Incoming changes across the EU

As part of its Digital Single Market strategy, the EU passed a new Directive in 2019 relating to the sale of goods to consumers (Sale of Goods Directive). The Sale of Goods Directive must be transposed by 1 July 2021 and applied by 1 January 2022.

The Sale of Goods Directive is a maximum harmonisation Directive, meaning Member States will be prevented from deviating from the Directive requirements unless expressly allowed for in the Directive. The hope is to achieve a more consistent consumer law landscape across the EU, thereby stimulating cross-border trade.

Businesses trading online across the EU and UK, will need to navigate both legislative regimes. It remains to be seen whether the UK chooses to mirror the Directive to ensure conformity with EU standards although there are no indications of that to date.

What is its aim?

To harmonise rules on:

  • conformity of goods with the sales contract
  • remedies in the event of non-conformity and how to exercise those remedies
  • commercial guarantees.

What does it cover?

The Directive applies to business-to-consumer contracts for the:

  • sale of any tangible moveable items (goods)
  • supply of goods to be manufactured or produced
  • sale of any goods that incorporate or are inter-connected with digital content or a digital service (eg smart fridges and TVs).

What is excluded?

The Directive does not apply to:

  • contracts for the supply of digital content or digital services
  • any goods sold by way of execution or otherwise by authority of law
  • any tangible medium which serves exclusively as a carrier for digital content.

Therefore, goods such as DVDs and CDs will likely escape the remit of the Directive and instead be regulated under the Digital Content Directive. Member States may also exclude from the scope of the Directive contracts for the sale of second-hand goods sold at public auction and living animals.

Subjective requirements for conformity

Goods must:

  • Match the description, type, quantity, quality, functionality, compatibility, interoperability and any other features as set out in the contract.
  • Be fit for any particular purpose the consumer requires and which they have made known to the seller by conclusion of the contract and which the seller has accepted.
  • Be delivered with all accessories and instructions as required by the contract.
  • Be updated in accordance with the contract.

Objective requirements for conformity

In addition, to conform, the goods must:

  • Be fit for purposes for which that type of good would normally be used.
  • Be of the quality and correspond to the description of a sample or model the seller made available to the consumer before conclusion of the contract.
  • Be delivered with any accessories or instructions the consumer might reasonably expect.
  • Be of the quantity and possess the qualities and other features normal for goods of the same type and which the consumer would reasonably expect. This includes taking into account public statements including on labelling and in advertising unless the seller was not and could not reasonably have been aware; or the statement had been corrected by conclusion of the contract; or the consumer's decision could not have been influenced by the statement.

Updates

To ensure continuing conformity in the case of goods with digital elements, the seller must inform the consumer of and supply them with updates, including security updates, for as long as:

  • Two years from the time when the goods are delivered, where the supply of digital content or service is continuous or over a period of time less than two years.
  • The digital content or service is to be supplied, where the supply is continuous or over a period of time more than two years.
  • The consumer may reasonably expect relative to the type and purpose of the goods and digital elements and the contract terms, in relation to a single act of supply.

The seller will not be liable where the consumer fails to install or properly install an update within a reasonable time as long as the consumer was warned about the consequences of not updating, and the failure was not due to inadequate installation instructions.

No lack of conformity

There will be no lack of conformity if the consumer was specifically informed about a particular deviation and then expressly and separately accepted it when concluding the contract.

Incorrect installation

Any lack of conformity arising as a result of incorrect installation of the goods will be regarded as a lack of conformity if the seller installed it or was responsible for the installation, or the installation instructions for the consumer were insufficient.

Third party rights

If the consumer cannot use the goods at all or in conformity, as a result of any third party rights (including intellectual property rights), the consumer will be entitled to remedies for lack of conformity under the Directive, unless national law provides for the nullity or rescission of the contract in such cases.

Liability of the seller

The seller will be liable for any lack of conformity at the time of delivery or which becomes apparent, within at least a two year period from the time of delivery or, in the case of goods with digital elements, during the time the digital content or service is to be supplied, where the supply is continuous or over a period of time more than two years.

