Unfair Contract Terms and Consumers: Historical and Comparative Parallels of Asymmetrical Sanctions
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The recent case law of the CJEU regarding the sanction enclosed in the Article 6(1) of Directive 93/13/EEC, its implementation into national laws, and the standpoints of various legal doctrines prompted us to inquire about the nature of the sanction for unfair contract terms and its significance for the modern discussion on the typology of nullity. The CJEU is continually expanding its understanding, which has an impact on the application of national sanctions, despite the fact that it has been anticipated that it will be applied differently in EU member states in order to preserve the coherence of individual national civil laws. The evolving nature of the sanction is particularly relevant in Polish law, where it was applied to famous loan agreements indexed with a foreign currency exchange rate (Ziemblicki and Lewandowski 2021). In 2021, the Polish Supreme Court (III CZP 6/21) compared the operation of the sanction to an inchoate transaction with an unassisted minor, called in Polish legal scholarship negotium claudicans. The consumer distance contract regulated within the European Union was compared to the Roman law solution known by its medieval name as negotium claudicans, thus to the contract with unassisted pupilli (children under the age of puberty, i.e., minors). This article builds on this comparison and applies it to yet another EU directive which follows even more closely the idea to interfere with the binding nature of contractual terms. Recent CJEU case law pertaining to the sanction contained in Article 6(1) of Directive 93/13/EEC, its incorporation into national laws, and the perspectives of various legal doctrines, particularly in Polish law, spur us to investigate the nature of the sanction for unfair contract terms and its relevance for the contemporary discussion on the typology of nullity.
Evolving Sanction and Comparative Context
The sanction contained in Directive 93/13/EEC was to be formulated in such a neutral way that each member state could choose the type of legal consequence appropriate to its private law. Hence, the committee working on the directive considered two proposals for a legal sanction: “the unfair terms…shall be void or void as against the consumer” (Tenreiro 1995). This second sanction was presented to Parliament. Using the term “void as against the consumer”, an attempt was made to avoid the discussion of whether an unfair term should be “void”, “voidable”, “nonexistent”, “void ex tunc or ex nunc, erga omnes or inter partes”. Parliament wanted to leave this issue to the member states. Hence, it began to seek a more neutral formulation that indicated simply the practical effect and was removed from national legal traditions—an objective that the member nations may accomplish however they saw fit. It turned out to be a difficult task.
In the case of EU law, Article 6(1) of Directive 93/13/EEC reads as follows:
“Member States shall lay down that unfair terms used in a contract concluded with a consumer by a seller or supplier shall, as provided for under their national law, not be binding on the consumer and that the contract shall continue to bind the parties upon those terms if it is capable of continuing in existence without the unfair terms”.
Under EU law, the nonbinding by a contractual term is distinguished by the consumer’s ability to invoke the unilateral voidness of a contractual provision deemed unfair by a court. The sanction applies only to secondary contract terms— it has no bearing on matters crucial to the validity of the contract. It is in the interest of the contracting party imposing the term to give proper contract conditions in order to avoid their potential detriment, therefore it cannot be used as an argument against the unilateral voidness of the term. The consumer shall be protected against unfair terms by applying a sanction which causes that such a term shall not be binding on the consumer. In order to implement Directive 93/13/EEC, the Polish legislator introduced Article 3851 into the Civil Code, which is almost a literal translation of the European act. This also applies to the phrase used to designate a legal sanction. The Polish legislature stipulated that provisions of the contract not individually agreed with the consumer “are not binding on the consumer” if they shaped their rights and obligations in a manner contrary to good faith, strikingly infringing their interests. The Civil Code calls them “prohibited contractual provisions”. The literal wording of Art. 3851 §1 of the Civil Code arouses controversy in Polish doctrine. Other European countries have followed a simpler path and introduced their own well-known concepts—absolute or relative nullity, etc.—in the place of the EU formula. Only Italy made the directive’s formulation the basis for a new special kind of nullity sanction—the so-called nullity of protection (nullità di protezione) regulated separately in the Consumer Code, which is considered to be a relative nullity.
