The Mandatory Nature of the Right of Withdrawal
© 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_4
4. The Mandatory Nature of the Right of Withdrawal
University of Valencia, Valencia, Spain
Carmen Azcárraga Monzonís (Corresponding author)
Raquel Guillén Catalán
One of the main features of the CESL—unlike other international instruments—concerns its optional nature, i.e. the parties must agree upon its application in order for this instrument to govern the particular contract. However, once the parties have agreed upon its application, certain aspects of this instrument have a mandatory nature where the relevant contract is concluded between a consumer and a trader, one of these being the right of withdrawal. The aim of this chapter is to consider the regulation of this right of consumers in the Proposal on a CESL and in certain other instruments devoted to the harmonisation of contractual obligations in Europe.
KeywordsRight of withdrawalInformation dutiesMandatory nature of the right of withdrawalWithdrawal periodEffects of withdrawal
The right of withdrawal granted to consumers in certain situations (also known as the “cooling-off period”, (Ebers and Arroyo i Amayuelas 2006) appears in the context of contractual obligations as a more modern development of the principle of binding force (or pacta sunt servanda), which traditionally only operated when performance of contractual obligations became impossible for reasons that could not have been foreseen without the fault of one of the parties.
Today, the right of withdrawal is not based anymore on the impossibility of performance of the obligations. It is an exceptional facility of only one of the parties in the contract, the consumer, enabling him to terminate the contract ad nutum , with no reason, and with retroactive effect (Klein 1997). In other words, it refers to the ability of the consumer and user to revoke the contract by notice to the counterparty within the period established for exercising this right without having to justify the decision and without penalty (art. 68 Spanish Royal Legislative Decree 1/2007, of 16 November, approving the consolidated text of the General Law for the Defence of Consumers and Users and other complementary laws—TRLGDCU hereinafter—recently amended by Law 3/2014 of 27 March).
The grounds for this exception vary, but they can be seen in the specific situations where such rights of withdrawal exist. The inferior position of the consumer may arise in some situations where traders might have used certain commercial practices that push him into taking decisions without thinking about them (Klein 1997). For instance, the right to withdraw from contracts negotiated away from business premises (i.e. on the doorstep) exists where the consumer may have been taken by surprise or have been less attentive than he or she would have been in a shop. A further example is provided by certain complex contracts (i.e. timeshare contracts) where consumers may need an additional period for reflection (Von Bar et al. 2009).
The Legislations of EU Member States have traditionally regulated consumer rights in general, and the right of withdrawal in particular, differently due to the minimum amount of harmonisation in Directives in this area adopted so far in the EU, which allows each one to adopt, or maintain in force, more exacting provisions than the ones contemplated in the European instruments.
The right of withdrawal is actually the paradigm of inconsistent EU legislation, for instance, in terms of the period within which it can be exercised, the procedure that must be followed in order to exercise it, or the charges that may be imposed on a consumer who decides to withdraw. These inconsistencies appear as a consequence of the divergent rationale for granting this right in different pieces of legislation (Twigg-Flesner 2008).
Recently, nevertheless, Directive 2011/83/UE of the European Parliament and of the Council, of 25 October 2011, on Consumer Rights (OJ L 304 of 22.11.2011; DCR hereinafter) has completely harmonised certain aspects that will be considered in this contribution, including the pre-contractual information which must be provided to consumers, and their right of withdrawal in distance and off-premises contracts.
Following this Directive, the significance of the Proposal for a Regulation of the European Parliament and of the Council on a Common European Sales Law (COM(2011) 635 final; CESL hereinafter) reaffirms the will of the European legislator to attain a high level of protection for consumers because it establishes mandatory provisions in this field that cannot be modified by the parties to the detriment of the consumer; and this is true not only in those transactions where the habitual residence of both contracting parties is located in EU Member States—a situation that would be covered by the previously mentioned Directive—but also in those situations where the contract is concluded between one party who is residing in a Member State and the other party in a third country.
The main objective of this contribution is to consider the right of withdrawal in the CESL and to undertake a comparative analysis of the legal regime of this concept in the Spanish legal system as well as in some other European harmonising proposals, such as the Acquis Principles (ACQP hereinafter; Arroyo i Amayuelas 2008) and the Draft Common Frame of Reference (DCFR hereinafter). The Principles of European Contract Law (PECL) will not be included because they do not deal with the right of withdrawal.
