© Springer International Publishing Switzerland 2015Javier Plaza Penadés and Luz M. Martínez Velencoso (eds.)European Perspectives on the Common European Sales LawStudies in European Economic Law and Regulation410.1007/978-3-319-10497-3_9
9. Non Conformity of Goods and Digital Content and its Remedies
University Santiago de Compostela, Santiago de Compostela, Spain
María Paz García Rubio
The concept of conformity is one of the most important topics in modern Contract Law, especially concerning the sale, as well as other types of contracts of goods and services. This is also true for the CESL, where the lack of conformity constitutes a case of non-performance, which may be down to both contractual parties, although it is more often that a non-performance is the responsibility of the seller. A situation of non-performance opens up the possibility of recourse to the panoply of remedies. The analysis of the general rules laid down in the CESL for the lack of conformity and the remedies available to the buyer, is the subject of this contribution.
KeywordsPrinciple of conformityCriteria for conformityRemedies for lack of conformityRequiring performanceRight to withhold performanceTerminationPrice reductionDamages and interest
9.1 The Principle of Conformity
9.1.1 Scope of Application
The rules concerning the non-performance and conformity of the contract included in CESL are a direct inheritance from the United Nations Convention on Contracts for the International Sale of Goods (CSIG) , refined by Directive 1999/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees, the case-law of the ECJ that interprets the afore-mentioned Directive, and the Draft Common Framework of Reference (DCFR). In all of these instruments the issue of conformity is one of the most significant topics.
First of all it is important to remember that, according to the text originally proposed by the Commission, art. 1.1 CESL specified that the rules of this text “can be used for cross-border transactions for the sale of goods, for the supply of digital content and for related services where the parties to a contract agree to do so”. However, in the text of the European Parliament (Report of the Committee on Legal Affairs–JURI-, of 24 September 2013), the objective matter is restricted to the same cross-border contracts, but only those “which are conducted at a distance, in particular online”. According to the Working Group of the European Law Institute, this restriction of distance contracts brings with it a stronger focus on digital content, including a desire to use the CESL as a tool for further unleashing the potentials of cloud computing; (in this sense, vid.1st Supplement: Reactions to the Draft Report of 18 February 2013 of the EP Committee on Legal Affairs).
Furthermore, following the criteria of the European Law Institute (ELI, Statement on the Proposal for a Regulation on a Common European Sales Law of 2012), the Parliament has also merged the “chapeau” regulation with Annex I, because this division of the Regulation in two different parts seems to have created unnecessary confusion.
The Proposal of the Commission and the Report of the European Parliament affects both contracts between traders (B2B), and those agreed by traders and consumers (B2C). This has drawn criticism by some authors who believe that the CESL should only be for consumer protection , and take the form of a Directive. This is the opinion given by the Committee on the Internal Market and Consumer Protection (IMCO), for the Committee of Legal Affairs (JURI), released on 11 July 2013.
According to this pedigree and following the trends of modern Contract Law, art. 87.1 of Annex I of the text proposed by the Commission provides us with a concept of non-performance of large amplitude and maximum neutrality with regard to its causes; (in relation to this modern concept of non-performance, see, in the Spanish literature, Morales Moreno 2010, pp. 29–30). Furthermore the concept of non-performance relates equally to the two subjects of the obligation. In this way, art. 87.1 establishes “Non-performance of an obligation is any failure to perform that obligation, whether or not the failure is excused”;and in paragraph 2 of the same article, a definition of “fundamental non-performance”, which is of great important for opening up the possibility of using the remedy of termination, is added. This article, which is essential to the construction of the system providing the remedies (Zoll 2012, p. 397), has not been amended by the Parliament, although it would have been desirable to also introduce a definition of “the insignificant lack of conformity”, because under art. 114.2, in a B2C contract, the consumer may not terminate de contract if the lack of conformity is insignificant.
In a general, it can be said that a non-conforming performance is a specific, and very accurate, type of non-performance for sales contracts (Shelhaas 2009, p. 734), which seems to reflect a general principle of Contract Law: i.e. that contracts have to be performed in accordance with the terms of the agreement (Principles of European Sales Law 2006). The broad concept of non-performance includes, in the text of the CESL, three situations that refer specifically to the lack of conformity contained in the sub-paragraphs (c), (d) and (f) of the non-exhaustive list of article 87.1. Cases of non-performance are, among others: “(c) delivery of goods which are not in conformity with the contract; (d) supply of digital content which is not in conformity with the contract; (f) any other purported performance which is not in conformity with the contract.” Therefore, sub-paragraph (f) contains any alleged breach of contract which in turn assumes a lack of conformity with the contract, consequently also including the situation of aliud pro alio, as in § 434 (3) BGB, in art. 7:13.3 Dutch Code, or in art. III-1:102 (3) DCFR. This sub-paragraph (f) can affect both the buyer and the seller; while sub-paragraphs (c) and (d) only relate to the benefits payable by the seller. In any case, the concept of conformity is flexible enough to take into account very different situations.
