Breach of precontractual information duties in the B2C E-commerce: comparative remarks on english and spanish law

 

Zofia Bednarz
doctoranda en la Universidad de Málaga
área de Derecho mercantil
email: zbednarz@uma.es

 

 

ABSTRACT: Electronic commerce plays nowadays a crucially important role in both professional and private activity of European consumers and businesses. The precontractual information duties are one of the factors that distinguish online contract formation between businesses and consumers from other ways of selling goods and services. The rules that apply to the e-commerce in the scope of the European internal market originate in two different legal systems, that is in the European law and in the national law. The traditional contract law of Spain and England offers various remedies for not providing the other party with the due information. The interest in comparing those legal systems lies in the possible high number of cross-boarder transactions and the different nature of common and continental law. The most important directives that establish information duties in the B2C e-commerce are Directive 2000/31/EC on electronic commerce and  Directive 2011/83/EU on consumer rights. Even though the directives impose numerous information duties, they usually leave the remedies available for breach of those duties to the Member States' internal law, and therefore the analysis of the remedies available in the internal national law results necessary. The remedies analysed and compared in this study are, under English law, misrepresentation, fraudulent, negligent or innocent, breach of statutory duty and breach of contract, and in what refers to Spanish law, remedies for vices of consent, for culpa in contrahendo, and for breach of contract.

KEY WORDS: information duties, breach of information duties, e-commerce, consumers, misrepresentation, breach of contract, comparative law, contract law

 

Incumplimiento de los deberes precontractuales de información en el comercio electrónico: estudio comparado del derecho inglés y español

 

RESUMEN: El comercio electrónico constituye actualmente una parte muy importante de la actividad, tanto profesional, como privada, de los comerciantes y consumidores europeos. La contratación electrónica constituye una modalidad de especial de contratar a distancia, su especialidad se manifiesta, entre otros, por los requisitos especiales de información que el comerciante tiene que facilitar al consumidor antes de contratar. Las normas que establecen los deberes de información provienen de dos diferentes niveles legislativos: del derecho europeo y del derecho nacional interno. En este estudio se trata de comparar el derecho inglés y español, la creciente importancia del comercio electrónico conduce a un aumento del numero de relaciones contractuales entre los sujetos provenientes de estas diferentes tradiciones jurídicas muy distantes en cuanto al planteamiento de los deberes de información. Las Directivas europeas, sobre todo la Directiva 2011/83/UE sobre los derechos de consumidores y la Directiva 2000/31/CE sobre el comercio electrónico, imponen varios deberes de información. Sin embargo, los remedios ante el incumplimiento de dichos deberes dependen del derecho interno de los Estados Miembros. Por lo tanto es necesario analizar los remedios disponibles en el derecho contractual inglés y español. En este estudio se compara los siguientes conceptos del derecho inglés: la representación falsa, incumplimiento del deber legal e incumplimiento contractual, con las instituciones del derecho español: vicios del consentimiento, culpa in contrahendo e incumplimiento contractual.

PALABRAS CLAVE: deberes de información, incumplimiento de deberes de información, comercio electrónico, consumidores, representación falsa, derecho comparado, derecho de contratos.

 

I. General remarks on the information duties in the e-commerce

Electronic commerce plays nowadays a crucially important role in both professional and private activity of European consumers and businesses 1. Although the possibility of forming a contract online revolutionised the B2C commerce and the e-commerce is becoming one of the most popular ways of selling goods and services in the European internal market, it is still far from reaching its full potential, especially in what refers to cross-boarder transactions2 . The obstacles that prevent the cross-boarder e-commerce from developing at desired level have been widely discussed by the academics, as well as by the European institutions3 . Precontractual information duties, imposed by the directives which harmonise the Member States' contract law, may constitute one of those obstacles.

