Latest update: Nov. 16, 2021
The purpose of this blog is to provide an understanding of some of the rules that apply to consumer purchases. With a high level of knowledge, it will be easier to determine when it may be good to consult an expert in this area. In this blog, we focus on unfair commercial practices, unfair terms in consumer contracts and consumer rights.
For consumers or companies that buy or sell a product within the EU, there are many rules to follow. We have therefore compiled a few things to keep in mind and will follow up with more blogs in this area.
The rules are found in several laws and most set minimum standards for each country in the EU. Each country can choose to set stricter rules and we intend to cover the specific differences that exist in Sweden at a later time.
In the text, we will talk about consumers and traders and then refer to a
- ‘consumer’, meaning a natural person who, in connection with an agreement, acts for purposes which fall outside his own business or professional activity.
- ‘trader’, meaning a natural or legal person, whether publicly or privately owned, who, in connection with an agreement, acts for purposes which fall within the scope of his own business or professional activity.
Unfair Commercial Practices
A commercial practice applied by a trader towards consumers concerns how a trader acts or fails to act, behave or communicate when marketing, selling or delivering a product to a consumer.
A commercial practice is unfair if a consumer makes a purchase decision without having the right information at hand.
The legislation contains a blacklist of commercial practices which in any case are considered unfair and do not need a case-by-case assessment. You can find this list as Annex I here
Further, there are more general demands that could make a commercial practice unfair. Is the answer yes to one of the below questions, the practice is unfair and shall be prohibited.
Does the commercial practice
Misleading commercial practices
A commercial practice is seen as misleading if it contains incorrect information, misleads or may mislead the average consumer even if the information is correct in substance and causes or is likely to cause the consumer to make a purchase decision he would not otherwise have made.
This applies to the
- trader’s commitments
- price and how it is calculated
- service, part, replacement or repair
- nature, attributes and rights of the trader
- consumers right’s under EU law
- marketing of a product that creates confusion with competitors
A commercial practice is considered misleading if the trader fails to provide essential information to the consumer. What information that is considered essential will be decided on a case-by-case basis.
The lack of essential information can lead an average consumer to make an unfounded purchase decision that would not otherwise have been made. The same applies if traders hide or provide information in an unclear, incomprehensible, ambiguous or inappropriate way and this leads to a purchase decision by the consumer.
When a trader makes an offer to a consumer, certain information must always be provided so that the offer is not considered misleading. Such information is, for example
- Product specification
- The trader's address and identity, such as organization number
- Price and additional costs such as shipping, delivery and postage
- Payment terms
- Delivery terms
- Right of withdrawal or cancellation when such exists for a product
Aggressive Commercial Practices
A purchase decision is the consumers choice. If a consumer is under influence of harassment, coercion, physical force or undue influence, he can make a purchase decision that he would not otherwise have made.
In determining if a commercial practice is using such means, the following factors will be considered
- timing, location, nature or persistence
- language and behavior
- misuse by trader of any specific misfortune or circumstance of misfortune
- burdensome or disproportionate non-contractual barriers, such as right to terminate contract
- threats that no legal action can be taken
Average consumer and vulnerable consumer
Some consumers have higher level of protection due to mental or physical weakness, age or innocence. If a commercial practice targets towards such consumer, it must be given special consideration.
Unfair Terms in Consumer Contracts
There is a protection for the consumer against unfair standard contract terms, i.e. terms that a trader uses without negotiating with a consumer. This applies to both products and services.
Unfair terms are terms that
- is contrary to ‘good faith’ i.e. does not follow industry standards, and
- entails a big imbalance in the parties’ rights and obligations under the contract and to the harm of the consumer
‘Good faith’ refers to whether a trader acts fairly with a consumer and takes the consumer’s legitimate interests into account. A trader can consider whether a consumer would have agreed to the condition in an individual negotiation.