Burden of proof

Any lack of conformity which becomes apparent within one year of the time of delivery shall be presumed to have existed at the time the goods were delivered, unless proved otherwise or unless this presumption is incompatible with the nature of the goods or the nature of the lack of conformity. Members States may introduce a period of two years from the time when the goods were delivered.

In the case of goods with digital elements, where the supply is continuous over a period, the burden of proof for conformity is on the seller in relation to any non-conformity which becomes apparent during:

  • two years from the time when the goods are delivered, where the supply of digital content or service is continuous or over a period of time less than two years, and
  • the time the digital content or service is to be supplied, where the supply is continuous or over a period of time more than two years.

Obligation to notify

Member States may introduce provisions providing that, to benefit from the consumer's rights, the consumer has to inform the seller of a lack of conformity within at least two months from the date the consumer detected such lack of conformity.

Remedies for lack of conformity

Remedies for lack of conformity are:

  • to have the goods brought into conformity
  • a proportionate price reduction
  • termination.

To have the goods brought into conformity, the consumer has the right to choose between repair and replacement unless the remedy chosen would be impossible or would impose disproportionate costs on the seller, taking into account all factors including the value of the goods if there had been no lack of conformity and the significance of the lack of conformity and whether the alternative remedy could be provided without significant inconvenience to the consumer.

The conformity must be brought about within a reasonable time from when the seller is informed of the issue, for free and without significant inconvenience to the consumer.

The consumer is entitled to either a proportionate reduction of the price (where one was paid) or to terminate the contract where:

  • The seller has not brought the goods into conformity.
  • It would be disproportionate or impossible to bring the goods into conformity.
  • The seller has tried and failed to bring the goods into conformity.
  • The lack of conformity is sufficiently serious to justify immediate price reduction or termination.
  • The seller has declared, or it is clear from the circumstances that the seller will not bring the goods into conformity within a reasonable time or without significant inconvenience to the consumer.
  • The consumer shall not be entitled to terminate if the lack of conformity is only minor. If the consumer exercises the right to terminate, they must make a statement to that effect to the seller.

Commercial guarantees

Commercial guarantees shall be binding on the guarantor under the conditions in the guarantee statement and associated advertising available at the time, or before the conclusion of the contract. Where a producer offers a commercial guarantee of durability for certain goods for a certain period of time, the producer shall be liable directly to the consumer during the entire period of the commercial guarantee of durability for repair or replacement of the goods. The producer may offer more favourable conditions in the guarantee of durability statements.

If the conditions in the guarantee statement are less advantageous than those in the associated advertising, the guarantee shall be binding under the conditions in the advertising, unless before the conclusion of the contract, the advertising was corrected in the same way or in a comparable way to that in which it was made.

The guarantee statement shall be provided to the consumer on a durable medium at the latest at the time of delivery of the goods. It shall include the following:

  • a clear statement the consumer is entitled by law to remedies from the seller free of charge in the event of non-conformity
  • the goods and those remedies are not affected by the guarantee
  • the name and address of the guarantor
  • the procedure to be followed to obtain the implementation of the guarantee
  • the designation of the goods to which the guarantee applies, and
  • the terms of the guarantee.

Right of redress

The seller may seek redress for liability to the consumer down the supply chain according to national law.

Enforcement

Member States must ensure adequate and effective means to ensure compliance with the Directive in accordance with national law. This may include allowing public bodies, consumer organisations, and professional organisations to take action before the courts or competent administrative bodies.

How will the EU regime differ from the UK one?

There are a number of key differences between the incoming EU regime and the UK's existing one.

Contracts covered

The UK's Consumer Rights Act 2015 (CRA) applies to contracts for the hire of goods and hire-purchase agreements, in addition to sales contracts and contracts for the transfer of goods. The Directive does not cover either of the former.

Goods with digital elements

Goods which rely on digital elements to work are within the scope of the Directive. The CRA treats mixed contracts slightly differently although the end result is similar. Technically, there are different remedies for non-conforming contracts for the sale of goods as against the sale of digital content under the CRA. However, where digital content supplied with goods does not conform to the contract, the goods themselves will be treated as not conforming and goods remedies for non-compliance will be available.

