ANALYSIS OF DIRECTIVES ON CONSUMER PROTECTION – EU FUNDED
1. PURPOSE OF THE DIRECTIVE
Directive 2008/122/EC of the European Parliament and of the Council of 14 January 2009 on the protection of consumers in respect of certain aspects of timeshare, long-term holiday product, resale and exchange contracts («Directive») is intended to contribute to the proper functioning of the internal market and to achieve a high level of consumer protection, by approximating the laws, regulations and administrative provisions of the Member States in respect of certain aspects of the marketing, sale and resale of timeshares and long-term holiday products as well as exchange contracts.
LEVEL OF HARMONISATION: Based on recitals 3 and 11, the Directive is a full harmonisation directive except where otherwise indicated in specific provisions (such as the effects of the right of withdrawal to relationships outside the scope of the Directive).
IMPERATIVE NATURE OF THE DIRECTIVE: According to Article 12, consumers may not waive their rights under the Directive. Also where the applicable law is that of a third country, consumers are subject to the protection of the MS where the property is situated or in the case of a contract not directly related to immovable property, in the Member State, the trader pursues commercial or professional activities in a Member State or, by any means, directs such activities to a Member State and the contract falls within the scope of such activities.
SCOPE: The Directive applies to trader-to-consumer transactions which relate to the marketing, sale and resale (a) of timeshares, (b) long-term holiday products as well as (c) exchange contracts.
THE THREE TYPES OF TRANSACTIONS: According to the interpretative provisions of the Directive, the three types of transactions covered, namely timeshare, long-term holiday products and exchange contracts, are interpreted as follows:
(a) Timeshare contract is “a contract of a duration of more than one year under which a consumer, for consideration, acquires the right to use one or more overnight accommodation for more than one period of occupation”. Contracts for multiple reservations of accommodation (e.g. hotel rooms) in so far as multiple reservations do not imply rights and obligations beyond those arising from separate reservations cannot be considered as timeshares.
(b) Long-term holiday product is “a contract of a duration of more than one year under which a consumer, for consideration, acquires primarily the right to obtain discounts or other benefits in respect of accommodation, in isolation or together with travel or other services” . Long-term holiday product contracts should not be understood as covering ordinary loyalty schemes which provide discounts on future stays in the hotels of a hotel chain, since membership in the scheme is not obtained for consideration nor is the consideration paid by the consumer primarily for the purpose of obtaining discounts or other benefits in respect of accommodation.
(c) Exchange contract is “a contract under which a consumer, for consideration, joins an exchange system which allows that consumer access to overnight accommodation or other services in exchange for granting to other persons temporary access to the benefits of the rights deriving from that consumer’s timeshare contract”
In calculating the duration of a timeshare contract or a long-term holiday product contract, any provision in the contract allowing for tacit renewal or prolongation is taken into account.
As mentioned above, the Directive also covers cases of the resale of such contracts. Named as “resale contract”, there are contracts where “a trader, for consideration, assists a consumer to sell or buy a timeshare or a long-term holiday product”.
CONSUMER AND TRADER: A consumer is defined as a natural person who is acting for purposes which are outside that person’s trade, business, craft or profession. On the other hand, trader is defined as “a natural or legal person who is acting for purposes relating to that person’s trade, business, craft or profession and anyone acting in the name of or on behalf of a trader.”
The Directive does not affect national legislation which:
“a) provides for general contract law remedies.
b) relates to the registration of immovable or movable property and conveyance of immovable property
c) relates to conditions of establishment or authorisation regimes or licensing requirements and
d) relates to the determination of the legal nature of the rights which are the subject of the contracts covered by this Directive.”
2. SUBSTANTIVE PROVISIONS
2.1. INFORMATION/OBLIGATIONS PRECEDING THE COLCLUSION OF THE CONTRACT
2.1.1. INFORMATION IN ADVERTISING
According to article 3, each advertisement must indicate the possibility of obtaining the following information provided in Annexes I to IV and the source of the information :
“a) in the case of a timeshare contract: by means of the standard information form as set out in Annex I and information as listed in Part 3 of that form.
b) in the case of a long-term holiday product contract: by means of the standard information form as set out in Annex II and information as listed in Part 3 of that form;
c) in the case of a resale contract: by means of the standard information form as set out in Annex III and information as listed in Part 3 of that form.
d) in the case of an exchange contract: by means of the standard information form as set out in Annex IV and information as listed in Part 3 of that form.”
