Wednesday 24 July 2024

A ‘conditional payment’ is still a payment: the Court of justice rules again on online order buttons (Case C-400/22, Conny)

 


 

Alessandra Fratini and Giorgia Lo Tauro, FratiniVergano European Lawyers

Photo creditNamakkalshowroom, via Wikimedia Commons

 

 

Introduction

On 30 May 2024, the Court of Justice of the European Union issued its judgment in Conny (Case C-400/22), which concerned the labelling requirements for online order buttons under Article 8 of the Consumer Rights Directive (Directive 2011/83). The Court ruled that the order button, or any similar function on an online platform, must clearly indicate that by clicking on it the consumer commits to a payment obligation, even if the obligation is subject to further conditions.

The paragraphs below, after a short overview of the case-law touching upon Article 8, review the peculiarities of the Conny case and the findings of the Advocate General and the Court, and conclude on  the importance of consumer rights’ awareness in online transactions.

 

Article 8(2) and the earlier case-law

The Consumer Rights Directive aims at approximating Member States’ provisions related to contracts concluded between consumers and traders, to contribute to the proper functioning of the internal market through the achievement of a high level of consumer protection (Article 1). To this purpose, its Article 8 sets ‘formal requirements for distance contracts’, also when concluded by electronic means, that traders shall comply with.

Under Article 8(2), first subparagraph, if the contract places the consumer under an obligation to pay, the trader shall make the consumer aware ‘in a clear and prominent manner’, and directly before placing the order, of the related information (i.e., the main characteristics of the goods or services, the total price, the duration of the contract and, where applicable, the minimum duration of the consumer’s obligations), making sure that the consumer, when placing the order, is explicitly aware that such an order implies an obligation to pay. The second subparagraph clarifies that ‘[i]f placing an order entails activating a button or a similar function, the button or similar function shall be labelled in an easily legible manner only with the words ‘order with obligation to pay’ or a corresponding unambiguous formulation indicating that placing the order entails an obligation to pay the trader. If the trader has not complied with this subparagraph, the consumer shall not be bound by the contract or order’ (for ease of reading, the following references to Article 8(2) shall be read as to the second subparagraph).

Despite its intended clarity, this provision raised interpretative doubts which were submitted to the Court before Conny. In Fuhrmann-2 (Case C-560/20), the Court addressed for the first time the interpretation of the formal requirement related to the ‘order button’ laid down in Article 8(2). The case concerned the booking of hotel rooms in Germany via an online accommodation booking platform: the hotel charged a cancellation fee to a consumer who, after having clicked on the ‘I’ll reserve’ button, entered personal details of the guests and then clicked on a button labelled with the words ‘complete booking’, had not showed up on the planned day. For the purpose of determining whether a formulation displayed on the order button such as ‘complete booking’ could be considered as ‘corresponding’ to the words ‘order with obligation to pay’ according to the Consumer Rights Directive, the referring court asked the Court whether only the words appearing on that button or the overall circumstances of the booking process should be taken into account.

The Court relied on the systematic interpretation of the provision and insisted on the objectives of the Consumer Rights Directive. It first explained that the formulation ‘order with an obligation to pay’ laid down in Article 8(2) serves as an example, so that Member States are permitted to allow traders to use any other corresponding formulation of their choice, provided that it is unambiguous and entirely clear as to the creation of an obligation to pay (paras. 26-27). It went on to clarify that it is the button or similar function that must be labelled with such a formulation, so that only the words appearing on that button or similar function must be taken into account for determining whether the trader has fulfilled its obligation to ensure that the consumer explicitly acknowledges that the order implies an obligation to pay, emphasising the consumer’s attention in that respect, as required by recital 39 of the Directive (paras. 28-29). Taking the objective of the Directive into account, which is to guarantee a high level of consumer protection as regards information, the Court found that ‘it would effectively undermine that objective if, when activating a button or similar function, the consumer were required to infer from the circumstances of that process that he or she was giving a binding undertaking to pay, although the words appearing on that button or similar function are not such as to enable the consumer to identify such consequences with absolute certainty’ (para. 30).

