Sale of goods made to the consumer’s specifications at a trade fair: ab initio no right of withdrawal: Case C-529/19 Möbel Kraft,EU:C:2020:846

Exceptions to the right of withdrawal: Some guiding principles with regard to their interpretation

As has already been mentioned, article 16 CRD enumerates the exceptions to the right of withdrawal. The list of exceptions is exhaustive, implying that traders have to award the consumer a right of withdrawal for all contracts that fall within the scope of the CRD ¹³ and are not mentioned in article 16 CRD. The consumer cannot contractually waive the right of withdrawal (article 25 CRD). Traders can, however, voluntarily decide to award the consumer a right of withdrawal for a contract that is on the list of article 16 CRD. Taking into account the maximum harmonization approach of the CRD the list of article 16 CRD cannot be adapted by the Member States. Member States cannot add to the list, neither delete exceptions from the list. Contrary to the CRD of 2011, the new Omnibus Directive (amending the 2011 CRD) ¹⁴ leaves some room for derogations at the national level. More specifically, Member States may determine for certain contracts (those mentioned in article 16(a), (b), (c) and (e) CRD), that the consumer will be nevertheless entitled to withdraw from the contract if the contract was concluded in the context of unsolicited visits by a trader to a consumer’s home. ^15,16

Reading the case law of the ECJ with regard to the exceptions enumerated in article 16 CRD, it becomes clear that when interpreting these exceptions three principles must be taken into account. First, according to settled case law, the ECJ states that provisions of EU law must be given an autonomous and uniform interpretation throughout the European Union. The autonomous interpretation must take into account not only the wording of the provisions but also their context and the objective pursued by the legislation in question. ¹⁷ The CRD – as other Directives whose objective it is to protect consumers – aim to ensure a high level of consumer protection. The reason for this is that consumers are in a weaker position in their relation to traders. ¹⁸ Second, in the case of distance contracts and off-premises contracts the right of withdrawal is considered essential to protect consumers. In the case of a distance contract it must offset the disadvantage that the consumer was not actually able to see the goods or ascertain the nature of the services and therefore was not able to examine and test the goods. ¹⁹ In the case of an off-premises contract it must compensate the fact that the consumer may have been under potential psychological pressure or may have been confronted with an element of surprise when concluding the contract. ²⁰ As article 16 CRD contains restrictions of the right of withdrawal, which is considered essential, it must be interpreted strictly. ²¹ Third, the requirement of an autonomous and strict interpretation of the exceptions to the right of withdrawal, does not allow a national court to create additional requirements which must be met for the trader to rely upon one of the exceptions. The latter is clearly shown in Möbel Kraft where the ECJ states that, if there is nothing in the wording of article 16(c) CRD which indicates that the exception to the right of withdrawal is dependent on the occurrence of any event subsequent to the conclusion of the off-premises contract, such requirement cannot be added.

The exception of goods made at the consumer’s specifications and clearly personalized goods

As already mentioned, article 16(c) CRD implies that a consumer cannot withdraw from the contract if the contract relates to clearly personalized goods or goods made at the consumer’s specifications. The latter are defined in article 2(4) CRD as ‘non-prefabricated goods made on the basis of an individual choice of or decision by the consumer’. Recital 49 CRD mentions tailormade curtains as an example.

Other indications of what should be understood under goods made at the consumer’s specifications or clearly personalized can be found in the European Commission’s Guidance Document concerning the CRD. According to this Document the exception of article 16(c) CRD applies to (1) goods, for which the consumer has provided specifications, such as measurements for furniture or the size of a fabric, (2) goods for which the consumer has requested specific personalized features, such as particular design for a car that is made to order or a specific component for a computer, which has to be individually procured for that particular order and which was not part of the trader’s general offer to the public and (3) T-shirts with a personalized print. ‘Specification/ personalization’ means that the goods are, in principle, unique and produced according to the individual wishes and requirements stated by the consumer and agreed with the trader. On the contrary, where the consumer simply makes up the goods by picking from the standard (preset) options provided by the trader (for example when a consumer chooses the colour and additional equipment of a car from a catalogue), the condition of neither ‘specification’ nor ‘personalization’ is met. ²² Although the Document is not legally binding and the authoritative interpretation remains within the sole remit of the ECJ ²³ the examples provided seem to be in line with the requirement of a strict interpretation of exceptions to the right of withdrawal, set by the ECJ.