If a contract term is unfair will be assessed taking into account
- the nature of the goods or services under the contract,
- circumstances surrounding the purchase, and
- all other terms of the contract or another contract on which the contract is dependent.
The price of the goods or services will not be considered unless this information has not been provided in plain understandable language.
Unfair contract terms are not binding on consumers.
An agreement that contains unfair terms is valid but excludes the unfair terms. This can not be deviated from in any way.
You find a simplified list of terms that are considered unfair in the Annex here
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The structure of certain elements of contracts between traders and consumers is based on a division of contracts into
- contracts concluded outside the trader’s business premises (off-premises contracts),
- contracts concluded using distance communication – internet, phone etc (distance contracts), and
- contracts other than the two above (on-premises contracts).
This is information that is necessary to allow the consumer to make an informed choice before concluding a contract. The information must also take into account what is written above regarding unfair and misleading commercial practices.
- For on-premises contracts, traders must provide consumers with information in a clear and comprehensive way if it is not clear from the context.
- For off-premises contracts, information shall be provided in a clear and comprehensive way on paper or if the consumer agrees, on another durable medium. This applies also to the signed contract.
- For distance contracts, information shall be provided or make the information available in way appropriate to the means of distance communication. When a distance contract is concluded electronically and the consumer has an obligation to pay, there must be specific order requirements specified before an order is placed and there must be an explicit acknowledgement from the consumer that the order leads to an obligation to pay. On websites, delivery restrictions and payments methods must be clear. For contracts concluded over phone, there are specific requirements for identification.
Right of withdrawal
Consumers have a 14-day period to withdraw from distance or off premises contracts without explanation. This applies to goods, services and digital content and withdrawal shall be made within 14 days from receipt of goods or after the conclusion of the contract for services or digital content.
This right cannot be excluded or limited in any country within EU.
There are some exceptions to this right and are for example supply of goods made to customer specifications or personalized, provision of car rental services, catering and more.
Traders must always inform consumers of their right to withdraw. Failure to inform the consumer will result in that the right to withdraw is extended by 12 months, to 12 months and 14 days. If a trader forgets to inform the consumer but corrects this within 12 months from conclusion of contract, the withdrawal period will expire 14 days from when the consumer receives the information.
A consumer shall not bear any costs other than sending back the goods or for a lower value in case of mishandling for exercising this right.
Understanding the rules that apply between consumers and traders when consumers buy goods or services within the EU is quite complicated. The EU lays the foundation for the rules and gives the countries within the EU the freedom to set stricter rules. A trader must follow these rules to avoid potential costly actions.
In 2022, there will be a further tightening of consumer rights and fines will be imposed when traders do not follow the rules.
1 - A consumer must be informed by a trader in order to make an informed decision. The information must be understandable for the consumer. In addition, information must not be misleading, omitted if it is relevant for the consumer's decision or be aggressive. In addition, consideration must be given to whether it is aimed at a vulnerable consumer.
2 - Standard contract terms used by a trader cannot be unfair. Unfair terms are not binding on consumers and will be set aside. If not on the blacklist, an assessment must be made in each situation.
3 - Consumer contracts are divided into
- Off premises contracts,
- Distance contracts, and
- On-premises contracts.
For all contracts above, pre-contractual information needs to be provided to the consumer in clear and comprehensive manner so the consumer can make an informed decision. This can be in paper form, if the consumer so elects, or on other durable media.
For off premises and distance contracts, the consumer has always a 14 days period right to withdrawal from the contract without explanation. This the trader must inform the consumer of. Should the trader not inform the consumer thereof, the period is extended to 12 months and 14 days.
Should you have any questions relating to this article, you are very welcome to contact us at any time.
For contracts outside fixed business premises and distance contracts, the consumer always has a 14-day right to cancel the contract without explanation. The trader must inform the consumer of this before entering into an agreement. Should the trader not inform the consumer about this, the period is extended to 12 months and 14 days.
If you have any questions regarding this blog, you are warmly welcome to contact us at any time.