of product delivery or service provision. This information must be provided to the consumer in a durable medium, namely, a hard copy, offer to print it, send by e-mail or burn on a DVD, CD and the like.

A vital condition from the legal point of view is that the information to be provided by the trader or service provider is an integral part of the contract. Therefore these conditions will actually be included in the contract contents and regulations that can be amended only if the parties clearly agree. Traders and service providers should be aware that upon amending this information and provisions, the amendments will apply only to new contracts. Contracts that have already been concluded can be amended only with the parties’ agreement.

If a distance contract is made electronically and the consumer has to pay before placing the order the seller or service provider must provide clear and prominent information about the goods or service specifics, delivery and postal expenses, subscription fee, payment for use of means of distance communication to conclude the contract, minimal contract duration, deposits or other guarantees.

Traders or service providers who use the web should definitely be aware that they need to ensure that upon placing an order the consumer provides clear consent that the order includes the obligation to pay. If, for example, upon placing an order the consumer must press a button or perform another similar operation, this must be presented in an easily legible manner with the words “order with obligation to pay” or  some other similarly clearly unambiguous formulation as to the consumer’s obligation to pay. If the seller or service provider fails to do so, the contract or order is not binding on the consumer under the new regulation.

In turn, a seller or service provider who uses telephone to conclude a distance contract must inform the consumer at the beginning of the conversation about his identity or the identity of the person on whose behalf he is calling, as well as about the commercial intent of the call.

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MOST IMPORTANT CHANGES IN CONSUMER RIGHT OF WITHDRAWAL FROM CONTRACT

The right of withdrawal was known before, and in itself is nothing new. However, the new regulation contains supplements and improvements. So far, the right of withdrawal was available within 14 days. This has not changed in the new regulation. However, the new regulation specifies the moment when this period starts running. If the trader has not provided the specified information about the right of withdrawal before concluding a distance contract, the consumer will be entitled to use the right of withdrawal within a year. So far, this period was three months.

If a service is provided, the period for the right of withdrawal starts running from the day when the contract is concluded. In the case of delivery of goods, the period for withdrawal starts from the day when the consumer obtained possession of the goods. If the consumer orders several goods in one order delivered separately, the period of withdrawal is counted from the day the consumer obtains possession of the final item. In turn, in the case of delivery of a product which consists of several units or parts, the term for withdrawal is calculated from the day when the consumer obtained possession of the last lot or piece. In the case of contracts for regular delivery of goods, the term for withdrawal starts running from the day the consumer obtained possession of the first good.

The new regulation provides for a range of cases when the right of withdrawal cannot be used. This list is quite detailed, but the most significant cases are, for example, situations when:

1. goods are manufactured upon the consumer’s instructions or the goods are clearly personalised;
2. goods are liable to deteriorate or expire rapidly;
3. the consumer has unsealed the packaging of a product that cannot be returned for health or hygiene reasons;
4. due to their specifics, the goods have inseparably mixed with other items after delivery;
5. the consumer has unsealed the packaging of an audio or video recording, or computer software;
6. newspapers, periodicals or magazines, except when delivered under a subscription contract;
7. the contract covers delivery of digital content that is not delivered in a durable medium, if delivery of the digital contents started with the consumer's clearly expressed consent and confirmation about losing the right of withdrawal.

In provision of services, specific features apply to use of the right of withdrawal. In particular, if a consumer starts receiving the service during the term, when the right of withdrawal can be used, and provision is fully completed, the consumer can no longer use the right of withdrawal. If service provision is not completed, then the right of withdrawal can be used with regard to the remaining part of the services. In these cases the service provider must ask the consumer to confirm consumer intent to start using the right to cancel service provision during the period, as well as to inform the consumer about loss of the right of withdrawal if service provision is fully completed. When the right of withdrawal remains in force because services are not completed, the consumer must compensate the service provider for the scope of services provided by the end of the term of the right of withdrawal, before use of such right.

News regarding delivery of digital content should be especially emphasized. These are video, audio and other files downloaded by the consumer. The consumer loses the right of withdrawal if downloading digital content that is not delivered in a tangible medium has started on the consumer’s initiative. In this case the trader must request clear consent from the consumer to start downloading digital content before expiry of the right of withdrawal and information that once delivery of digital content starts the right of withdrawal can no longer be used. Unlike services of digital contents the right of withdrawal is lost when delivery of digital contents of intangible delivery starts (but is not finished), and the consumer cannot claim compensation for any undelivered digital content. These regulations are highly significant because, if the trader has not met the requirement to request the consumer’s confirmation and to warn him, the consumer will not lose the right of withdrawal with regard to distance contracts for services and digital contents whose performance has been initiated before expiry of the right of withdrawal.

¹ Cabinet Regulations No. 255 “Distance Contract Regulations” adopted on 20 May 2014.