Möbel Kraft was not the first case in which the ECJ (in 2020) had to deal with the exception of goods made at the consumer’s specifications. In NK, ²⁴ the trader, an architect, tried to argue that an agreement relating to the design of a house according to the consumer’s instructions, fell under the exception. The argument failed, since such agreement must be considered as a service agreement falling under article 16 (a) CRD. The exception of article 16(c) CRD can only be applied to agreements relating to the supply of goods. The fact that the agreements’ objective is eventually to hand over or send the plans to the consumer, does not change the analysis. Although the plans, if provided on paper, can be considered goods, the supply of these plans (=goods) is clearly ancillary to the provision of intellectual services by the architect. The fact that the exception of article 16(a) CRD must be applied, instead of the exception of article 16(c) CRD, is important since the requirements for the application of the exception differ.

As already mentioned, the ECJ decided in Möbel Kraft that the exception of goods made to the consumer’s specifications is inherent in the very subject matter of the contract. That exception applies from the outset to that consumer, without being conditional on the occurrence of any event and irrespective of whether that contract has been performed or whether it is being performed by the trader. More specifically, the consumer concluding such an agreement does not lose his right of withdrawal at a certain point in time (such as the moment where production of the goods start). On the contrary he will ab initio not possess a right of withdrawal. The ECJ uses three arguments to reach this conclusion.

First, the wording of article 16(c) CRD is compared to the wording of some other exceptions, which do explicitly require the occurrence of an event subsequent to the conclusion of the off-premises contract. ²⁵ It concerns (1) service contracts, where the consumer only loses his right of withdrawal after the service has been ‘fully performed’ and insofar as ‘the performance has begun with the consumer’s prior express consent and with the acknowledgement that he will lose his right of withdrawal once the contract has been fully performed by the trader’ (article 16(a) CRD), (2) ‘the supply of sealed goods which are not suitable for return due to health protection or hygiene reasons and which are unsealed after delivery’ (article 16(e) CRD), (3) ‘the supply of sealed audio or sealed video recordings or sealed computer software which were unsealed after delivery’ (article 16(i) CRD) and (4) ‘the supply of digital content which is not supplied on a tangible medium if the performance has begun with the consumer’s prior express consent and his acknowledgment that he loses his right of withdrawal once the performance has begun’ (article 16(m) CRD). Article 16(c) CRD, on the contrary, neither requires that the execution by the trader has begun, nor that the consumer has authorized the trader to start the production of the goods. It can indeed be argued that if the European legislator had wanted the consumer only to lose the right of withdrawal once the production of personalized goods or goods made to his specifications had started, it would have determined so explicitly.

Second, the ECJ argues that this interpretation is supported by the context of that provision, in particular as regards the obligation to inform the consumer, before he or she is bound by an off-premises contract, of the existence or absence of the right of withdrawal. ²⁶ Let us first have a brief look at this information requirement and then see whether indeed it supports the Court’s interpretation of the exception for goods made at the consumer’s specifications.

In order to protect consumers, the European legislator regularly uses information requirements that are imposed on traders. With respect to distance contracts and off-premises contracts, these information requirements are even more extensive, because of the specific context within which such contracts are concluded. ²⁷ More specifically with regard to the right of withdrawal, a distinction is made whether or not the consumer is entitled to withdraw from the contract. If so, the trader must inform the consumer on the conditions, time limit and procedures for exercising the right of withdrawal and provide the consumer with a model withdrawal form (article 6.1(h) CRD). In case one of the exceptions to the right of withdrawal applies the consumer must be informed either of the fact that he will not be entitled to withdraw from the contract from the outset (for example in case the contract relates to goods that are made at the consumers’ specifications) or of the fact that he will lose the right to withdraw from the contract under certain circumstances (for example when the contract relates to services that are fully performed within the withdrawal period) (article 6.1 (k) CRD).

