ECJ ruling on consumer revocation: Contracts without proper revocation instructions could be expensive

The ECJ ruling on consumer revocation: What it means

The ruling of the European Court of Justice in case C-97/22 delivers a significant message for all business managers, freelancers, and companies that offer their services outside of traditional business premises or via digital platforms. This decision makes it clear that the duty to inform about the right of withdrawal plays a central role in consumer protection. Specifically, the court determined that in case of omitted or incorrect information about the right of withdrawal by the entrepreneur, the consumer can revoke the contract even after complete fulfillment of the contract. Furthermore, the ruling emphasizes that in such a case the consumer is exempt from any obligation to pay.

This means that companies that do not fulfill their information obligations run the risk of having to provide their services without corresponding payment, even if they have already been provided in full. This ruling makes it clear that respecting and complying with the right of withdrawal is not only a legal aspect, but also a business aspect of great importance. Companies are thus urged to carefully review their contracts and business practices and adjust them if necessary, both to protect consumers’ interests and to protect themselves from potential financial losses.

The details of the ruling and their impact on companies

The case before the European Court of Justice involved a consumer who had entered into a contract with a company to overhaul the electrical installation in his house. The special feature here is that the company concerned failed to inform the consumer about his legal right of withdrawal. After the company had provided the agreed services in full, the consumer surprised by revoking the contract and refused to settle the issued invoice.

In its decision, the ECJ determined that the company, despite complete fulfillment of the contract, is not entitled to payment. This ruling is based on the fact that the company had failed to properly inform the consumer of his right of withdrawal. This information represents a fundamental right of the consumer to enable him to make his decision to conclude the contract consciously and in full knowledge of all the consequences.

This case highlights the importance of fully understanding and implementing the legal framework and obligations that come with entering into a contract. In this specific scenario, the company suffered significant financial losses due to its failures, as it was left with the costs incurred after successfully performing its services

The principle of the right of withdrawal and the impact on practice

The right of withdrawal is intended to protect the consumer, especially if the contract was concluded away from business premises. In this context, the consumer may be exposed to greater pressure or succumb to an element of surprise. The information about the right of withdrawal enables him to make the decision whether to conclude the contract or not in full awareness of the factual situation.

The ruling and its relevance for SaaS providers and freelancers

In the increasingly digital business world, similar legal challenges can affect not only traditional companies, but also players in the digital space. This includes, for example, SaaS (software as a service) providers, marketing service providers, graphic designers, and other freelancers who often offer their services via online platforms. If the right of withdrawal is not correctly explained in contracts concluded over the Internet, or is even omitted completely, these providers may find themselves facing the same legal and economic challenges as the company in the case decided by the ECJ.

Digital contracting is a special situation because consumers in this context have no physical contact with the contracting party and may be less vigilant due to the lack of face-to-face contact. Therefore, correct and complete information about the right of withdrawal is also essential in this context.

The case underscores the need for providers in the digital economy to carefully review their contracts and terms and conditions and ensure that they provide consumers with the necessary information. Otherwise, they may face significant legal consequences and economic losses. This can have far-reaching consequences, especially for freelancers and small business owners, whose financial margins are often limited.”

How can companies ensure that they comply with the requirements of the right of withdrawal?

It is important that companies seek legal advice to ensure that their contracts comply with the requirements of the right of withdrawal. In addition, it is important that the cancellation policy is prominently placed to ensure that the consumer can easily find and understand it.

Final thoughts

The consequences of the ECJ’s ruling are far-reaching and underscore the importance of consumer protection. Companies of all sizes and in all industries should take this ruling as an opportunity to review and adjust their practices with regard to revocation notices. It should always be kept in mind that under the provisions of German law enacted to implement the Consumer Rights Directive, a consumer is not required to pay for the service provided before the expiry of the withdrawal period if the trader has failed to inform him of his right of withdrawal. This also applies to the area of digital services and online contracts.

By carefully observing the right of withdrawal and correctly implementing cancellation policies, companies can both protect their customers and save themselves from financial and legal consequences.

Conclusion

The ECJ’s ruling sheds light on the need to examine contracts carefully. The provision of services without the possibility of value replacement after revocation can have high economic consequences for providers. Especially for small and medium-sized companies as well as freelancers, it is of utmost importance to comply with the legal requirements for the revocation policy in order to avoid financial losses. This decision clearly shows that consumer protection is a high priority in the European Union and companies should be aware of this.

Author: Marian Härtel

Marian Härtel ist Rechtsanwalt und Fachanwalt für IT-Recht mit einer über 25-jährigen Erfahrung als Unternehmer und Berater in den Bereichen Games, E-Sport, Blockchain, SaaS und Künstliche Intelligenz. Seine Beratungsschwerpunkte umfassen neben dem IT-Recht insbesondere das Urheberrecht, Medienrecht sowie Wettbewerbsrecht. Er betreut schwerpunktmäßig Start-ups, Agenturen und Influencer, die er in strategischen Fragen, komplexen Vertragsangelegenheiten sowie bei Investitionsprojekten begleitet. Dabei zeichnet sich seine Beratung durch einen interdisziplinären Ansatz aus, der juristische Expertise und langjährige unternehmerische Erfahrung miteinander verbindet. Ziel seiner Tätigkeit ist stets, Mandanten praxisorientierte Lösungen anzubieten und rechtlich fundierte Unterstützung bei der Umsetzung innovativer Geschäftsmodelle zu gewährleisten.