Goods sold at a distance and digital content: Conformity with the contract and the Burden of Proof Christian Twigg-Flesner Professor of Commercial Law, University of Hull

Overview A few introductory words Two models for a “conformity with the contract” requirement Conformity of goods sold on-line/at a distance –Details of the conformity requirement –Burden of proof Conformity of Digital Content –Details of the conformity requirement –Burden of proof Comments –What is the appropriate model for a Digital Single Market? –Is the notion of “conformity with the contract” appropriate? –Is more consistency needed?

Introductory points Good intention behind both proposals But full harmonisation by directives? –Single standard for these transactions fine –Unconvinced that directives better than regulation Should CESL provisions have been the main basis for these proposals?

Model 1 for a “conformity with the contract” requirement The standard: base-line quality requirement set by law (objective) Disclosure of specific quality shortcomings by seller Quality shortcomings identified by examination of goods by consumer Lowering standard Raising standard Additional quality promises made by seller Agreement between consumer and seller about additional quality requirements (incl. fitness for particular purpose) Primary focus

Model 2 for a “conformity with the contract” requirement The standard: quality as agreed by parties (subjective) Disclosure by seller of shortcomings compared to default/background criteria Discovery by consumer of shortcomings compared to default/background criteria Lowering standard Raising standard Background minimum criteria for conformity Default criteria in the absence of express agreement Primary focus ?

Conformity of goods sold on-line/at a distance Art.4: Subjective conformity requirement Goods shall, “where relevant”, a)be of the quantity, quality and description required by the contract, which includes that where the seller shows a sample or a model to the consumer, the goods shall possess the quality of and correspond to the description of this sample or model; b)be fit for any particular purpose for which the consumer requires them and which the consumer made known to the seller at the time of the conclusion of the contract and which the seller has accepted; and c)possess the qualities and performance capabilities indicated in any pre-contractual statement which forms an integral part of the contract

Conformity of goods sold on-line/at a distance Art.5: objective conformity criteria The goods shall, where relevant: a)be fit for all the purposes for which goods of the same description would ordinarily be used; b)be delivered along with such accessories including packaging, installation instructions or other instructions as the consumer may expect to receive; and a)possess qualities and performance capabilities which are normal in goods of the same type and which the consumer may expect given the nature of the goods and taking into account any public statement made by or on behalf of the seller or other persons in earlier links of the chain of transactions, including the producer, unless the seller shows that: i.the seller was not, and could not reasonably have been, aware of the statement in question; ii.by the time of conclusion of the contract the statement had been corrected; or iii.the decision to buy the goods could not have been influenced by the statement.

Conformity of goods sold on-line/at a distance Art.6: extension to “installation” situations Where goods installed incorrectly, any lack of conformity resulting from incorrect installation is regarded as lack of conformity if: –the goods were installed by the seller or under the seller’s responsibility; or –the goods, intended to be installed by the consumer, were installed by the consumer and the incorrect installation was due to a shortcoming in the installation instructions.

Conformity of goods sold on-line/at a distance Art.4(3): limitation of Art.5/6 requirements: Agreement excluding, derogating from or varying the effects of Articles 5 and 6 to the detriment of the consumer is valid only if, at the time of the conclusion of the contract, (i)the consumer knew of the specific condition of the goods and (i)the consumer has expressly accepted this specific condition when concluding the contract.

Conformity of goods sold on-line/at a distance Relevant Time (Art.8): –When consumer has taken delivery (“acquired physical possession of goods”); or –When goods handed over to carrier chosen by consumer (not from options offered by seller) Special provision for installation: –If seller to install, once installation complete –If consumer to install, once consumer has had reasonable period of time for installation (but no later than 30 days from delivery)

Conformity of goods sold on-line/at a distance Third party rights At the relevant time (Art.8), the goods must be free from any right of a third party, –including based on intellectual property, so that the goods can be used in accordance with the contract.

Burden of Proof –Goods sold on-line/at a distance –Presumption of non-conformity at delivery for two-years from delivery (or installation date) unless this is with the nature of the goods or incompatible with the nature of the lack of conformity.