This chapter will examine the basic general elements on which this right is constructed: its definition, mandatory and binding nature for traders, withdrawal period and the restitution of the supplies or services following the exercise of this right. In addition to these general issues we will focus on certain specific types of contract where this right is legally granted; in particular, distance and off-premises contracts. Furthermore, taking into account that the CESL is aimed at the protection of consumers, the inclusion of the right of withdrawal as one of the specific duties to provide information in the acquisition of products and services will also be considered. Finally, the legal consequences of non-compliance of this obligation will also be addressed.
An overall consideration of all the parts of this contribution will lead the reader to gain a broad overview of the current regulation of the right of withdrawal , reflecting on the traditional view of this topic that has existed until now, while bearing in mind, at the same time, its future perspective under the forthcoming CESL.
4.2 Legal Antecedents: The Regulation in the DCFR
The Common Frame of Reference was conceived to bring the contract law of EU Member States closer together and form the starting point for the evaluation by the European Commission of whether it would be desirable to develop an “optional instrument” (Loos 2008), turning a combination of the “best solutions” in the domestic laws of the Member States and the existing acquis communautaire into a coherent whole (Twigg-Flesner 2008).
The current draft version of the Common Frame of Reference of 2008 (DCFR) provides rules designed to protect the vulnerable. The main example of this aspect of justice is the special protection afforded to consumers. It should be noted in this regard that for reasons of simplicity and legal certainty, withdrawal rights are granted to consumers, irrespective of whether individually they need protection, as a considerable number of consumers are considered to be in need of protection in such situations (Von Bar et al. 2009).
This special protection appears prominently: in the rules on marketing and pre-contractual duties in Book II, Chapter 3; on the right of withdrawal in Book II, Chapter 5; and on unfair contract terms in Book II, Chapter 9, Section 4. It also appears, notably, in the parts of Book IV dealing with sale, the lease of goods and personal security.
Focusing specifically on the subject of this chapter, the DCFR provides for general model rules on pre-contractual information duties and withdrawal rights, offering both the European and the national legislators a model set of sanctions for breach of information duties. These two aspects respond to the new developments existing in current markets, where consumers may feel “overwhelmed” by the ever-increasing choice of products, suppliers and methods of marketing such products (Twigg-Flesner and Schulze 2010).
In the first place, the regulation of the right to withdraw in the DCFR will be considered, followed by a brief reference to the information duties of businesses towards consumers and the remedies for breach of these information duties.
4.2.1 The Right of Withdrawal in the DCFR
The definition of this right under the DCFR is included in the Annex of this instrument, under which “A right to “withdraw” from a contract or other juridical act is a right, exercisable only within a limited period, to terminate the legal relationship arising from the contract or other juridical act, without having to give any reason for so doing and without incurring any liability for non-performance of the obligations arising from that contract or juridical act” (II.-5:101 to II.-5:105).
The main aspects regulated in the chapter devoted to the right of withdrawal (Chapter 5 of Book II of DCFR—“Contracts and other juridical acts”) are the following: in Section 1—“Exercise and effect”—several aspects are dealt with: scope and mandatory nature ; exercise of right to withdraw; withdrawal period; adequate information on the right to withdraw; and effects of withdrawal and linked contracts. In Section 2—“Particular rights of withdrawal”—this right is applied in two specific contracts: contracts negotiated away from business premises and timeshare contracts .
According to the first rule of Section 1, the provisions in this section apply where, under any rule in Books II–IV, a party has a right to withdraw from a contract within a certain period. In these situations, the parties may not, to the detriment of the entitled party, exclude the application of the rules in this chapter or derogate from or vary their effects (II.-5:101).
Under Article II.-5:102, the right to withdraw is exercised by notice to the other party and no reasons need to be given. But as well as an explicit notice, it can also be exercised implicitly through returning the subject matter of the contract, although the provision does not clarify when this returning must be accomplished. A possible solution to this lack of clarification may be to refer to art. I-1:109 which states how notice, for any purpose, must be given (Vaquer Aloy et al. 2012).
