We have the pleasure of Prof. Fryderyk Zoll‘s company at the Berkman Center at Harvard Law School this morning. Prof. Zoll’s visit has been arranged by Filip Wejman, an LLM student here. Prof. Zoll is speaking about standard contract terms in the EU. His discussion picks up the conversation we started in Class 2.1: Online Transactions in the Cyberlaw and Global Economy seminar this semester.
A bit of history: Prof. Zoll told us about how in the Germanic tradition, in the standard terms context, (in which tradition there’s a strong presumption of unequal bargaining power between parties), a contracting party has a duty to protect of the interests of both parties. A German statute in 1976 memorialized this tradition; it is now incorporated into the civil code. Three threshold requirements must be met before these rules attach: 1) Incorporation: Are the standard terms incorporated into the contract? Did the offeror make clear that the standard terms are being used? Were these terms in place at the time of formation of the contract? We talked a bit about when contract formation occurs, a hot and relevant topic in the US commercial law discussions in the e-commerce context over the past few years. 2) Control of the content of the standard terms (see also Article 3 of the EU directive, discussed below). The idea is to declare void the clauses abusive to the less powerful party. 3) Interpretation: In case of doubt, standard terms are interpreted against the proposer of those standard terms (the proposer is not necessarily mean the buyer or the seller). An interesting twist that Prof. Zoll mentioned: this interpretation doctrine can work against the less powerful party in the event that the term — e.g., a very extensive limitation of liability in the standard terms in favor of the proposer of the standard terms — is construed in such a way as to appear favorable in the near-term to the less powerful party but, as a result of scaling back that limitation of liability, the term would no longer be abusive and therefore might be enforceable as against the less powerful party, where otherwise it might not have been.
Prof. Zoll spoke also of the EU Directive 93/12/EEC of 5 April 1993 on unfair terms in consumer contracts, which has been implemented in all member states and in all accession countries. The directive set a minimum level of consumer protection and left it to the states to create a more protective standard as the countries see fit (as compared to other directives, which set not only a minimum but also a maximum for the protections of consumers). This directive leaves a great deal of discretion to the member states. There are no Internet-specific elements in this directive, in part because of its date of adoption, but there is obvious relevance in the e-commerce context for shrink-wrap, click-wrap, and browse-wrap contracts. Very important to our area of inquiry: Article 3 which reads in part: “1. A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer.” The way it works is that, if the contract meets other requirements for consideration under the standard terms regulations and is otherwise enforcable, a consumer may challenge the enforcability of a given provision that she thinks is unfair. The proposer of that language then may defend based on good faith, but it’s tough for the proposer to win on such a defense, Prof. Zoll suggests.
He pointed us also to Article 6 of the directive, which covers the choice/conflict of laws matter. The consumer cannot be deprived of the protections of this provision just based on the choice of law. So, a United States business dealing with a German consumer needs to worry, potentially, about German consumer protection rules, even if the choice of law provisions result generally in the application of New York law.
Check out Filip et al.’s new global law-focused weblog.