Conformity of Digital Content Art.6 – Subjective conformity test To conform with the contract, digital content shall (where relevant): –be of the quantity, quality, duration and version and shall possess functionality, interoperability and other performance features such as accessibility, continuity and security, as required by the contract including in any pre-contractual information which forms integral part of the contract; –be fit for any particular purpose for which the consumer requires it and which the consumer made known to the supplier at the time of the conclusion of the contract and which the supplier accepted; –be supplied along with any instructions and customer assistance as stipulated by the contract; and –be updated as stipulated by the contract.

Conformity of Digital Content Objective conformity requirement (default only?) To the extent that the contract does not stipulate, where relevant, in a clear and comprehensive manner, the requirements for the digital content … the digital content shall be fit for the purposes for which digital content of the same description would normally be used including its functionality, interoperability and other performance features such as accessibility, continuity and security, taking into account: a)whether the digital content is supplied in exchange for a price or other counter- performance than money; b)where relevant, any existing international technical standards or, in the absence of such technical standards, applicable industry codes of conduct and good practices; and c)any public statement made by or on behalf of the supplier or other persons in earlier links of the chain of transactions unless the supplier shows that i.he was not, and could not reasonably have been, aware of the statement in question; ii.by the time of conclusion of the contract the statement had been corrected; iii.the decision to acquire the digital content could not have been influenced by the statement.

Conformity of Digital Content Digital content supplied over a period of time must be in conformity with the contract throughout that period. Unless otherwise agreed, digital content shall be supplied in conformity with the most recent version of the digital content which was available at the time of the conclusion of the contract.

Conformity of Digital Content Art.7: Incorrect integration of the digital content into consumer’s digital environment Any lack of conformity resulting from incorrect integration treated as lack of conformity of the digital content if: the digital content was integrated by the supplier or under the supplier’s responsibility; or the digital content was intended to be integrated by the consumer and the incorrect integration was due to shortcomings in the integration instructions –where those instructions were supplied in accordance with point (c) of Article 6(1) or should have been supplied in accordance with Article 6(2).

Conformity of Digital Content Third party rights At the time of supply, the digital content must be free from any right of a third party, –including based on intellectual property, so that the digital content can be used in accordance with the contract. Supply over a period of time: Supplier to keep the digital content supplied to the consumer free of any right of a third party for the duration.

Burden of Proof –Digital Content Burden of proof Burden of proving conformity with the contract at the time of supply is on the supplier But not where the supplier shows –that the digital environment of the consumer is not compatible with interoperability and other technical requirements of the digital content –and supplier informed the consumer of such requirements before the conclusion of the contract. Obligation of co-operation on consumer: –Consumer to cooperate with supplier to the extent possible and necessary to determine the consumer's digital environment. Limited to the technically available means which are the least intrusive for the consumer. –Where the consumer fails to cooperate, the burden of proof with respect to the non-conformity with the contract shall be on the consumer.

Conformity with the contract - Comments Both proposals are Model 2 approaches: –Party agreement is core of “conformity” requirement With background minimum criteria for goods sold online/at a distance With default minimalist criterion for digital content But whatever the rationale for such an approach in some domestic legal systems, is this appropriate for the EU Digital Single Market?

Conformity - Comments

Subjective vs. Objective standard –Starting point in both proposals is the contract “agreement” between parties (subjective standard) –But how much “agreement” is there, especially on-line/at a distance but also for digital content? –Objective aspects provide background base-line for goods but less so for digital content Lower priority than subjective standard –“Simple and Modern Rules” requires clear objective standard at the centre

Conformity - Comments Why different conformity standards? Current proposals would create 3 separate conformity standards: –Sale of goods face-to-face (99/44/EC) Subject to “fitness check” –Sale of goods at a distance/on-line –Supply of digital content Rationale for different standards unclear

Conformity - Comments Why treat digital content significantly differently from goods? Some jurisdictions are treating digital content and goods alike Others have adopted specific rules but largely mirror rules on goods CESL would have applied same provisions to both goods and digital content Better approach to be as consistent as possible Cf. UK’s Consumer Rights Act 2015

Conclusions Doubts as to “fitness for purpose” of conformity requirements as currently proposed Objective of “simple and modern rules” requires streamlined approach Model 1 approach: objective standard with scope for variation in clearly defined circumstances Greater consistency between different sales channels for goods …and between goods and digital content And perhaps think again whether Directive really the best tool

Thank you!