The precontractual information duties are one of the factors that distinguish online contract formation between businesses and consumers from other ways of selling goods and services4 . However, the information duties were introduced in the contract law long before even the Internet started to be used as a mean of communication by the individuals. The information asymmetry between consumers and traders has always been, together with the weaker economic power, an argument in favour of consumer protection5 . The duties of information imposed on businesses are designed to correct these asymmetries, being in the meantime a tool that ensures the minimal possible restriction of the freedom of contract6 . Moreover, the duties of information are especially important in the B2C e-commerce, as studies show that lack of trust, which could be remedied through providing relevant information, is one of the main factors responsible for discouraging consumers from online buying7 .

The rules that apply to the e-commerce in the scope of the European internal market originate in two different legal systems, that is in the European law and in the national law. The specific duties of information were, and still are being introduced in the national legal systems by the European directives. Nevertheless, the national contract law also contains rules related to information duties. The e-commerce is by its nature a perfect mean for cross-border transactions, hence the importance of the comparative approach in the analysis of the information duties in the B2C e-commerce. Scope and remedies available in the case of breach of those duties will be different in each national legal system8 , due to the important influence of the traditional contract law on the effectiveness of information duties. The legal systems being compared in this study, English and Spanish, represent two different European traditions: common law and civil law, distant in what refers to their origins and basic concepts, yet very close in practise due to cross-border online transactions being an every day reality. Precontractual information duties and remedies available against breach of those duties constitute a field in which the difference between civil and common law is particularly evident9 .

The information duties mean that one contracting party is under a duty to inform, whilst the other party benefits from the right of information. The consumer can reasonably expect to be provided with accurate information in a comprehensible manner. Therefore the information duties in fact  cover two concepts, a positive duty to provide information and a negative duty not to provide false, misleading or inaccurate information10.

II. Information duties in the European law

The aquis communautaire on the B2C e-commerce establishes various information duties. The most important directives in this context are Directive 2000/31/EC on electronic commerce and  Directive 2011/83/EU on consumer rights, however some provisions of other directives may also be relevant 11. The Directive on e-commerce in its articles 5, 6 and 10 lists the information requirements that should be met by the service provider, these requirements include information relating to the trader himself, to the service provided and to the formation of contract. This Directive is subject to minimum harmonisation, Member States can therefore adopt more stringent provisions than those established in the Directive.

The Directive on consumer rights, adopted in October 2011, was intended to revolutionise online shopping 12 and contains various requirements in what refers to information that should be provided before the formation of a distance contract, which concept includes also online contracts. Article 6 of the Directive contains a list of information requirements, which again can be grouped as those referring to the identity of the trader, characteristics of the good or service offered and the way in which the contract is made. Nevertheless, the list of information duties is much more developed in this Directive, as it contains also information requirements related to the right of withdrawal, as well as to the costs, such as delivery and returning costs. Those provisions are subject to the full harmonisation, prohibiting Member States from adopting both less and more stringent provisions than those stated in the Directive13 . The full harmonisation approach to information requirements raises doubts as to relation between the very specific information duties listed in the Directive and more general concepts of Member States' law14 , such as misrepresentation or fraud, which are to be mentioned below.

Even though the directives impose numerous information duties, they usually leave the remedies available for breach of those duties to the Member States' internal law15 . For example, the Directive on consumer rights in its art. 24.1 requires Member States to take all measures necessary to ensure the implementation of its provisions, which includes also the information requirements16 . This solution makes it essential to analyse the national internal law to be able to decide which remedies are available for consumers in the case of a breach of information duties. The character of those remedies, for example a question whether contract or tort law applies, is of crucial importance also for determining the law applicable in the case of eventual cross-boarder dispute 17.

However, the concept of the European law covers not only the aquis communautaire, but also the soft law instruments, such as PECL18 or DCFR 19. Those instruments form an important part of the European law, although their rules are more of a model and guidance, especially in what refers to consumer contracts, where law applicable is usually positive national or European law. Section 1 of Chapter 3, Book II of DCFR contains rules referring to information duties and the last article of this Section, II.-3:109 establishes remedies for their breach. These remedies include the extension of the withdrawal period20 and remedies available in the case of non-performance of obligations, such as damages, performance withholding or right to enforce performance21 . It can be therefore assumed that information duties are perceived as actionable obligations in the DCFR, although their nature may vary between contractual and tortious.