The information must be given to the consumer before he is bound by the contract or any corresponding offer. With respect to off-premises contracts, the trader must give the information to the consumer on paper. Only if the consumer agrees may the information be given on another durable medium (article 7.1 CRD). The objective of these precontractual information requirements is to ensure that consumers can make an informed decision. ²⁸ As pointed out by the ECJ in Walbusch Walter Busch, information on (the existence or absence of) the right of withdrawal is of fundamental importance for the consumer. ²⁹ Indeed, it is essential for the consumer to know before he gives his consent whether he will be definitively bound by the contract or will be able to withdraw from it at a later stage. ³⁰ The importance of the trader’s obligation to inform the consumer on the right of withdrawal is further shown by the harsh specific civil remedy in case of its violation. If the trader does not inform the consumer on the conditions, time limit and procedures for exercising the right of withdrawal, the withdrawal period is extended by 12 months (article 10.1 CRD).

According to the ECJ, a situation in which the existence of the consumer’s right of withdrawal would be conditional on a future event, the occurrence of which depends on a decision by the trader, would not be reconcilable with the obligation to provide precontractual information on the existence or absence of the withdrawal right. ³¹ In the same line of reasoning, the ECJ argues (and this is the third argument) that its interpretation contributes to the attainment of the CRD’s objective of legal certainty, inasmuch as it prevents a situation in which the existence or absence of the consumer’s right to withdraw from the contract would depend on the state of progress of the performance of that contract by the seller or supplier, a state of progress of which the consumer is not, as a general rule, informed and over which he or she has, a fortiori, no control. ³²

When a consumer loses his right of withdrawal by breaking a seal (for example sealed goods that are not suitable for return due to health protection or hygiene reasons or sealed audio recordings), it is indeed not the trader but the consumer himself who decides whether and when he loses the right of withdrawal that has initially been awarded. However, in the present Directive there are also exceptions where the loss of the right of withdrawal results from the trader’s decision. In the case of a service agreement the consumer loses his right to withdraw from the contract when the services are fully performed by the trader within the withdrawal period. When digital content is supplied as a download, the consumer loses his right of withdrawal once the performance has begun within the withdrawal period. In both cases the loss of the right of withdrawal depends on the trader’s decision, either to fully perform the services within the withdrawal period (services agreement) or to start the performance within that period (supply of digital content not supplied on a tangible medium), actions which are as well beyond the consumer’s control. However, the difference with the exception in article 16(c) CRD is that in those cases it is required by the CRD that the consumer has previously given his express prior consent to start the performance (article 7.3 CRD and 8.8 CRD) and that the consumer must have acknowledged that he will lose the right of withdrawal once the service agreement has been fully performed or once the supply of digital content has begun (article 16(a) and (m) CRD). ³³ Although such consent will normally already be given at the time of conclusion of the contract, the consumer is clearly informed on the fact that the loss of the right of withdrawal depends on the traders’ decision to perform the contract. Since such an explicit information requirement does not exist with regard to the beginning of the production of goods made at the consumer’s specifications one can indeed argue that the ECJ’s interpretation is in line with the entire set of information requirements imposed by the CRD (not only those in article 6 CRD). However, from a theoretical point of view, the information requirement on the existence or absence of the right of withdrawal, as well as the requirement of legal certainty, as such would not prevent the European legislature from determining that in the case of goods made to the consumer’s specifications, the consumer only loses his right of withdrawal (1) once the production of these goods has started within the withdrawal period (2) with the consumer’s prior express consent and (3) with the consumer’s acknowledgement that he loses his right of withdrawal once the production has begun, with (2) and (3) applying either at the time of conclusion of the contract or at the moment that the trader wants to start the production of the goods. Considering these additional requirements and the point in time at which they must be met, one must take into account their economic consequences, as well as the administrative burden they create, in particular when (2) and (3) must be met at the moment that the trader actually wants to start production. More specifically, one must examine whether the benefits of consumer protection outweigh the possible economic and administrative costs for traders.

