Reading online terms and conditions can be as daunting as tackling a James Joyce novel. Linking to terms and conditions is considered by some to be a commercially sensible way of not drowning consumers in pages upon pages of legalese. However a new ECJ ruling has ruled that this approach could be unenforceable.
Businesses therefore need to revaluate the construction of their contracts in the future and ultimately how they conduct distance selling over the internet.
This decision comes from the recent case, Content Services Ltd v Bundesarbeitskammer and clarifies the ECJ’s interpretation of Article 4 and 5 of the European Directive 97/7/EC (the “Directive”) as incorporated in the UK by the Consumer Protection (Distance Selling) Regulations 2000 (the “Regulations”). The European Court of Justice (“ECJ”) made a decision on the legitimacy of using a hyperlink to access a company’s terms and conditions and other material information during the formation of a contract in the context of distance selling.
Content Services offered various services on its website including selling downloadable software for a fee of EUR 96. Consumers were able to use the website by completing a registration form. When placing an order, consumers had to tick a box on the registration form declaring that they had accepted Content Services’ terms and conditions and that they had waived their right to withdraw from the contract. A contract could not be concluded if the box on the form had not been ticked.
Article 4 and 5 of the Distance Selling Directive requires certain information, including the right of withdrawal to be provided to consumers. In this case, the right of withdrawal was only available if the consumer clicked on a hyperlink which would navigate away from the original web page to an additional web page where the information was located.
Once the contract was confirmed the consumer received an email providing a username and password to use the web based service, as well as the hyperlink to obtain further information regarding the user’s waiver of his or her right of withdrawal. This information was not produced in the email itself.
Proceedings were brought in the Austrian Consumer Court in the first instance by Bundesarbeitskammer, a body which was responsible for the protection of consumers. Bundesarbeitskammer challenged Content Services’ business practice on the grounds that it infringed several provisions of European Union law in regard to consumer protection.
The ECJ concluded that Content Services were infringing several provisions of the Directive.
Article 4 of the Directive (Regulation 7 of the Regulations) lists information that must be provided by a seller to a consumer when contracts are concluded by electronic means. This includes information regarding the supplier, the goods or services being provided, the price, the delivery costs and the consumer’s right to withdraw.
Article 5 of the Distance Selling Directive states that a consumer must “receive” written confirmation of the information referred to in Article 4 in a “durable medium”.
The Advocate General interpreted “receive” in Article 5 to mean that a consumer should be provided with the information referred to in Article 4 without having to take any specific action on their part. In this case the requirement of clicking on a hyperlink involves customer effort and an active role in obtaining the information, and therefore the consumer did not passively “receive” the information in accordance with Article 5.
Also because the webpage to which the hyperlink relates can be changed at anytime the consumer would not be able to record and store the information for a sufficiently long period to enable him to enforce his rights. This was held not to be a “durable medium”.
The above case has brought clarity to this area of European Law. It is important that sellers who are selling products or services to consumers without face-to-face contact i.e. where the consumer has not had the opportunity to examine the goods before buying them, understand the distinction between providing the information referred to in Article 4 to the consumer and the consumer receiving the information. The onus has shifted towards the seller to inform the passive consumer proactively.
Information referred to in Article 4 includes:
- the identity of the supplier and, in the case of contracts requiring payment in advance, his address;
- the main characteristics of the goods or services;
- the price of the goods or services including all taxes;
- delivery costs, where appropriate; the arrangements for payment, delivery or performance;
- the existence of a right of withdrawal;
- the cost of using the means of distance communication, where it is calculated other than at the basic rate;
- the period for which the offer or the price remains valid;
- where appropriate, the minimum duration of the contract in the case of contracts for the supply of products or services to be performed permanently or recurrently.
Regulation 7 of the Regulations requires that the information must be given to the consumer either:
- prior to the conclusion of the contract, or
afterwards, provided it is done:
- in good time;
- in contracts for services, during the performance of the contract; and
- in contracts for goods, at the latest at the time of delivery of the goods where goods not for delivery to third parties are concerned. This means that where consumer A orders goods to be dispatched to consumer B (e.g. as a gift), the information must be given to consumer A prior to the conclusion of the contract.
In practice, traders operating online or by other distance methods instead of face-to-face should ensure that they are complying with the Directives and the Regulations by fully setting out the information listed in Article 4 (above) in an email sent prior to or on delivery or on a delivery note sent with the goods.