Although the proposed Regulation is intended to rule three types of contractual arrangements: i.e. the sale of goods, supply of digital content and other services contracts, in principle it seems that the “not in conformity” is an idea applicable to goods and digital content, and should not be applied to “related services”. In fact the heading of Section 3, Chapter 10 of Part IV of Annex I is “Conformity of goods and digital content.” Similarly, art. 91 (c) includes, among the main obligations of the seller , the obligation to “ensure that the goods or the digital content are in conformity with the contract”, but does not mention ‘related services’.
At first glance, this restriction is not consistent with the general tenor of art. 87.1 (f) CESL. However, those who think that services should be excluded from the idea of conformity, do so because they believe that in the contracts of services, the debtor’s diligence represents a role that is not in accordance with the notion of conformity (cf. ad. ex., art. 148 Annex I), which is a purely objective concept. This review is in line with those authors who think that the idea of “conformity” only fits with the obligations to achieve a result and never with the obligations of care and skill (Zamir 1991: passim; vid, however, Vaquer Aloy 2011, pp. 31–32, advocating overcoming the duality result versus care and skill, and supporting the general application of the concept of conformity). However, it should be noted that in related service contracts a reference to conformity is also included. Generally speaking, this is because art. 147 CESL determines the application of the rules of Chapter 9 to related services contracts , including art. 87 where both concepts, non-performance and conformity, are to be found. Specifically, this is because under art. 148.4 CESL “Where in a contract between a trader and a consumer the related service includes installation of the goods, the installation must be such that the installed goods conform to the contract as required by Article 101”. Certainly, if the distinction between the obligations of result and the obligations of care and skill is accepted, the installation obligation included in a contract is configured as a result and, therefore, in those contracts the idea of “conformity” could fit, even for the more restrictive doctrine. Furthermore, art. 156 CESL governs the requirement of notification of lack of conformity in related service contracts between traders (B2B contracts), which means that related services contracts are also affected by the rule of the conformity (Vaquer Aloy 2012, p. 442).
The concept of conformity under the CESL resolves some of the problems that it had in Directive 1999/44. So, contrary to what happened in this Directive or in Spanish Law (arts. 114-127 TRLGDCU), where there have been some doubts expressed, and in accordance with the BGB (§ 453) (Schuller and Zebefels 2013, p. 588), in the CESL the concept of conformity clearly applies to digital content, regardless of whether it is incorporated in a material form or not, because, for example, they have been downloaded either online or offline(cf. art. 5 b Proposal and Parliament Amendment Number 62). Thus, in the CESL, the corporeality of the contract object is irrelevant. For the European Law Institute (ELI) (1st Supplement, 2013) it would be unrealistic in the twenty-first Century to treat these transactions as conceptually different, the first governed by the law of sales and the second governed by intellectual property law. Actually, they are simply different ways of supplying the product to the purchaser and should be treated both as sales contracts and within the scope of the CESL.
However, it is considered by some authors (Spindler 2012, p. 461; Yanguas 2012, p. 479) that all digital content that is not transferred to the client in a way that he holds it as if he were its owner, such as the streaming of a broadcast that can be used only at the specific time or that cannot be used offline (cloud computing) must be excluded. In a similar way, the ELI (1st Supplement, 2013) takes the view that a Sales Law regime is an appropriate legal regime only where the customer has the right to request the download of a usable copy of the digital content to a suitable storage facility within the customer’s control at no further cost. Where, by contrast, the digital content has to remain in the seller’s cloud, or where it can be downloaded but is usable only while the customer’s device is connected to the seller’s cloud, the contract resembles a service contract more than a sales contract.
In principle, the Regulation will be applied to digital content acquired through the payment of a price as well as those acquired without such payment. Indeed, art. 5(b) CESL governs this type of contract “irrespective of whether the digital content is supplied in exchange for the payment of a price”. In the Commission’s Proposal for the contracts that are not supplied in exchange for a price, there was an important limitation to the remedies available (cf. art. 107 Appendix I), and a special rule about conformity (art. 100 g) that reduced the legitimate expectations of the buyer in those cases. However, the absence of a price does not necessarily mean that they are gratuitous contracts, because the digital content can be delivered without paying a price but in exchange for things other than money that can be very valuable for the purchaser, such as the personal data (Loos et al. 2011, p. 750). For this reason, Amendment 62 of the Parliament (also ELI, 2012) no longer distinguishes between digital content contracts with or without price, but between digital content supplied in exchange for the payment of a price or in exchange for a counter-performance other than the payment of a price on the one hand, and those that are not supplied in exchange for any other counter-performance on the other hand. Only in the last category are contracts really free and, therefore, a limitation of the remedies available can be justifiable. Moreover, following the stronger focus on distance contracts (and in particular electronic contracts) taken by the Parliament, the storage and use of the buyer’s personal data should receive more attention and more protection (ELI, 1st Supplement, 2013).
Furthermore, the concept refers to conformity, or lack of it, both physically and legal, although there is a difference between the two types since the latter is expressly provided for in art. 102 under the heading “Third party rights or claims”.