In Sofatutor (Case C-565/22), which concerned the interpretation of the right of withdrawal (Article 9), the Court reiterated the importance of information and formal requirements for distance contracts. By clarifying that the consumer’s right to withdraw from an initially free subscription made via distance contract is guaranteed only once, the Court specified that this is only the case if the consumer, when concluding that contract, has been informed in a clear, comprehensible and explicit manner by the trader that, after that initial free period, payment will be required for the performance of services (paras. 50-51). It repeated the traders’ obligation to ensure that the consumer explicitly acknowledges that the order implies an obligation to pay (via a button or a similar function). In the absence, the consumer is not to be bound by the contract or order (para. 45).

 

The peculiar ‘condition’ of the Conny case

In Conny, the Court was called again to rule on the ‘button or a similar function’ indicating the obligation to pay the trader. Interestingly, different from the cases above, in Conny it was not the consumer but a third party, who was interested in questioning the validity of a contract concluded by the former with a trader, that had invoked consumer protection rules.

Conny is a debt recovery company governed by German law. It offers a service whereby tenants may enter into an agency contract via its website and assign their rights to reclaim any overpayments of rent (i.e., in case the maximum rent ceiling under national law is exceeded) in favour of Conny, who shall attempt to reclaim such overpayments from landlords on the tenant’s behalf. To enter into the agency contract on Conny’s website, tenants must tick a box to approve the general terms and conditions, where reference is made to the pecuniary nature of the contract (tenants must pay the company a third of the annual rent saved, where the company’s attempts to assert their rights are successful) and then click on a button to place the order. So did the tenant in this case, who also signed a form provided by Conny (‘Confirmation, power of attorney and assignment, authorisation’), which did not contain any information on obligation to pay on the tenant’s part (para. 14 of the judgment).

Conny asserted the tenant’s rights against the landlords. In the ensuing dispute, the latter claimed that Conny could not act on behalf of the tenant because the agency contract was ‘null and void’ (para. 18 of the judgment), since it did not comply with the formal requirements laid down in the national law transposing the Consumer Rights Directive (Section 312j (3) and (4) BGB, which requires the fulfilment of the trader’s obligation in order for the contract to be validly in place). In particular, the order button was not labelled with an explicit mention of the obligation to pay associated with the order.

In those circumstances, where the contract concluded at a distance entailed only a possible obligation to pay on the part of the consumer, i.e. that obligation was subject to the fulfilment of certain future conditions, the referring court had doubt as to the applicability of the formal requirements under Article 8(2) concerning the order button, and referred that question to the Court of justice. The referring court also underlined that the transposing legislation was not interpreted uniformly in national case-law (para. 22 of the judgment).

 

The Opinion of the Advocate General: ‘protective nullity’ and consumer protection at all costs

The Advocate General took into account the peculiarity of the case, including the fact that consumer protection was invoked by a third party against the validity of a contract concluded by a consumer seeking protection. In his Opinion, he noted that, in the event that the contract was considered invalid due to order button lacking any explicit mention of the obligation to pay, it was also necessary to ascertain whether the applicable national provision, according to Article 8(2) of the Directive, allowed the referring court to maintain the effects of the contract where the consumer objects to the disapplication of the disputed clause (para. 22 of the Opinion). In fact, under Section 312j(4) BGB, contracts shall be formed ‘only if’ traders fulfil the required obligation. Against this background, the Advocate General identified two legal issues to be examined in order to answer the preliminary question: (a) whether the ‘conditional payment’ case falls within Article 8(2) of the Directive; and (b) if so, the effects of the infringement of the requirement laid down therein on the signed contract, especially as regards the consumer’s will and the standing of a third party to rely on the possible invalidity (para. 24).