PROMOTION OR SALES EVENT: Where during an event for the promotion or sale of products the trader proposes contracts for timeshare, long-term holiday products, resale or exchange then the trader must clearly state in the invitation the commercial purpose and nature of the event. Also, the above information shall be available to the consumer at any time during the event.
Based on article 3(4) of the Directive, a timeshare or a long-term holiday product must not be marketed or sold as an investment.
2.1.2. PRE – CONTRACTUAL INFORMATION
Article 4 of the Directive states that the trader must, provide the consumer, before the consumer is bound by any contract, the information (Annex I – IV) referred to in the immediately preceding section in a clear and comprehensible manner. The information must be provided, free of charge, by the trader on paper or on another durable medium which is easily accessible to the consumer. Also, the information must be drawn up in the language of the Member State in which the consumer is resident or a national, at the choice of the consumer.
DURABLE MEDIUM: According to the interpretative provisions of the Directive, durable medium “means any instrument which enables the consumer or the trader to store information addressed personally to him in a way which is accessible for future reference for a period of time adequate for the purposes of the information and which allows the unchanged reproduction of the information stored”
Also, based on article 5(4), before the conclusion of the contract the trader must explicitly draw the consumer’s attention to the existence of the right of withdrawal, the length of the withdrawal period referred to in article 6, and the ban on advance payments during the withdrawal period referred to in article 9.
2.2. OBLIGATIONS INHERENT IN THE CONTRACT AND INFORMATION
Based on article 5(1), the timeshare, long-term holiday product, resale or exchange contract must be in writing, on paper or on another durable medium, and drawn up in the language or one of the languages of the MS in which the consumer is resident or a national, at the choice of the consumer, provided it is an official language of the Community.
The MSs where the consumer resides have the right, based on the same article, to additionally require:
“a) in every instance, the contract be provided to the consumer in the language or one of the languages of that Member State, provided it is an official language of the Community;
b) in the case of a timeshare contract concerning one specific immovable property, the trader provides the consumer with a certified translation of the contract in the language or one of the languages of the Member State in which the property is situated, provided it is an official language of the Community.”
The MS where the trader carries out sales activities may also require the contract to be provided to the consumer in the language or one of the languages of that Member State, provided it is an official language of the Community.
NATURE OF THE INFORMATION: The information in Annexes I to IV form an integral part of the contract and should be included in the contract. Also this information must not be altered unless the parties expressly agree otherwise or the changes result from unusual and unforeseeable circumstances beyond the trader’s control, the consequences of which could not have been avoided even if all due care had been exercised. These changes must be communicated to the consumer on paper or on another durable medium easily accessible to him, before the contract is concluded and the contract must expressly mention such changes.
In addition to the information in Annexes I to IV, the contract shall include also the identity, place of residence and signature of each of the parties and the date and place of the conclusion of the contract.
INFORMATION ON THE RIGHT OF WITHDRAWAL: In relation to the notice of withdrawal, this must be signed separately by the consumer. The contract must include a separate standard withdrawal form, as set out in Annex V, intended to facilitate the exercise of the right of withdrawal in accordance with Article 6.
COPY OF THE CONTRACT: Finally, the consumer must receive a copy or copies of the contract at the time of its conclusion.
Article 6 provides for the right of withdrawal. This article states that MSs must ensure that the consumer is given a period of 14 calendar days to withdraw from the timeshare, long-term holiday product, resale or exchange contract, without giving any reason. That time limit is calculated from the day of the conclusion of the contract or of any binding preliminary contract or from the day when the consumer receives the contract or any binding preliminary contract if it is later than the date of signature.
EXTENSION OF THE WITHDRAWAL PERIOD: If the consumer is not provided with a separate withdrawal form completed by the trader in writing on paper or other durable medium, then the withdrawal period expires after one year and 14 calendar days from the signing or receipt of the contract/pre-contract as the case may be.
In case the standard withdrawal form is provided but the information of Annexes I to IV is not provided in writing on paper or on another durable medium, then the period expires after 3 months and 14 calendar days from the signature or receipt of the contract/pre-contract, as the case may be.
Furthermore, the same article states that MSs must provide for appropriate penalties in accordance with article 15, in particular in the event that, on expiry of the withdrawal period, the trader has failed to comply with the information requirements set out in the Directive.
In the cases where the trader remedies the breach by providing the consumer with the information (either Annexes I to IV or the standard withdrawal form) then the 14-day withdrawal period starts from the day on which the consumer receives the form or information.