This paper firstly argues that the evolution of the EU sanction resembles and reflects to a higher degree the original history of the Roman negotium claudicans which in ancient law and in ius commune was understood differently than a modern inchoate transaction. Secondly, the evolution of sanctions to clarify or adjust their operation in order to achieve social equilibrium is nothing new: it is a natural consequence of the pluralism of civil law sanctions and the blurred boundaries, despite attempts to obliquely outline their types in the science of civil law. The paper tries to prove this historical analogy by marrying solutions applied in absolutely different times and contexts.
Such formula “not be binding on the consumer” evidently bears a similar unilateral effect regarding contractual terms as the Roman idea that pupillus sibi non obligat—that the unassisted minor was not obligated to the other party. The unfairness of contract terms caused an asymmetrical position of the consumer, which is now balanced by an asymmetrical sanction which liberates the consumer from the obligation to comply with any such term. What type of sanction does the phrase “not binding on the consumer” imply, and whether the supplier may still be bound by such term is a matter of concern.
First, in both, the weaker party to the transaction is not bound by the unfair term (EU) or the provision imposing the obligation (Roman law). Second, the sanction may serve to penalize the counterparty, i.e., the weaker party to the transaction has a claim against the counterparty, while the counterparty does not. Third, the weaker party may choose to knowingly perform based on such a provision, in which case restitution is impossible. Informed consent is what makes it such within EU law; execution of a natural obligation is what makes it so in Roman law. Fourth, the imposition of sanctions may result in the collapse and termination of the entire contract, in which case it is imperative to address how the parties will be reconciled. In the EU, the sanction cannot be applied to the main obligations of the contract, which requires defining the essential obligations and also discerning when the contract cannot continue to be in existence without the unfair terms (de Elizalde and Leskinen 2018); in Roman law, it is possible to apply sanction to the essential obligations only by maintaining that the weaker party retains natural obligation towards the other party. Due to a lengthy historical evolution of the sanction, in which the counterparty’s interest has been more guarded than in the case of the sanction protecting unassisted minors as developed in Roman law, transactions involving unassisted minors are now regarded as inchoate in countries with civil law. Even in Roman law itself, however, the punitive nature of the sanction against the party contracting with an unassisted minor was mitigated in the face of the need to maintain social equilibrium. Given the historical parallels, it is not excluded that the currently eminently penal nature of the EU sanction will be modified in the future; however, it is barely possible, due to one important difference: Unlike when they are customers, unsupported minors may act as providers and sellers. As a result, the EU sanction’s intent seems to be less impartial than it first appeared to be. In the perspective of historical examples, the restitutory nature of the sanction, however, demonstrates to give the EU remedy a more distinctive character.
A Flexible Sanction
In Polish doctrine and Supreme Court jurisprudence, the sanction is referred to as a Janus face of modern negotium claudicans—the inchoate transaction: consumer can decide to approve or invoke the voidness of an unfair contract term upon informed consent, and when invoking voidness, the restitutory claims for unjust enrichment start to operate if the parties have already performed, but the contract cannot stand still without unfair contract terms. It is true even more if negotium claudicans is taken within original the Roman law context. With regards to the unfair contract term which does not influence the whole transaction and does not constitute a synallagmatic performance, the consumer may sue the party on the basis of unfair contract term; however, the other party cannot. Furthermore, within EU law, unilateral voidness cannot be applied to unjust contract terms that have an impact on the validity of the entire synallagmatic transaction, but if it were, the results would be equal or superior to those of the existing approach. If the consumer sues the other party to perform there is an offset against what they have done, or a retention of performance. If the consumer did not perform and the other party did, the contracting party may sue the consumer only for unjust enrichment, and similarly, if the consumer performed only in part, there would be a claim for unjust enrichment limited by an offset, since to natural obligations, an offset can also be applied. This approach is also justified by the still-inspiring example of the South African regime (Gangwar 2022), and may also indicate that the Roman idea of a limping transaction can be combined with restiutio in integrum, as in Justinian’s time, to offer an alternative theoretical explanation of consumer protection.