III. Remarks on the national law and remedies it offers

The information duties existing in the national law are of a double origin and nature. On the one hand the European law, harmonising Member States' legal systems, has imposed detailed, specific information requirements that can be found usually in the national legislation that implements directives into the internal law. On the other hand, the traditional national contract law usually contains by itself various rules linked to the precontractual duty to disclose. These two types of duties coexist in internal law, which may cause various problems.

An important issue, already mentioned above, is the full harmonisation approach used in the 2011/83/EU Directive. The problems may arise when the general duty of fair dealing and good faith present in the national internal legal system implies a wider than the Directive scope of the duty to inform. Such a situation may be even considered as violation of the full harmonisation principle.

The nature of the information duties, that is whether they are obligations of a contractual or different character, also poses a problem, as internal systems may catalogue them differently. It would then influence for instance jurisdictional rules applicable , as well as lead to other important consequences23 .

Since Member States are obliged to implement the European directives together with the information requirements they establish into the national law, the national acts implementing those directives have to contain information duties. In what refers to the e-commerce the most relevant for purposes of this study would be those Acts of Parliament which implement the Directive on distance contracts and the Directive on e-commerce.

The English Consumer Protection (Distance Selling) Regulations 200024 in the regulation 7 and following establish information duties. Those requirements form groups that contain certain types of information, for instance information about the trader, about the goods or services, about the sale itself, and about the right of withdrawal. The correspondent Spanish Act of Parliament, TRLGDCU25 , imposes similar duties in its articles 60, 97 and following. In what refers to the online B2C transactions, the legislation that should be analysed is The English Electronic Commerce Regulations 2002 26 and on the Spanish side the LSSI 27. All those Acts establish a broad scope of information duties. The question that rises is how those duties are enforced by the national law and which remedies are available to consumer for their breach.

The traditional approach to liability in private law is dichotomal, it is either arising from contract or from tort and it always aims at repairing the damage caused to the other party28 . However, in the B2C contractual relationships, the breach of information duties will not always cause economically evaluable damage to consumers, and this situation should not result in depriving them of any remedies. Moreover, the important issue is the economic efficiency of the remedies available for a consumer, since importance of a particular contract for the consumer and for the trader is different. The former is pursuing a good or a service which is unique and necessary for his personal purposes, while for the latter the particular contract is just one of many formed that day. Therefore the remedies appropriate for consumers in the case of  a breach of information duties often will not fit the traditional private law liability.

Information duties implemented in the national internal law become its part and therefore are subject to general rules of the traditional contract law. Civil law systems, as in Spanish case, tend to recognize a general duty to inform the other contracting party. The consumer's right to be informed and correspondent information duties in Spanish legal system reach beyond the contract law as they are established in the supreme set of norms, the Spanish Constitution29 . The contract law itself is based on the principle of good faith, resulting from articles 7.1 and 1258 of the Spanish Civil code, and this principle is interpreted in this way that it gives rise to a duty to disclose material information before the conclusion of a contract 30. In this context the information duties established in the Acts of Parliament implementing European directives can be seen as a specific application of general principles.

In what refers to English law, however, the analysis of the information duties is more complicated, as English law recognises no general duty to disclose. The authority for this rule in English law is the classic case Smith v Hughes [1871] 31 where Blackburn J explained that 'there is no legal obligation on the vendor to inform the purchaser that he is under mistake, not induced by the act of vendor'32 . Despite the attempts to introduce a general duty to inform in the English law, such a doctrine, apart from specific application to uberrimae fidei contracts, was never accepted 33. This position was confirmed in a recent case National Westminster Bank v Utrecht – America Finance Co. [2001], where it was stated again that 'in England a contract like TOA is not a contract uberrimae fidei and neither party owes a duty to disclose material facts to the other.'34 .