In addressing the first issue, the Advocate General found that both the textual and systematic interpretation and the objectives of the Directive lead to the same solution: the formal requirements of Article 8(2) also apply where the payment is subject to the fulfilment of a specific condition outside the consumer’s sphere of influence (para. 38). And this is because the contractual relationship, which is the legal condition of the obligation to pay, arises at the moment at which the consumer manifests the will, i.e. the click on the button to sign the order (para. 44). This view would also be supported by an interpretation based on the effectiveness of the provision: compliance with formal requirements even in the case of ‘conditional payment’ is the only way of ensuring sufficient information and safety in commercial relations between consumers and traders, otherwise the scope of the protection established by the Directive would be undermined (para. 45), while no extension of the text of the button in cases of conditional payments is needed to accomplish the requirement (para. 48).

As regards the second issue, i.e. the effects of the infringement of the requirement on the validity of the main contract, the Advocate General recalled that according to settled case-law of the Court ‘unfair terms must not be applied, unless the consumer objects’, otherwise this would have distortive effects vis-à-vis the purpose of the Directive (para. 52), and that the scope of Article 8 is not unconditional, but is limited by the will of the consumer (para. 53). Therefore, in the Advocate General’s opinion, since the invalidity of the term is specifically designed for consumer protection, and ‘the invalidity provided for in the consumer protection directives may be attributed to the category of ‘protective nullity’, irrespective of the exact classification under national law,’ the referring court shall take its decision in accordance with the wishes of the consumer, i.e. even maintaining the effects of the term and the contract’ (para. 55). On this point, the Advocate General addressed the question of the differences in wording between the national provision and the Directive and concluded that it is for the national court to ascertain, by considering the whole body of domestic law, whether an interpretation of national law in conformity with the wording and spirit of Directive is possible. Guided by the consumer’s wish to remain bound by the order placed on the trader’s website, the Advocate General also suggested that the referring court interpret national law in line with the possibility of maintaining the effects of the contract at issue (paras. 57-61).

The twofold analysis proposed by the Advocate General paved the way for a consumer protection-oriented interpretation of Article 8(2), while at the same time paying due attention to the effective protection of the consumer in the case pending before the national judge.

 

Judgment of the Court: a consumer protection-oriented interpretation and the relevance of the consumer’s will

In its judgment, the Court followed the Advocate General’s Opinion and confirmed the consumer protection-oriented approach when it comes to online contracts.

The Court recalled the case-law on the formulation on the order button or similar function, that shall clearly indicate the obligation to pay, and added that the formal requirement under Article 8(2) ‘does not make any distinction between payment obligations subject to conditions and those which are unconditional. On the contrary, it is apparent from that wording that the obligation to provide information laid down in that provision applies since an order placed ‘implies’ an obligation to pay. Consequently, it may be inferred therefrom that the obligation on the trader to inform the consumer arises when he or she agrees to be bound by an irrevocable obligation to pay in the event of satisfaction of a condition over which he or she has no control, even if that condition has not yet been satisfied.’ (paras. 46-47). A different interpretation would lead to the trader being required to fulfil the information obligation not while the consumer can still abandon the order, but only subsequently, when payment becomes due, therefore allowing the trader to disregard such an obligation at the very time when it may prove useful to the consumer (paras. 52-53). Therefore, the Court concluded that the obligation on traders under Article 8(2) also applies in cases of conditional payments.

In addition, on the second issue identified by the Advocate General, the Court clarified that the requirement under Article 8(2) merely provides that the consumer is not bound by the contract concerned, and this does not affect the national rules on the validity, formation or effect of a contract, according to Article 3(5) of the same Directive. Therefore, without prejudice to the interpretation given by the Court to the provisions of Article 8(2) of the Directive, the consumer in the main proceedings may decide to maintain the effects of the contract or order which was not binding, because of the failure of the trader (paras. 54-55), in so far as it, in essence, best serves the rationale of the Directive, namely consumer protection.

 

Concluding remarks

In a nutshell, the judgment restates the Directive’s aim of ensuring a high level of consumer protection in online transactions, by requiring the unambiguous acknowledgment of payment obligations by consumers for them to be bound, irrespective of the conditions which the payment is subject to.

It validates the importance of awareness of, and compliance with, EU consumer protection rules for both consumers and traders when concluding distance contracts. At the same time, it highlights the prominence of the consumer’s will, which national courts shall take into account in cases where the contract or order, because of the trader’s failure to comply, is not binding on the consumer.

 

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