In relation to exchange contracts offered jointly and simultaneously with the timeshare contract to the consumer, then the withdrawal period is calculated as above and as applicable to the timeshare contract.
EXERCISE OF THE RIGHT: Under article 7, when the consumer notifies his intention to withdraw within the withdrawal period, either on the standard form or on paper or on another durable medium, he is deemed to have validly withdrawn from the contract.
EFFECT OF THE EXERCISE OF THE RIGHT: According to article 8, upon exercise of the right of withdrawal, the obligations of both parties cease to apply. The consumer is not liable for any expenses and is not liable for amounts corresponding to the services provided before the withdrawal.
ADVERTISEMENT: Article 9(1) expressly prohibits traders in timeshare, long-term holiday products and exchange contracts from charging any advance payment, provision of guarantees, reservation of money on accounts, explicit acknowledgement of debts or any other consideration to the trader or to any third party by the consumer before the end of the withdrawal period.
TERMINATION OF ANCILLARY CONTRACTS: Based on Article 11, where the consumer exercises the right to withdraw from the timeshare or long-term holiday product contract, any exchange contract ancillary to it or any other ancillary contract is automatically terminated, at no cost to the consumer.
An “ancillary contract” is defined in the Directive as «a contract under which the consumer acquires services which are related to a timeshare contract or long-term holiday product contract and which are provided by the trader or a third party on the basis of an arrangement between that third party and the trader» .
Also, where the price is fully or partly covered by a credit granted to the consumer by the trader, or by a third party on the basis of an arrangement between the third party and the trade contract agreement, this is terminated, at no cost to the consumer, where the consumer exercises the right to withdraw from the timeshare, long-term holiday product, resale or exchange contract.
Of course, for the termination of ancillary contracts, the MSs are required to lay down more detailed rules.
2.4. OTHER RELATED OBLIGATIONS/RIGHTS
SPECIAL PROVISIONS RELATING TO RESALE CONTRACTS: In relation to resale contracts, article 9(2) states that MSs must ensure that any advance payment, provision of guarantees, reservation of money on accounts, explicit acknowledgement of debt or any other consideration to the trader or to any third party by the consumer before the actual sale takes place or the resale contract is otherwise terminated, is prohibited.
SPECIFIC PROVISIONS RELATING TO LONG-TERM HOLIDAY PRODUCT CONTRACTS: Article 10 states that in cases of long-term holiday product contracts, payment must be made according to a staggered payment schedule.
Any payment of the price specified in the contract otherwise than in accordance with the staggered payment schedule is prohibited. The payments, including any membership fee, must be divided into yearly instalments, each of which must be of equal value. Also, the trader must send a written request for payment, on paper or on another durable medium, at least fourteen calendar days in advance of each due date.
Finally, on the basis of article 10(2) from the date of payment of the 2nd instalment, the consumer may terminate the contract without incurring any penalty, by giving notice to the trader within fourteen calendar days of receiving the request for payment of each instalment. This right does not affect rights to terminate the contract under existing national legislation – i.e., the consumer’s rights in relation to other infringements are not affected.
3. OBLIGATIONS OF MEMBER STATES
JUDICIAL AND ADMNISTRATIVE REDRESS: Article 13 states that MSs have an obligation to maintain that adequate and effective means exist to ensure compliance by traders with the Directive. The instruments include a right for various actors to have recourse to the courts or competent administrative bodies to ensure the application of national provisions. These bodies consist of public bodies and authorities or their representatives, consumer organisations with a legitimate interest in protecting consumers as well as professional organisations with a legitimate interest in taking such action.
The MSs also have to inform consumers about transposing the Directive and must encourage, where appropriate, traders and code owners to inform consumers of their codes of conduct. Code owner means “any entity, including a trader or group of traders, which is responsible for the formulation and revision of a code of conduct and/or for monitoring compliance with the code by those who have undertaken to be bound by it.”. Code of conduct means “an agreement or set of rules not imposed by law, regulation or administrative provision of a Member State which defines the behaviour of traders who undertake to be bound by the code in relation to one or more particular commercial practices or business sectors”.
Also, MSs encourage the setting up or development of adequate and effective out-of-court complaints and redress procedures for the settlement of consumer disputes under this Directive and must, where appropriate, encourage traders and their branch organisations to inform consumers of the availability of such procedures .
PENALTIES: Article 15 states that MSs must provide for penalties in the event of a trader’s failure to comply with the national provisions. The penalties must be effective, proportionate and dissuasive.
REPEAL: With the adoption of the Directive, Directive 94/47/EC has been repealed.