The right of withdrawal can be exercised at any time after the conclusion of the contract and before the end of the withdrawal period , i.e. 14 days after the latest of the following times: (a) the time of conclusion of the contract; (b) the time when the entitled party receives from the other party adequate information on the right to withdraw; or (c) if the subject matter of the contract is the delivery of goods, the time when the goods are received .
This period of 14 days must be understood as calendar days under art. I.-1:110 (5) because there is no explicit reference to working days.
Furthermore, the right of withdrawal cannot be exercised later than 1 year after the time of conclusion of the contract, a time limit that can be considered as a limitation period (Vaquer Aloy et al. 2012).
The DFCR (art. II.-5:201(4)) does not clarify whether this right can be exercised within the mentioned period when contracts have already been performed, because it only refers to financial services contracts concluded away from business premises (Diéguez Oliva 2009).
On the other hand, adequate information on the right to withdraw requires that the right is brought to the entitled party’s attention appropriately, and that the information provides, in a textual form on a durable medium and in clear and comprehensible language, information about how the right may be exercised, the withdrawal period, and the name and address—both geographical and telematic—of the person to whom the withdrawal is to be communicated (art. II.-5:104) .
If the above requirements are fulfilled, art. II.-5:105 provides for the effects of the withdrawal. Among them, “withdrawal terminates the contractual relationship and the obligations of both parties under the contract” and “where the withdrawing party has made a payment under the contract, the business has an obligation to return the payment without undue delay, and in any case not later than 30 days after the withdrawal becomes effective”. It must be noted in this regard that the DCFR does not contemplate any sanction against the trader who does not return the payment within the said period.
As regards the costs associated with the right of withdrawal , art. II.-5:105(6) states that except where otherwise provided in art. II.-5:105 “the withdrawing party does not incur any liability”. In particular paragraph (4) of this same provision establishes that “The withdrawing party is not liable to pay (a) for any diminution in the value of anything received under the contract caused by inspection and testing; (b) for any destruction or loss of, or damage to, anything received under the contract, provided the withdrawing party used reasonable care to prevent such destruction, loss or damage”. By contrast, paragraph (5) states that “The withdrawing party is liable for any diminution in value caused by normal use unless that party had not received adequate notice of the right of withdrawal”.
The DCFR also tackles the particular case of linked contracts, where the general rule under art. II.–5:106(1) states that the effects of withdrawal extend to any linked contract to a contract for the supply of goods, other assets or services by a business from which a consumer exercises a right of withdrawal .
Furthermore art. II.–5:106(1) establishes “where a contract is partially or exclusively financed by a credit contract, this forms linked contracts, in particular: (a) if the business supplying goods, other assets or services, finances the consumer’s performance; (b) if a third party which finances the consumer’s performance uses the services of the business for preparing or concluding the credit contract; (c) if the credit contract refers to specific goods, assets or services to be financed with this credit, and if this link between both contracts was suggested by the supplier of the goods, other assets or services, or by the supplier of credit; or (d) if there is a similar economic link”.
This list must be deemed merely illustrative, meaning that other linked contracts may be included (Jiménez Muñoz 2011). Moreover, as regards linked contracts with similar economic links it is interesting to note that the ACQP refers to the “economic unit”.
As stated above, Section 2 of Book II refers to particular rights of withdrawal, i.e. those exercised in the framework of contracts negotiated away from business premises (art. II.-5:201) and timeshare contracts (art. II.-5:202).
As regards the first category of contracts, a preliminary remark must be made regarding the broader definition of this type of contracts if compared with the one contemplated in the DCR. The DCFR establishes, in art. II.-5:201(1), a general rule that “a consumer is entitled to withdraw from a contract under which a business supplies goods, other assets or services, including financial services, to the consumer, or is granted a personal security by the consumer, if the consumer’s offer or acceptance was expressed away from the business premises”.
However, a long list of exceptions to this general rule is also contemplated, in line with the ACQP, save that in the latter instrument this right is only applied to contracts where the amount due by the consumer reaches a legally determined minimum (Diéguez Oliva 2009).
