Last year, I already drew attention to the problem that tradespeople and service providers acting without proper withdrawal instructions face significant financial risks. Unfortunately, in my experience, this situation has not improved over the past year. Trade chambers do not seem to adequately warn about this issue, leading many tradespeople to repeatedly "fall for it".
It is crucial to understand that the cancellation policy is not merely an annoying formality. It is a legal obligation. Non-compliance can have serious consequences. Tradespeople and service providers must be aware that without proper instruction, they may not be entitled to remuneration and might even have to refund payments already received.
The Importance of Withdrawal Instructions for Tradespeople
The cancellation policy is of crucial importance for tradespeople and service providers who conclude contracts outside their business premises. They must inform their customers about the right of withdrawal. This right allows consumers to withdraw from a contract within 14 days without giving reasons.
This information must be provided in writing or on a durable medium. Furthermore, it must be formulated clearly and comprehensibly. A mere reference on a website or in general terms and conditions is insufficient.
The withdrawal policy must inform the customer about:
- The conditions for exercising the right of withdrawal.
- The deadlines for exercising the right of withdrawal.
- The procedure for exercising the right of withdrawal.
If this obligation is breached, it has considerable financial consequences for the tradesperson. They are not entitled to remuneration and must refund any payments already received, even if the service has already been provided in full.
Current Case Law and Its Consequences for Service Providers
The significance of withdrawal instructions has been emphasized by the case law of the European Court of Justice (ECJ) in recent years. In a ruling dated May 17, 2023 (Ref.: C-97/22), the ECJ clarified a key point. In the absence of information about the right to withdraw from an off-premises contract with a tradesperson, the consumer does not have to pay for services already provided after withdrawing.
In the case at hand, a consumer commissioned a tradesperson to carry out electrical installation work for their house. After the work was completed and the electrical installation installed, the tradesperson demanded payment of the agreed remuneration. The contract was concluded by way of distance selling, but the consumer was not informed about their right of withdrawal. Consequently, the consumer withdrew from the contract.
The ECJ ruled that, in this specific case, the tradesperson must bear the costs of fulfilling the contract during the withdrawal period. This ruling clearly shows the importance for tradespeople and service providers who conclude contracts outside their business premises.
Whether contracts are made by email, telephone, or at the consumer's home, they must properly inform the consumer about the right of withdrawal. They must fulfill all statutory information obligations and hand over these instructions to the consumer. The tradesman's business should also confirm the latter in writing.
Consequences of Missing or Incorrect Withdrawal Instructions
It is not uncommon for consumers to regret contracts they have already concluded. This can occur particularly if these contracts are agreed outside business premises, as consumers are often put under psychological pressure and surprised in such situations. Due to the risk of so-called "surprise situations," the European legislator created a Europe-wide standard for consumer protection many years ago, especially for distance selling and off-premises contracts.
The right of withdrawal aims to protect consumers from making spontaneous decisions. In many cases, consumers are unaware of their right of withdrawal outside of traditional purchase and loan agreements. Companies often fail to inform them correctly or at all.
Contrary to common belief, consumers are not only entitled to a right of withdrawal for online purchases. This was also highlighted by the ECJ's decision regarding electrical installation work on a house. Nowadays, most contracts not concluded at the contracting party's business premises can be revoked. Even if payments have already been made, these can be reclaimed after revocation. This represents a significant legal risk for businesses.
Practical Tips for Ensuring Proper Withdrawal Instructions
To avoid payment defaults and legal disputes, tradespeople should pay attention to a few important points. First, it is essential that the withdrawal instruction is provided in writing or on a durable medium. The model forms provided in the Annex to the Introductory Act to the German Civil Code (EGBGB) can be used for this purpose. It is advisable to obtain written confirmation from the customer that they have received the withdrawal instructions. This can be done by signing an appropriate form.
Another important point is the timing of when you start work. Tradespeople should not begin work until after the 14-day withdrawal period has expired, unless the customer expressly requests an earlier start. In this specific case, the customer should confirm in writing that they waive their right of withdrawal.
To ensure legal certainty, it is highly advisable to seek advice from a lawyer or the Chamber of Crafts. This proactive step helps avoid costly mistakes and ensures that all legal requirements are met. Professional contract drafting can save significant future expenses.
Conclusion
Proper withdrawal instructions are of utmost importance for tradespeople and service providers. Recent ECJ case law has demonstrated that breaches of this obligation can lead to severe financial consequences. Tradespeople should, therefore, exercise the greatest care when informing their customers about their rights.
It is advisable to review existing contracts and, if in doubt, seek legal advice to ensure compliance with all legal requirements. This is the only way tradespeople can avoid not being paid for their services and being left to bear the costs themselves.
It is hoped that chambers of crafts and trades will draw more attention to this problem in the future and raise awareness among their members. Comprehensive information and education are key to preventing tradespeople from repeatedly "falling for" the problem of missing withdrawal instructions and suffering considerable financial losses.
Consumers, on the other hand, should be aware of their right of withdrawal and, in case of doubt, seek legal advice to enforce their rights.