It is the contract terms between seller and producer on a B2B basis and between seller and consumer on a B2C basis which defines the rights and duties of the parties who are bound to the contract. Standard contract terms facilitate commercial certainty and are beneficial for consumers. However, in consumer contracts the sellers and suppliers are entitled to define their own contract terms which confers them another advantage without having to individually negotiate them with the consumers. It is for the purpose of harmonizing consumer laws on this matter and diminishing unfair contract terms that the intervention on EU level is desirable. The directive on unfair contract terms introduces the concept of “good faith” so as to prevent sellers and consumers to circumvent any imbalances of their respective rights and obligations. Terms that are unfair are enshrined in the directive and do not bind any of the parties where the consumers are favoured in the event of ambiguous contract terms. Article 3(1) of the Unfair contract terms directive reads: “A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer.”
The UNCITRAL Model Law on Electronic Commerce states that
”an offer and the acceptance of an offer may be expressed by means of data messages. Where a data message is used in the formation of a contract, that contract shall not be denied validity or enforceability on the sole ground that a data message was used for that purpose.”
An obligation on Member States to ensure that their legal system allows for contracts to be concluded electronically, which requires Member States to screen their national legislation to eliminate provisions which hinder the electronic conclusion of contracts. This means that member states introduce into their legislation a horizontal provision stipulating that contracts concluded by electronic means which have the same legal validity as contracts concluded in writing. Thus, contracts concluded by electronic mean should be able to fulfil the requirement of contracts being in writing.
The lack of bargaining power of the consumer gives the consumer certain rights where they are entitled to withdraw their contract with the web-shop. “The right of withdrawal is therefore intended to offset the disadvantage for the consumer resulting from a distance contract by granting him an appropriate period for reflection during which he can examine and test the goods acquired.” Stricter protection is afforded in favour of the consumer rather than the business who runs the online web-shop i.e. the seller, which leaves the latter in a risky position. E-commerce consumer protection laws exist because consumers who buy “in the dark” have little knowledge about the products end-result until it is delivered to their homes. Thus, in order to protect the consumer, there exists an obligation on the web-shop to provide the consumer with the possibility to cancel the contract in the event that the purchaser decides to exercise their right to return the item. As a result, the web-shop who has contracted with the customer has to fill in an “empty seat” and accept the cancelled good. The CRD affords rights to the consumer to return goods to the online retailer within 14 days of the purchase, without any justification. Web-shops have to comply with hurdles such as providing the right information prior to the conclusion of the e-contract in international legislative instruments, such as the CRD or consumer sales directive, which puts them in a risky position. The consumer has a contract with the retailer and not the manufacturer and cannot use their right of withdrawal against the manufacturer. The reason to why the consumer cannot enforce his rights against so as to receive a remedy from the manufacturer is due to the legal phenomena known as privity of contract.
In relation to goods being damaged during the cooling-off period, first the CJEU must determine the type of goods in question. A defence left for the seller would be to go to court and the latter applying the doctrine of abuse of right or doctrine of estoppel, fair dealing, deceit or good faith. Yet the costs for litigation in such cases would be too high for the seller. However, only when”[the consumer] has made use of the goods acquired under a distance contract ”in a manner incompatible with the principles of civil law, such as those of good faith or unjust enrichment”, will he have to reimburse the trader. As per Article 14(2) of the CRD, which states; “The consumer shall only be liable for any diminished value of the goods resulting from the handling of the goods other than what is necessary to establish the nature, characteristics and functioning of the goods. The consumer shall in any event not be liable for diminished value of the goods where the trader has failed to provide notice of the right of withdrawal.” Thus, this can be used as a defence mechanism for the online retailer when rejecting to reimburse the consumer for the mishandling of the goods. Hence, the online retailer will be allowed to deduct money form refunds where goods show sign of use or unreasonable handling leading to diminished value. Further, the question as to whether the consumer is liable to pay compensation to the seller for the use of those defective goods until their replacement with new goods is admissible under national law, was deemed inadmissible as ruled in the Quelle case.
Another way for the web-shop to be protected is thanks to product liability insurance which entails that the exporting manufacturer agrees to cover by insurance the risk caused by a defective product. Yet, this does not apply to product which has just been returned by a consumer vis- a-vis a distance contract. However, this can be very costly for retailers who have to pay the price for such an insurance cover. A consumer who does not have a direct contractual relationship with the manufacturer is not entitled to sue the latter as a general rule under tort and contract law. The only circumstance in which a claimant may sue for damage caused by a defective product is when it causes physical harm to the person raising the claim and economic loss or monetary loss is not recoverable by the plaintiff.
If a web-shop has terms and conditions on their webpage which contravene with EU law then the web-shop must amend these so as to put these in line with EU law. For example, in 2003, the company Virgin Wines Online terms and conditions stated that a consumer that the goods sold on their website were non-refundable and that cancellation of the product could only be effective if such a measure was done via email or a phone call. Another term stated that in certain contracts, delivery could take over 30 days. Virgin Wines were obliged to change these terms following an approach by the Office of Fair Trading.
A view by Dr Rott is that distance selling is advantageous for both parties since the consumer does not have to travel and saves money whereas the trader will save money by not having to maintain a shop. Further, the consumer will be able to test the goods before being bound to the contract, yet the downside is that they bear the costs for returning the goods to the seller. On the other hand the seller usually has to take the risk that where the goods are damaged or lost in transport, he will have to bear the loss for refunding the consumer. Where the seller is transporting the goods to the consumer, the seller is also liable for any damage to the goods during delivery, provided that he has not insured against any perils with the manufacturer or carrier of the goods.Thus, the Court of justice of the European Union has concluded “In this connection, it should first be observed that it is settled case-law that derogations from the rules of European Union law for the protection of consumers must be interpreted strictly.”
In order to protect the seller’s interests, a defense mechanism from the sellers side in case of litigations initiated by the consumer to protect the sellers interest is demonstrated by the following scenario. Another abuse of the right of withdrawal could be where the person who is aware that he has the right of withdrawal, yet has not been informed by the trader. The consumer could argue, after using the product for many months that they are allowed to be compensated, where in fact they do not wish to use the product anymore. This can be illustrated where a consumer purchases a refrigerator which is silver in colour yet, they start to believe that a white refrigerator would suit their kitchen. A consequence may then be that they wish to withdraw from the contract as a result of the trader being unable to properly inform them of their right of withdrawal. A defence left for the seller would be to go to court and the latter applying the doctrine of abuse of right or doctrine of estoppel, fair dealing, deceit or good faith. Yet the costs for litigation in such cases would be too high for the seller.
There is one problem with the above method of burden of proof which puts the consumer in a weaker position than that of the trader. Specifically, Rott illustrates this issue by arguing that since the consumer has already paid for the goods, he will be entitled to have his payment returned if he withdraws within the cooling-off period. As a consequence, the trader may set his claim against the consumers by deducting the price of the good and return only partial payment for what the consumer had originally paid for. The burden of proof will shift in this respect since now it will be for the consumer to prove that he did not use the goods beyond merely testing them. Since the burden of proof usually rests with the trader, to prove a defect, the consumer will have to initiate the litigation which will obviously entail financial risks for the consumer, “leaving it in practice to the trader to determine the amount of money that the consumer owes for the use of the goods.”
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