Nevertheless, if there is a duty to inform, like in the B2C e-commerce, where specific information requirements apply, then not providing any information or providing information that is untrue, not accurate or defective in any way, will constitute a breach of that duty, also under English law35 . Moreover, even when there is no obligation on the party to inform, giving false information is not allowed36 . The most important remedies for breach of information duties under English and Spanish law will be presented below.

III.1. Consumer induced into the contract by misleading information
 
When a party was given false or misleading information in the precontractual period, the traditional remedies are action for misrepresentation under English law and under Spanish law usually the doctrine of vices of consent, vicios del consentimiento,is taken into account. An actionable misrepresentation is a false statement of fact or law which induced the representee, a consumer in this case, to enter into a contract37 . The remedies available in the case of mirepresentation vary depending on the grounds for misrepresentations, which can be fraudulent, negligent or innocent.  In what refers to vices of consent, el dolo38 , which is a mistake induced by the other party, would be the most relevant in the analysed context.

If the information provided by the other party was fraudulently misleading, English law offers a possibility of bringing a claim for fraud, providing that certain conditions are met. It must be shown that the representor knew a statement was untrue, had no belief in its truth, or was reckless as to whether it was true or false39 . The remedies available for fraud are damages under the tort of deceit and rescission of contract 40. Both remedies can be pursued providing it doesn't result in recovering twice for the same loss41 . In similar circumstances under Spanish law an action for dolo can be taken, since the art. 1269 of the Spanish Civil Code defines 'dolo' as 'fraudulent misrepresentation [which] exists where, with insidious words or machinations on the part of one of the contracting parties, the other is induced to enter into a contract which he would not have done without them' 42. The Civil Code distinguishes between the dolo grave (serious fraud), which occurs when the representee wouldn't have entered the contract if it hadn't been for the misrepresentation of the other party, and dolo incidental, when the representee would have entered the contract anyway, but on better conditions. Both types of dolo entitle the damaged party to recover its loss, but only dolo grave renders the contract void and allows to claim its rescission43 .

The main difference between fraudulent misrepresentation and dolo is the scope of those actions. Under English law only statements, with some exceptions regarding for example conducts, can amount to representations 44, while dolo can also be constituted by silence, that is by simple non-disclosure45 . Another interesting difference between the effects of fraudulent misrepresentation and dolo is that the former makes the contract voidable, and the latter void. The voidable contract exists from the beginning and the effects of the rescinded contract are recognised to have taken place, whilst the void contract never existed and therefore can not produce any effects46.

English law offers remedies  for the representee also when the misrepresentation was made negligently or even innocently by the representor. Negligent misrepresentation covers situations where representations were made without due care but not fraudulently by the representor. The remedies available are damages and rescission, with two possible claims for damages available for representee, a claim in tort for negligent misstatement47 and a claim for damages under s.2(1) Misrepresentation Act 1967. The difficulty with the claim for damages for negligent misstatement at common law is that the misrepresentee has the burden of proving both the existence of the duty of care and its breach. Under Misrepresentation Act the burden of proof is reversed and the defendant has to show that he had reasonable grounds to believe that the statement he made was true. In the case of innocent misrepresentation, the aggrieved party is entitled to rescission of the contract and to an indemnity intended to restore the parties to the position before entering the contract48 .

Under Spanish law the false information provided negligently by the representor gives rise to liability under the doctrine of culpa in contrahendo49 , as action for dolo may be brought only if the false representation was made intentionally. As culpa in contrahendo gives rise to tortiuos liability under art. 1902 of Spanish Civil Code, the remedy available would be damages for the loss suffered by the aggrieved party.

Nevertheless, in what refers to consumer contracts, an action for misrepresentation has a great disadvantage. The representee has to demonstrate that the false statement induced them to enter the contract50 , which may constitute an important obstacle in practice. The same refers to actions offered by Spanish law, the burden of proof rests on the aggrieved party.