As stated above, among the primary obligations of the seller , art. 91 (c) includes the power to “ensure that the goods or the digital content are in conformity with the contract”. In order to measure if such conformity exists, arts. 99–105 CESL contain the rules that establish the concept, the criteria and the relevant time to gauge the performance. As reported in the Commission’s Proposal, in B2C contracts many of these rules are mandatory in favour of the consumer (vid., ad ex., arts. 99.4, 101.2, 102.5 and 105.5).
Article 99.1 contains the general rule concerning the meaning of ‘conformity with the contract’. According to this precept “In order to conform with the contract, the goods or digital content must: (a) be of the quantity, quality and description required by the contract, (b) be contained or packaged in the manner required by the contract, and (c) be supplied along with any accessories, installation instructions or other instructions required by the contract.”
In relation to the quantity mentioned in sub-paragraph (a), it should be noted that when this is lower than that required by the contract, art. 130.2 recognises “If the seller delivers a quantity of goods or digital content less than that provided for in the contract the buyer must take delivery unless the buyer has a legitimate interest in refusing to do so”, which according some authors means that the only quantity that can imply lack of conformity is there is a concealed delivery (Zoll 2012, p. 467). By contrast, when the quantity is greater than that promised by the contract, in principle this situation is one of non-conformity, because according to art. 130.3. “If the seller delivers a quantity of goods or digital content greater than that provided for by the contract, the buyer may retain or refuse the excess quantity”, although the article adds in para. 4 “If the buyer retains the excess quantity it is treated as having been supplied under the contract and must be paid for at the contractual rate”. In a consumer sale (B2C), this last paragraph does not apply if the buyer reasonably believes that the seller has delivered the excess quantity intentionally and without error, knowing that it had not been ordered (art. 130.5).
In this context, conformity is not limited to goods as such. Article 99 sets out that the goods must be of the quality and description required by the contract, and be contained or packaged in the manner required by the contract; in this text ‘contained’ and ‘packaged’ seem to be synonyms (Zoll 2012, p. 468). Finally, the failure to deliver any accessories and instructions required by the contract also falls under the category of lack of conformity.
9.1.2 Conformity and Consent of the Contracting Parties
The concept of conformity gives priority to the contractual specifications, according to the principles of party autonomy and pacta sunt servanda (Feltkamp and Vanbossele 2011, p. 886).
Article 99.3, interpreted “a contrario”, implies that in B2B contracts the criteria of conformity can be excluded by the parties. For these same contracts, art. 104 establishes a self-liability rule for the trader-buyer, by providing “In a contract between traders, the seller is not liable for any lack of conformity of the goods if, at the time of the conclusion of the contract, the buyer knew or could not have been unaware of the lack of conformity”. The wording of this provision has been restricted to the case of lack of conformity of the goods (digital content not being mentioned), not any lack of conformity with the contract under art. 87.1 f, as would be the delivery of an aliud pro alio.
Article 99.3 provides “In a consumer sales contract, any agreement derogating from the requirements of articles 100, 102 and 103 to the detriment of the consumer is valid only if, at the time of the conclusion of the contract, the consumer knew of the specific condition of the goods or the digital content and accepted the goods or the digital content as being in conformity with the contract when concluding it”. This rule has to be combined with the rules on protection against unfair terms, including the issue of whether these may or may not affect the main object of the contract. It should be noted that following the submissions of certain doctrine (Zoll 2012, p. 470), Amendment 184 European Parliament has replaced the reference to arts.100, 102 and 103, with arts. 100, 101 and 102.
Furthermore it is necessary to interpret art. 100 sub-para. (f) in relation to other provisions of the CESL, because this rule establishes a criterion for conformity that is: that the goods or the digital content “possess the qualities and performance capabilities indicated in any pre-contractual statement which forms part of the contract terms by virtue of article 69”. Article 69 governs the contract terms derived from certain pre-contractual statements and according its para. 4 “In relations between a trader and a consumer the parties may not, to the detriment of the consumer, exclude the application of this article or derogate from or vary its effects”. This means that art. 99.3 lacks utility in the case provided for by art. 100.f, as highlighted by Zoll (2012, p. 476). In fact the same author notes that art. 100.f is superfluous, because its content is already contained in art. 69, which shows that these pre-contractual statements promised by the seller or by a person engaged in advertising or marketing become part of the contract, and also that this rule cannot be deviated from in the case of B2C contracts.
9.1.3 Criteria for Conformity
Article 100 specifies the criteria for conformity of the goods and digital content, extracted from different sources. In this case, they are positively formulated, unlike its predecessors, art. 35.2 CISG (Schuller and Zenefels 2013, p. 597) and IV.A.-2:301 DCFR, that approached the criteria negatively, that is, as so-called non-conformity. Moreover, the DCFR and CESL, following the words of the Principles of European Sales Law (2006), seem slightly more straight-forward than the CISG, although, in the end, the result remains more or less the same.
Under art. 100 CESL, the “goods or digital content must:
be fit for any particular purpose made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for the buyer to rely, on the seller’s skill and judgement;
befit for the purposes for which goods or digital content of the same description would ordinarily be used;
possess the qualities of goods or digital content that the seller held out to the buyer as a sample or model.