This rule does not apply under art. II.-5:201(2) to: “(a) a contract concluded by means of an automatic vending machine or automated commercial premises; (b) a contract concluded with telecommunications operators through the use of public payphones; (c) a contract for the construction and sale of immovable property or relating to other immovable property rights, except for rental; (d) a contract for the supply of foodstuffs, beverages or other goods intended for everyday consumption supplied to the home, residence or workplace of the consumer by regular roundsmen; (e) a contract concluded by means of distance communication, but outside of an organised distance sales or service-provision scheme run by the supplier; (f) a contract for the supply of goods, other assets or services whose price depends on fluctuations in the financial market outside the supplier’s control, which may occur during the withdrawal period ; (g) a contract concluded at an auction; (h) travel and baggage insurance policies or similar short-term insurance policies of less than 1 month’s duration” .
In addition to those exceptions, this rule does not apply either under art. II.-5:201(3) if “the business has exclusively used means of distance communication for concluding the contract, and the contract is for (a) the supply of accommodation, transport, catering or leisure services, where the business undertakes, when the contract is concluded, to supply these services on a specific date or within a specific period; (b) the supply of services other than financial services if performance has begun, at the consumer’s express and informed request, before the end of the withdrawal period; (c) the supply of goods made to the consumer’s specifications or clearly personalised or which, by reason of their nature, cannot be returned or are liable to deteriorate or expire rapidly; (d) the supply of audio or video recordings or computer software (i) which were unsealed by the consumer, or (ii) which can be downloaded or reproduced for permanent use, in case of supply by electronic means; (e) the supply of newspapers, periodicals and magazines; (f) gaming and lottery services”.
In the second place, with regard to timeshare contracts, two preliminary remarks must be made. Firstly, the DCFR does not provide a definition for this type of contract; and secondly, other similar products such as the long-term holiday product—which is actually covered by Directive 2008/122/EC of the European Parliament and of the Council of 14 January 2009 on the protection of consumers in respect of certain aspects of timeshare, long-term holiday product, resale and exchange contracts—have not been contemplated (Feliú Rey 2009) .
The DCFR only establishes in art. II.-5:202 that “a consumer who acquires a right to use immovable property under a timeshare contract with a business is entitled to withdraw from the contract”.
The consumer is not obliged to reimburse any expenses when exercising the right of withdrawal in cases where the consumer has been put at a particular disadvantage in the sense of art. II.–3:103(1): consumers placed at a significant informational disadvantage because of the technical medium used for contracting, the physical distance between business and consumer, or the nature of the transaction. In other situations, if the consumer exercises this right, art. II.–5:202(2) states that “the contract may require the consumer to reimburse those expenses which (a) have been incurred as a result of the conclusion of and withdrawal from the contract; (b) correspond to legal formalities which must be completed before the end of the withdrawal period ; (c) are reasonable and appropriate; (d) are expressly mentioned in the contract; and (e) are in conformity with any applicable rules on such expenses” .
It should be noted in this regard that unlike the general regulation of the right of withdrawal and the particular rules devoted to the contracts negotiated away from business premises, the DCFR explicitly establishes for timeshare contracts in art. II.–5:202(3) that “The business must not demand or accept any advance payment by the consumer during the period in which the latter may exercise the right of withdrawal”. If the trader does not comply with this obligation the same provision states that “the business is obliged to return any such payment received” .
4.2.2 Information Duties in the DCFR
As mentioned above, after having dealt with the regime on the right of withdrawal, the information duties contemplated in Section 1 of Chapter 3 of Book II DCFR need to be considered. The aspects covered by this section are the following: the duty to disclose information about the goods, other assets and services; specific duties for businesses marketing to consumers; duty to provide information when concluding contract with a consumer who is at a particular disadvantage; information duties in real time distance communication; formation by electronic means; clarity and form of information; information about price and additional charges; information about address and identity of business; and remedies for breach of information duties.
Two of these aspects are particularly interesting: the information duties in real time distance communication (art. II.-3:104) and the remedies for breach of information duties (art. II.-3:109).
As regards the first issue, the DCFR provides a definition in art. II.-3:104(2). “Real time distance communication means direct and immediate distance communication of such a type that one party can interrupt the other in the course of the communication. It includes telephone and electronic means such as voice over internet protocol and internet related chat, but does not include communication by electronic mail”.
Where these situations involve communication with a consumer, art. II.–3:104(1) states that “a business has a duty to provide at the outset explicit information on its name and the commercial purpose of the contract”. If these pieces of information are not provided, paragraph (4) of this provision clarifies that the consumer has a right to withdraw from the contract within the general period of withdrawal mentioned above (14 days) .