III.2. Lack of information that should have been provided

The mentioned above actions for dolo and culpa in contrahendo, available under Spanish law, may be brought also in the case of non-disclosure, when the information was not provided. The scope of action for misrepresentation under English law is, however, more limited, as in general it could be brought only when representation was made, that is when some information, although false, was provided. Nevertheless, an implied representation may be taken into account by the courts given the known characteristics of the actual representee, especially if he is a consumer51 . Moreover, in some cases a representation may be inferred from conduct, circumstances or custom, and therefore non-disclosure would amount to misrepresentation 52.

However, in the case of consumer contracts, the information duties are usually imposed by statutes. In some very limited cases, where the statute establishes so itself, the breach of statutory duty can lead to the damages being awarded to the aggrieved party 53, however this does not necessarily mean that the contract could be rescinded. The remedy offered in similar situations by the Spanish law is equally limited, however for different reasons. The Spanish Act of Parliament LOCM54 in its articles 44.5 and 47 offers a claim for rescission of contract to the aggrieved party in the case of breach of some specific information duties in the distance contracts. Nevertheless, the TRLGDCU55 does not establish the same remedy in the case of distance contracts, which can be considered to be an incoherent legislative solution56 .

III.3. Breach of contract

In some cases the information that was (or should have been provided) before the conclusion of the contract forms part of the contract itself and becomes one of the terms of the contract. Breach of this kind of information duties, either by providing false or incomplete information or by not providing any at all, will then amount to the breach of contract.

Under English law it is important to determine if the breach of information duties gives rise to the claim for misrepresentation or for the breach of contract, as the assessment of damages will be different 57. In what refers to liability for misrepresentation in tort, the damages awarded should put the claimant into the position he would have been in, had not the tort been committed, that is as if the representation had not been made. On the other hand, the damages for the breach of contract put the claimant into the position in which he would have been, had the contract been correctly performed, as if the statement had been true. Moreover, the rescission of contract is always granted in the case of actionable misrepresentation, while the breach contract does not always give right to set the contract aside 58. Therefore it is essential to distinguish statements that are representations from those that can be regarded as terms of contract.

The main distinction between terms and representations lies in the intention with which the statement was made. Although the approach adopted by courts in what refers to intention is objective, it is often difficult to determine the nature of the statement, as there are numerous principles, none of which decisive, to guide the court in deciding on this matter59 .

Also terms implied in law should be taken into account as their breach will amount to the breach of contract, as in the case of any other term of contract. Acts of Parliament concerning consumer contracts often imply terms related to the information duties, as to duties that arise out of certain types of contracts.

In what refers to Spanish law, there are authors who opt for the remedies for breach of contract in the case of breach of information duties. The information duties are considered to be precontractual duties but their breach will amount to the breach of contract. This is the reasoning of P. Valés Duque, who explains that 'In what refers to the information duties, it has to be considered that, to the liability rising from the breach of those precontractual duties […], the law of contract should apply'60 .

IV. Closing remarks and conclusions

The information duties at the same time constitute an obstacle to the development of the cross-boarder e-commerce and a factor that could contribute to the increase of trust of both consumers and traders. Electronic B2C transactions differ from the traditional commerce as the bargaining power of the contracting parties is even less equal than normally, and therefore the European legislator seeks to boost the e-commerce by addressing the issue of the information duties. Nevertheless, those duties without effective remedies available for their breach in the national legal systems would not be observed by the traders.

It has to be taken into account, however, that those duties do not present any particular novelty in European legal systems, and the traditional contract law in both Spain and England offers various remedies for not providing the other party with the due information. The interest in comparing those legal systems lies in the possible high number of cross-boarder transactions and the different nature of common and continental law, which may be confusing for the consumers seeking remedies in the case of breach of their rights.

The main difference between the compared systems is that the English law does not recognise a doctrine of good faith and fair dealing and therefore neither  a general duty of disclosure, while the Spanish contract law is based on those principles. However, the effectiveness of the remedies offered by both systems is similar, it can be therefore concluded that the differences are more of technique than result61 .