Fitness for purpose

The CRA implies a statutory term that goods will be fit for a particular purpose. Under the CRA, fitness for particular purpose means any particular purpose for which the consumer informs the trader (expressly or by implication) that they are entering into the contract. The contract will contain an implied term that the goods are reasonably fit for that purpose, whether it is a purpose for which the goods of that kind are normally supplied. A contract may also be treated as making provision about fitness of the goods for a particular purpose by custom.

Under the Directive, the goods must be fit for any particular purpose the consumer makes known to the seller and which the seller accepts prior to conclusion of the contract, and for any purpose for which the goods are normally supplied.

Defects

Under the CRA, a trader is not liable for any defect in a good which was expressly drawn to the attention of the consumer or which was obvious on examination before conclusion of the contract. Under the Directive, sellers must get express and separate acceptance to any defects or variations from the quality requirements.

Under the Directive, Member States have the option to introduce or maintain the obligation on consumers to notify defects within a period of two months of the defect becoming apparent (although this is not mandatory). There is no equivalent prompt notification requirement in the CRA.

Installation

Under the CRA, goods do not conform if:

  • installation forms part of the contract
  • the goods are installed by the trader or under the trader's responsibility, and
  • the goods are installed incorrectly.

The Directive, however, makes the seller responsible for correct installation where the seller carries out the installation or it is under the seller's control or in accordance with their instructions. Instructions must be sufficiently clear and complete to allow the average consumer to carry them out.

Updates

Unlike the CRA, the Directive requires sellers to update goods with digital elements as needed to keep the goods in conformity. This includes supplying security updates. In the case of a continuous supply, updates must be supplied for a minimum of two years or the period of supply where longer than two years and, in relation to a one-off supply, for as long as the consumer might reasonably expect.

Burden of proof

Under the CRA, the burden of proof is on the consumer to demonstrate that goods were defective or not in conformity. If they prove a fault within the first six months of delivery, the defect will be presumed to have been present since the delivery was made. Under the Directive, this burden of proof applies for one year (extendable to two years by Member States) from delivery of the goods.

For goods with digital elements supplied on a continuous basis, the burden of proof for conformity is on the seller in relation to any non-conformity which becomes apparent during a minimum of two years or the period of supply where longer than two years.

Third party restrictions on the use of goods

Under the Directive, if there are restrictions on the consumer's ability to use the goods pursuant to the contract because of third party rights (for example, intellectual property rights), a consumer would be entitled to seek remedies from the trader. There is no direct equivalent right under the CRA.

Commercial guarantees

Under the CRA, if goods do not meet the specifications set out in the guarantee statement or in associated advertising, the consumer will be reimbursed for the price paid for the goods, or the goods will be repaired, replaced or handled in any way. Under the Directive, a producer (whether a manufacturer or importer) of goods which offers consumers a guarantee of durability for goods on commercial terms will be directly liable to consumers under such guarantee for the repair or replacement of the goods only during this period.

Consumer return obligations

The Directive contains an express obligation on consumers to return the goods to the seller at the seller's expense where the consumer terminates a sales contract. The CRA provides that from the time when a consumer rejects goods, the consumer has a duty to make those goods available for collection by the trader, or if there is an agreement for the consumer to return rejected goods, to return them as agreed.

Remedies for failure to conform

The Directive remedies are similar to those under the CRA. However, consumers have a short-term right to reject a good and obtain a full refund for a 30-day period after delivery or transfer of ownership under the CRA. Under the Directive, there is no mandatory short-term right to reject the goods. Consumers are entitled to a proportionate reduction of the price or to terminate the contract under the Directive if, for example, repair or replacement is impossible or can't be carried out within a reasonable time and without significant inconvenience to the consumer.

Withholding payment

Under the Directive, consumers are allowed to withhold payment of any outstanding part of the price of goods until the seller has brought the goods into conformity with the contract and are not liable to pay for normal use made of the replaced goods during the period prior to replacement. There is no direct equivalence in the CRA.

Other changes to the EU's consumer protection regime

The Sale of Goods Directive is one of three incoming EU Directives on consumer protection. You may also be interested in our articles on the Digital Content and Services Directive, and the Omnibus Directive.