29 May 2019
New EU Law Governing Sale of Goods Between Sellers and Consumers Published
On 22 May 2019, the EU Official Journal published Directive 2019/771 on certain aspects concerning contracts for the sale of goods. The purpose of the new Directive is, among others, to lay down common rules concerning sales contracts concluded between sellers and consumers, in particular rules on the conformity of goods with the contract of sale, remedies in the event of a lack of such conformity, the modalities for the exercise of those remedies, and rules on commercial guarantees (e.g., a manufacturer’s warranty). The new Directive overhauls the earlier EU rules on legal guarantees which have been in place since 1999. Member States have to apply the new Directive’s measures from 1 January 2022.
Hong Kong sellers of all kinds of consumer goods will recall that under the hitherto existing Directive, namely, Directive 1999/44/EC on the sale of consumer goods and associated guarantees, All EU consumers are entitled to a host of remedies in the event that the goods they purchase prove to be faulty. This consumer right has come to be known as the “legal guarantee”, which is implicit in all consumer sales contracts. While the legal guarantee right will continue under the new Directive published on 22 May 2019, it will be strengthened further, affording consumers in any of the Member States more rights vis-à-vis the final seller, when they purchase goods that turn out to be defective. It should be noted that the new Directive (just as the one from 1999) applies to both the offline and online environments.
The Directive requires that, in addition to meeting all the provisions that are set out in a sales contract, all consumer goods must:
- be fit for the purposes normally expected of such products;
- if applicable be of the quality and correspond to the description of a sample or model that the seller made available to the consumer;
- where applicable, be delivered along with such accessories, including packaging and instructions, as the consumer may reasonably expect to receive;
- be of the quantity and quality, including in relation to, e.g., durability, which the consumer may reasonably expect, taking into account any public statement made by or on behalf of the seller, or other persons in the supply chain including the producer, particularly in advertising or on labelling.
A new consumer right concerns intellectual property. The Directive stipulates that where a restriction resulting from a violation of any right of a third party, in particular intellectual property rights, prevents or limits the use of the goods, Member States shall ensure that the consumer is entitled to the remedies for lack of conformity that are laid down in the Directive. National law may even provide for the nullity or rescission of the sales contract between the seller and the consumer in such cases.
As regards the legal guarantee itself, the Directive stipulates that all sellers shall be liable to the consumer for any lack of conformity which exists at the time when the goods were delivered (e.g., for hidden defects and malfunctions), and which becomes apparent within two years of that time. Member States are expressly allowed to maintain or introduce a longer time limit, i.e., more than two years.
As a general rule, any lack of conformity which becomes apparent within one year (Member States may opt to make this two years) from the time when the goods were delivered, shall be presumed to have existed at the time when the goods were delivered. Sellers will thus have the burden of rebutting the presumption during the aforementioned period, should they deem that the consumer’s claim is false or not valid. Hong Kong sellers may be alarmed by this new presumption of conformity provision: under the existing rules from 1999, such presumption of conformity lasts for only six months from the date the goods were purchased.
In the event of a lack of conformity, the consumer shall be entitled to have the goods brought into conformity or to receive a proportionate reduction in the price, or to terminate the contract. In order to have the goods brought into conformity, the consumer may, as a general rule, choose between repair and replacement. The seller may refuse to bring the goods into conformity if repair and replacement are impossible or would impose costs on the seller that would be disproportionate.
The consumer shall be entitled to either a proportionate reduction of the price or the termination of the sales contract if: (a) the seller has not completed repair or replacement or has refused to bring the goods into conformity; (b) a lack of conformity appears despite the seller having attempted to bring the goods into conformity; (c) the lack of conformity is of such a serious nature as to justify an immediate price reduction or termination of the sales contract; or (d) 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 for the consumer.
The consumer shall not be entitled to terminate the contract if the lack of conformity is only minor. The burden of proof with regard to whether the lack of conformity is minor shall be on the seller.
The new Directive also states that any commercial guarantee (e.g., a producer’s warranty against defects which is offered to the consumer) shall be binding on the guarantor under the conditions laid down in the commercial guarantee statement and associated advertising. A novel provision concerns any warranty regarding a product’s durability. Where a producer offers to the consumer 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 Directive requires that by 1 July 2021, Member States shall adopt and publish the measures necessary to comply with this Directive. They shall apply those measures to the market from 1 January 2022. Indeed, the provisions of the Directive shall not apply to contracts concluded before 1 January 2022.