Precontractual information requirements on the absence of a right of withdrawal: a plea for effective private sanctions

Although information on the absence of the right of withdrawal or on the circumstances under which the consumer loses the right to withdraw from the contract is without doubt as essential as information on the existence of the withdrawal right, there is no specific civil remedy in the CRD for cases where this information (see article 6.1(k) CRD) requirement is not met. As far as service agreements that have been fully performed within the withdrawal period (article 16(a) CRD) and digital content which is not supplied on a tangible medium (article 16(m) CRD) are concerned, article 16 CRD itself, however, offers a solution. As already mentioned, consumers only lose their right to withdraw from the contract after they have given their prior express consent to start the performance, with the acknowledgement that they will lose their right of withdrawal (once the services contract has been fully performed by the trader or once the performance of the supply of the digital content has begun). These requirements must ensure that consumers are actually aware of the fact that later on they can lose their right of withdrawal.

However article 16 CRD does not always solve the problem. Take the examples of clearly personalized goods, goods that are made at the consumer’s specifications or unsealed goods that are not suitable for return due to health protection or hygiene reasons. There is not a single remedy in the CRD itself for cases where the consumer is not informed on the absence from the outset or loss afterwards (for example when unsealing the goods) of the right of withdrawal. This is regrettable, in particular because consumers concluding a distance or off-premises contract might be likely to expect they will be able to withdraw from the contract, at least insofar they have not been clearly informed about the impossibility to do so. Of course, the lack of information on the absence of the right of withdrawal can be considered a misleading through omission (and therefore an unfair commercial practice) (article 7 Unfair Commercial Practices Directive (UCPD)), ³⁴ but just like the CRD, the UCPD does not contain a specific private law remedy. Admittedly, the Omnibus Directive (which has to be transposed by 28 November 2021 and its provisions applied by 28 May 2022) ³⁵ will have a certain impact here since it will entitle consumers to a compensation for damage suffered and, where relevant, a price reduction or the termination of the contract, ³⁶ but the damages suffered might be hard to prove.

In order to increase consumer protection it would be preferable to include a specific civil remedy in the CRD in case no information is given to the consumer, prior to the conclusion of the contract, on the impossibility to withdraw from the contract. Inspiration for such a remedy can be found in the former Belgian legislation, which allowed consumers that were not informed on the absence of the withdrawal right, to withdraw from the contract during a three-month period. ³⁷ The Belgian legislator deleted this sanction when transposing the CRD because of the maximum harmonization character of the CRD. Although in my opinion it can be argued that a civil remedy for the lack of information on the absence of the right of withdrawal falls outside the field harmonized by the CRD and the Belgian legislator could have kept this remedy, a clear remedy at the European level would be preferable.

Agreements concluded at trade fairs: No(t necessarily) off-premises contracts

Off-premises contracts include contracts concluded in the simultaneous physical presence of the trader and the consumer, in a place which is not the business premises of the trader (article 2(8)(a) CRD), as well as contracts concluded on the business premises of the trader ³⁸ immediately after the consumer was personally and individually addressed ‘in a place which is not the business premises of the trader’ (article 2(8)(c) CRD). ³⁹ Business premises mean ‘any immovable retail premises where the trader carries out his activity on a permanent basis’ or ‘any movable retail premises where the trader carries out his activity on a usual basis’ (article 2(9) CRD, emphasis added). According to recital 22 of the CRD, fair stands should be treated as business premises if they ‘serve as a permanent or usual place of business for the trader’. ⁴⁰

In Möbel Kraft, the referring court did not ask the ECJ for additional criteria in order to determine whether the contract for the sale of a fitted kitchen concluded at a fair stand must be considered an off-premises contract. However, the question whether and when contracts concluded at a trade fair can be considered off-premises contracts has been subject to debate. ⁴¹ In Möbel Kraft, the ECJ clearly finds it necessary to refer to its decision in Unimatic. ⁴² More specifically, it states that ‘a contract concluded at a trade fair may be classified as an “off-premises contract” (…), provided that the contract was not concluded at a trade fair stand, which may be regarded as a “business premises” (…). ⁴³ It is for the referring court to verify, in accordance with the case-law (…), whether, in the light of the facts before it, the contract at issue must indeed be regarded as an “off-premises contract” (…)’. ⁴⁴ Taking into account the importance of the topic, I take the opportunity to analyse the ECJ’s reasoning in Unimatic and briefly comment on it.

