Revised rule in Article 8
Influence of EU legislation
Scope of applicability and effects of Article 8
The partially revised Federal Act Against Unfair Competition entered into force on April 1 2012. However, its Article 8, which contains a revised rule that protects consumers against unfair terms in general conditions of contract, will become effective on July 1 2012.
Article 8 was initially enacted in 1986 under the heading "Use of abusive conditions of contract". Its purpose was to ban abusive or unfair clauses in general conditions of contract. However, Article 8 turned out to be a blunt weapon, mainly because it made the removal of unfair contract conditions dependent on the requirement that they be misleading. That requirement was seldom met.
The revision attempts to revive Article 8, particularly by removing the element of deception. The new provision states than an act of unfair competition is committed by:
"anyone who, in particular, makes use of general conditions of contract which cause, to the detriment of the consumers and contrary to good faith, a significant and unwarranted imbalance in the contractual rights and contractual duties."
It is no coincidence that the revised Article 8 is similar to EU legislation, particularly Article 3(1) of the EU Unfair Consumer Contract Terms Directive (93/13/EEC). The similarity was intended, although the Federal Council had proposed in its parliamentary bill that Article 8 should protect all buyers and customers, not just consumers. However, during the parliamentary debate, the scope of application was restricted to consumers.
Unlike Article 3(3) of the directive, Article 8 neither contains nor refers to an annex or a catalogue containing a list of unfair terms. Therefore, as has been discussed in legal literature, the Swiss courts may consider the EU directive and its annex when looking for guidance on a particular case.
Scope of applicability and effects of Article 8
The precise scope and effects of the revised Article 8 will become clear only in future, when the relevant issues are decided by the courts. However, some indication can be given now.
The provision will apply only to general conditions of contract – uniform conditions that are used in a multitude of contracts. Contracts and contract clauses that have been negotiated individually are not affected.
The provision applies only to consumer contracts. Although no uniform definition of 'consumer contract' exists in Swiss law, in this context it is likely to be understood to mean a contract for services or goods for ordinary consumption that are:
- intended for the personal use of the consumer or his or her family; and
- offered by the supplier in the course of its professional or commercial activity.
When deciding whether a controversial clause is unfair, the court will examine not only that particular clause, but also the totality of the contract's conditions (including the main subject matter of the contract), to assess whether a significant imbalance of rights and duties exists.
In order to reach the threshold for intervention, the significant imbalance must also be unwarranted and in violation of good faith. What this means is open to debate; the courts which will have to consider all relevant aspects of a particular case in order to reach a decision have not been given a suitable instrument. It is therefore likely that Swiss courts will consult the directive more than once (particularly its annex, which provides a non-exhaustive list of 17 indicative examples or groups of examples of unfair terms).
The Federal Act Against Unfair Competition contains no rule on the consequences of a disputed contract clause being found to be unfair and abusive. It is generally held that such a clause will be declared void, and that the pertinent rules of general contract law will apply instead.
Consumers whose interests are impaired in a particular case are entitled to initiate a court action and to raise the issue of unfairness. An action may also be brought by the Swiss Confederation, as well as by trade associations and by consumer organisations in particular.
Article 8 is said to be at the core of the partial revision of the act. It will clearly influence the drafting and use of general conditions of contract in the future, although only to the extent that consumer contracts in the mass-market sector are concerned. Thus, while it is unlikely that a large number of court actions will be initiated as of July 1 2012, sellers and suppliers will profit from reviewing and possibly revising any general conditions of contract that are currently being used in the consumer sector.
For further information on this topic please contact Stefan Knecht at BADERTSCHER Rechtsanwälte AG by telephone (+41 44 266 20 66), fax (+41 1 266 20 70) or email ([email protected]).