Consumer Sales and Guarantees Directive, link Consumer Sales and Guarantees Directive, Article 1, 2., (a)

The fact that a professional party mistakes the other one for a consumer in a contract does not mean that false assertion is binding in future disputes between parties.

The Court of Appeal reinforced the differentiation between consumers and professionals and addressed the legal issue inherent when one party makes a mistaken assertion regarding the other’s consumer status.

The plaintiff and the respondent bank entered into a loan contract, with the purpose of financing the plaintiff’s establishment (a guesthouse) on two connected properties. As part of the contract, the properties were  mortgaged. The guesthouse later entered into operation, housing up to 28-30 guests simultaneously. After several years, the respondent terminated the agreement, citing the lack of payments from the plaintiff, and demanded the plaintiff’s full remaining debt. The case went to court. During the first process, there was a significant dispute between the parties regarding certain verbal elements of the contract, but ultimately, the Court of First Instance decided in favour of the respondent. This was appealed by the plaintiff.

Whether the plaintiff was a consumer or a professional when the loan contract was signed. If not, is the bank’s mistaken assertion that the plaintiff was a consumer binding for future disputes?

A significant aspect of the dispute was deciding a twofold question: whether the plaintiff was objectively a consumer, and if it was not, was the bank’s assertion to the contrary at the signing of the contract binding. For the first element, the Court of Appeal referred to EU directives and jurisprudence, including Directive 1999/44/EC, to determine an objective meaning of the term consumer. After concluding that the plaintiff was not a consumer under these terms, the Court also examined the second legal issue. It found that the bank’s mistaken assertion with regards to the consumer status of the plaintiff was not relevant in further evaluations of the legal relationship between the parties.

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The Court of Appeal mostly upheld the decision of the Court of First Instance but ameliorated some of the financial burden placed on the plaintiff. The Court of Appeal concluded that even if one of the parties is mistakenly assumed by the other party to be a consumer, it has no legal relevance, and that courts must only examine and apply the objective, legal definition of consumer in order to determine a party’s status.