In Unimatic, the ECJ starts its reasoning by emphasizing that stands, which are generally set up at a trade fair for a few days each calendar year, are clearly not immovable premises where the trader exercises his activity on an permanent basis. ⁴⁵ Therefore it is important to find out whether these stands can be qualified as movable retail premises where the trader carries out his activity on a usual basis. ⁴⁶ Since in its usual meaning, the expression ‘on a usual basis’ may be understood as referring either to the fact that the activity in question is carried out with a certain regularity over time or to the fact that the activity is normally carried out on the premises concerned, the meaning of that expression in everyday language does not, of itself, make it possible to give an immediate unequivocal interpretation of it. Therefore, the ECJ relies on the Directives’ objective for their interpretation. More specifically, the ECJ emphasizes in this regard that the right of withdrawal for off-premises contracts is justified by the European legislator because of the fact that the consumer concluding an off-premises contract may be under potential psychological pressure or may be confronted with an element of surprise. ⁴⁷ Whereas a consumer visiting the premises spontaneously can expect to be solicited by the trader and therefore cannot properly claim subsequently that he was surprised by the offer made by the trader, the consumer concluding an off-premises contract will often be unprepared and surprised by the trader’s offer. Clearly the ECJ uses a teleological interpretation in order to conclude that ‘a stand (…) run by a trader at a trade fair, at which he carries out his activity for a few days each year, constitutes “business premises” (…) if, in the light of all the factual circumstances surrounding that activity (…), a reasonably well-informed and reasonably observant and circumspect consumer could reasonably assume that the trader is carrying out his activity there and will solicit him in order to conclude a contract.’ ⁴⁸

Whether or not the average consumer should expect to be solicited at a trade fair, is – as the ECJ also repeats in Möbel Kraft – up to the national courts to decide. However, the ECJ has given some guidance: when assessing the factual circumstances surrounding the activity at the trade fair, national courts must take into account the appearance of the stand, as well as the information relayed on the premises of the fair itself. The following examples of elements that can be taken in account have been cited in literature: whether the trade stand looks like a point of sale or is rather presented as an information stand, the name that is used to promote the trade fair, the information that is available at the entrance of the trade fair and of its different halls, the exhibition plan of the trade fair (and in particular whether this makes clear what type of products are sold in a certain part of the trade fair). ⁴⁹ Additionally, commercial communications made prior to the start of the trade fair (for example on radio, TV, website, in the newspapers…) may also play an important role. ⁵⁰ On the other hand, whether a trader exclusively offers its products at trade fairs is in itself not decisive. It would not be justified to treat consumers differently simply because a specific trader at a trade fair decided to sell its products exclusively at trade fairs or also in regular shops. ⁵¹

Unimatic is not the only case relating to contracts concluded at a trade fair. In Elektrogeräte, the ECJ decided that if a contract is concluded between a trader and a consumer at a stand run by the trader at a trade fair, ‘immediately after the consumer, who was in the aisle common to the various stands present in an exhibition hall of the fair, had been solicited by that trader’, the contract must be considered an off-premises contract. ⁵² According to the ECJ, the situation where a consumer is solicited in the aisle common to various stands resembles the situation where the consumer is solicited in a street accessible to the public. Contrary to its decision in Unimatic, the ECJ leaves no margin for interpretation for the national courts. Such a contract must always be seen as an off-premises contract.

A few remarks can be made with regard to the ECJ’s decisions relating to contracts concluded at a trade fair.

First, in practice, it will be far from easy for a consumer to prove that he found himself in an Elektrogeräte situation. After all, how can a consumer prove that at the time of conclusion of the contract at a trade stand he was previously solicited by the trader in the common aisle of a trade fair?