Such discussion over a novel method of expressing an invalidity sanction indicates the existence of a more widespread issue: the ambiguity and diversity of terminology used to characterize sanctions, whether they be nullity/voidness, voidability, or ineffectiveness or others. As evidenced by the legal doctrine of the majority of EU member states, who reinterpreted the EU sanction in accordance with their already established legal systems, acceptance of the “nonbinding” wording may, after all, be regarded from the perspective of legal practice as one of the forms of invalidity or voidability depending on the adopted scope of the two concepts. However, when a simple classification is not possible, the features of such a sanction, which are, after all, most important for both parties to the contract, turn out to be decisive. However, the problem of the precise determination of sanctions is nothing new. Moreover, even the modern legislator, although aware of the basic types of sanctions, does not maintain discipline in the clear formulation of sanctions. In Roman law and the Roman law scholarship, more than 30 terms were used for what we may now call voidness or voidability, but it was not causing any problem of delimitation between them, since Roman jurists were rather interested in the question of the “enforceability” of a legal transaction rather than top-down distinctions from which one may infer consequences in a particular case. In this context, Roman law should be considered closer to the attitude of common law (Scalise 2014). Pandectistic scholars tried to systematize Roman terms adopting as a general notion invalidity, which was then distinguished between ipso iure and other ways of challenging a legal act (Zimmermann 1996). Although even then, the idea of relative nullity/voidness already caused an interpretative issue (Honoré 1958; Zimmermann 1996). However, as J. Preussner-Zamorska pointed out, exactly the same problem with the difficulty of arranging sanctions in a logical way is present in contemporary Polish civil law (Preussner-Zamorska 1983). The inevitability of imprecision in the formulation of sanctions confirms that subsequent attempts to standardize or systematize sanctions may prove to be unsuccessful. The modern doctrine of civil law recognizes that the flexible nature of sanctions is a better solution.
Long-known sanction of unilateral voidness of a legal transaction is now utilized in a different way than it was formerly. In the European legal tradition, which includes Roman-Dutch Law and Roman law, the sanction of unilateral voidness of a legal transaction was applied only to the contract with an unassisted minor and resulted in the voidness of one of the essential terms of a contract either on the basis of the theory of placing a minor in a superior or inferior position (in Roman law) or on the theory of the economic viability of the transaction as in the English common law doctrine. The interpretation of Article 6(1) of Directive 93/13/EEC in the CJEU jurisprudence, on the other hand, means that in the European Union, the unilateral voidness of a legal transaction can be applied to a wider range of actors: consumers. However, it is limited only to nonessential terms of the contract and is based on the theory of unfair terms and the criterion of consumer benefit. It would mean a significant return of the “limping contract” in its ancient Roman meaning—a transaction that is unilaterally void—to the European continent if the EU legislator did not introduce the restriction that the sanction for an unfair contract term cannot concern the essential terms that determine the essence of a contract. As demonstrated by historical and comparative legal experience, the concept of asymmetrical legal sanctions can be used to defend certain goods: the interest of the consumer or the interest of the creditor. The proposed opening of a catalog of sanctions in Polish private law is an opportunity to make the legal order more flexible by providing a wider range of instruments taking into account the demands of utility and equity.
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Grzegorz Blicharz is Assistant Professor at the Department of Roman Law at the Jagiellonian University in Kraków, Poland, where his work focuses on Roman law, comparative law, European legal tradition, and governing the commons. He serves as co-editor of the Forum Prawnicze law journal and has held visiting appointments at the University of Oxford (2020) and Antonin Scalia Law School (2021).