Second, as has been pointed out by other scholars, the ECJ’s judgment leads to some uncertainty, in particular because of the vagueness of the criteria national courts are provided with, in order to determine whether the consumer could reasonably expect to be solicited by a trader. ⁵³ In my personal opinion, the courts’ criteria imply that average consumers going to an annual motor show can expect to be solicited by traders to buy a new car. Average consumers going to a construction trade fair can expect to be solicited with regard to the sale and installation of, for example, solar panels. ⁵⁴ Therefore, Unimatic implies that these consumers will not be able to rely on the rules on off-premises contracts and will thus not be entitled to withdraw from the contract. However, if a contract for to the sale and installation of solar panels is being promoted at an individual stand at the annual motor show, this offer will come as a surprise for the average consumer visiting the annual motor show (even when he is not solicited in the common aisle of various stands). The average consumer will be unprepared to start negotiations with that trader for this type of contract and therefore should be entitled to withdraw from the contract. Although Unimatic does not prevent this reasoning, it also makes clear that the absence of a direct link between on the one hand the fair’s theme (Grüne Messe) and on the other hand the nature of the products sold (household products such as steam vacuum cleaners) is not sufficient to argue that the trader’s stand is not a business premises. ⁵⁵ The mere fact that the average consumer before his arrival at the fair is not aware that household products will be on sale does not necessarily prevent that at the time of conclusion of the contract the consumer had to reasonably assume that he could also be solicited for these types of products. This might for instance be the case if sellers of household products are located in a different hall, the information provided to the consumer (for example in the form of a plan of the exhibition halls) makes it clear that within a certain exhibition hall only household articles are on sale and the consumer nevertheless decides to visit this hall. ⁵⁶ In any case, it remains to be seen how national courts will come to the conclusion that an average consumer could reasonably assume to be solicited to conclude a contract relating to a certain product.

Third, it is remarkable that the ECJ focuses in particular on the element of surprise as a justification for the right of withdrawal and less on the risk of irrational behaviour and psychological pressure (although it is also mentioned by the Court). Although consumers may also suffer from psychological pressure when buying goods or services in a shop, ⁵⁷ it has been argued that the risk of irrational behaviour – either due to psychological pressure or due to the circumstances – might be substantially higher at a trade fair. In particular, irrational behaviour might occur because of the fact that consumers may believe that offers are limited (in time) and because of the fact that they will no longer be able to return to the trader’s stand, once the trade fair has finished. ⁵⁸ The European legislator also clearly believes that consumers should not only be entitled to withdraw from the contract when they are overwhelmed or surprised. This is clearly shown by the fact that contracts concluded at the consumer’s home are (since the replacement of the 1985 Directive by the CRD) no longer excluded from the right of withdrawal when the visit has taken place at the consumer’s express request. ⁵⁹

Finally, one might argue that the rules on unfair commercial practices sufficiently protect consumers concluding contracts at trade fairs from aggressive and misleading commercial practices. ⁶⁰ However, the prohibition of unfair commercial practices cannot protect the consumer in the same way as the right of withdrawal, which can be exercised without giving any reason. Moreover, the per se prohibited commercial practice of conducting personal visits to the consumer’s home, ignoring the consumer’s request to leave or not to return, has also not refrained the European legislator from entitling the consumer to withdraw from all contracts concluded at home.

In conclusion, legal certainty would benefit from a clear provision in the CRD explicitly stating whether or not consumers are entitled to withdraw from a contract concluded at a trade fair (without the necessity of examining whether or not a trade fair stand constitutes a business premise). The option to allow consumers to withdraw from all contracts concluded at trade fair stands would definitely increase consumer protection. However, the question remains whether such a general right of withdrawal can sufficiently be justified on the basis of the risk of irrational behavior and/or psychological pressure. How real is the risk today of average consumers behaving irrationally at trade fairs, and are they really under additional psychological pressure? Legal scholars or judges cannot answer this question. Only behavioural economics can tell.