Case law

  • Case Details
    • National ID: Recourse 54/2015
    • Member State: Cyprus
    • Common Name:link
    • Decision type: Administrative decision, first degree
    • Decision date: 23/09/2015
    • Court: Competition and Consumer Protection Service
    • Subject:
    • Plaintiff: Competition and Consumer Protection Service
    • Defendant: E. H. Hi-Spec Properties Ltd
    • Keywords: immovable property, one-off costs, unfair terms
  • Directive Articles
    Unfair Contract Terms Directive, Article 1, 1. Unfair Contract Terms Directive, Article 3, 1. Unfair Contract Terms Directive, Article 3, 2. Unfair Contract Terms Directive, Article 3, 2. Unfair Contract Terms Directive, Article 3, 2. Unfair Contract Terms Directive, Article 4, 2. Unfair Contract Terms Directive, Article 6, 1. Unfair Contract Terms Directive, ANNEX I, 1., (b) Unfair Contract Terms Directive, ANNEX I, 1., (e) Unfair Contract Terms Directive, ANNEX I, 1., (f) Unfair Contract Terms Directive, ANNEX I, 1., (o)
  • Headnote
    (1) Terms setting out an obligation on the seller/supplier, but not specifying the consumer's rights in case of default, or specifying such rights in an incomplete manner, are regarded as unfair.

    (2) Terms setting a significantly unequal deadline for the seller/supplier vis-à-vis the consumer, are regarded as unfair.

    (3) Terms providing for an insignificant loss of profit in case the seller/supplier does not perform his obligations under a contract, provided they have not been individually negotiated, are regarded as unfair.

    (4) Terms setting out an important right of the consumer but not disclosing important information about the exercise of such right, are regarded as unfair.

    (5) Terms not specifying in detail costs and expenses borne by the consumer, are regarded as unfair.
  • Facts
    By virtue of a sales contract signed in 2006 (the "Contract"), the defendant sold in the context of its commercial activity to a consumer immovable property - a flat, for personal use. The consumer filed a complaint with the Consumer Protection Service (the "Service") against the defendant for the non-issuance of titles of ownership of the property she bought and for not informing her of pre-existing mortgage charges over the said property. The consumer requested the Service to review her complaint under the Unfair Business-to-Consumer Commercial Practices Directive 2005/29/EC (implemented into the national Unfair Commercial Practices From Business to Consumers Law 103(I)/2007), but, since the said piece of legislation was not in effect at the time of the signing of the contract and it had not retrospective effect, the Service decided to examine the Contract in accordance to the provisions of the Unfair Contract Terms in Consumer Contracts Directive 93/13/EC (implemented into the national Unfair Contract Terms in Consumer Contracts Law 93(I)/96) instead. The defendant was under liquidation following a court order, so the Service announced the complaint to the liquidator and asked his opinion on the matter. The liquidator's representative replied that the title of the property had not yet been issued, that he cannot know the circumstances in which the property was bought and that he does not have in his possession any sample of contract or advertising material. Further, he reported that the charge over the property existed at the time of purchase, however he was in no place to know whether the consumer was informed about the said charge. The liquidator added that certain encumbrances also existed over the property which, however, could not be paid off due to lack of available capital.
  • Legal issue
    (1) In the term in question, there is no reference to the time the defendant is expected to perform as well as any sanctions available to the consumer for non-performance by the defendant, or for late performance, or for non issuance of a building permit which would render the final building illegal. The way the term is phrased is unclear, and its wording is at parts flawed. The term thus may be considered unfair by virtue of article 5 of Directive 93/13/EC (implemented into national law by article 7 of the Unfair Contract Terms in Consumer Contracts Law 93(I)/96) , which sets out an obligation on the seller to ensure that contractual terms are formulated in a clear and understandable manner, and paragraph 1(b) of the Annex to the Directive 93/13/EC (implemented into national law by paragraph 1(b) of the Unfair Contract Terms in Consumer Contracts Law 93(I)/96, since it obstructs in a way that is unlawful the exercise of the consumer's rights against the seller.

    (2) The time frames afforded to the two parties to terminate or rescind the Contract (6 months for the seller and 30 days + 30 days for the consumer) create a significant imbalance between the rights and obligations of the two parties to the contract. Therefore they are regarded as unfair by virtue of article article 3 (1) of Directive 93/13/EC (implemented into national law by article 5(1) of the Unfair Contract Terms in Consumer Contracts Law 93(I)/96) since it creates at the expense of the consumer a significant imbalance, and by virtue of article 5 of Directive 93/13/EC (implemented into national law by article 7 of the Unfair Contract Terms in Consumer Contracts Law 93(I)/96) since the Contract does not set out the rights and/or obligations of the parties should they choose to terminate or rescind the Contract.

    (3) In proportion with the whole price of the property (CY£82.000 + VAT) and the importance of the defendant's obligation to transfer the titles of ownership to the consumer, an obligation through which all the legal rights of the consumer derive and as such is the subject-matter of the Contract, the amount of CY£500 is insignificant for safeguarding the transfer of ownership titles to the consumer. Furthermore, a significant imbalance is created between the rights and obligations of the defendant and the consumer to the detriment of the latter. Therefore the contested term is regarded as unfair by virtue of the following articles:
    - articles 1 (1) and 3 (2) of Directive 93/13/EC (implemented into national law by §(1) and §(3) of article 3 of the Unfair Contract Terms in Consumer Contracts Law 93(I)/96) , since they were not a product of individual negotiation but instead were pre-formulated and the defendant did not discharge his burden to prove the opposite;
    - article 3 (1) of Directive 93/13/EC (implemented into national law by article 5(1) of the Unfair Contract Terms in Consumer Contracts Law 93(I)/96) , due to the significant imbalance it creates between the rights and obligations of each party; and
    - paragraphs (e) and (o) of §1 of the Annex to the Directive 93/13/EC (implemented into national law by paragraphs (e) and (o) of §1 of the Annex to the Unfair Contract Terms in Consumer Contracts Law 93(I)/96) , since it imposes on the consumer a disproportionately high penalty in the event of not performing her obligations and it further obliges the consumer to perform her obligations (repayment of a debt to the defendant minus the amount of CY£500) before the defendant performs his obligations (transfer of titles of ownership of the property).

    (4) Due to the importance of the right of specific performance of the Contract and the way that it operates in favor of the consumer, it appears that the defendant was not acting in good faith, so as to ensure the real possibility of exercise of such right by the consumer, by offering her the necessary information for the procedure, or the laws and conditions that surround such right in the Contract. Such information relates to the update of the consumer for the existence of the legal context or legal basis which relates to the process of specific performance of the Contract, as well as the explanation of the conditions for exercise of the said right on the consumer's part (that is, the reason, the manner and the time), which does not appear in any case to have been given to the consumer or to have been provided within the Contract she signed at the time.

    (5) Taking into account the term it becomes apparent that there is no reference to the exact cost of the letter of credit creating an imbalance between the rights and obligations of the parties. Furthermore, the said term does not appear to have been subject to individual negotiation, resulting in the consumer not being able to affect its content. Therefore the said term is regarded as unfair by virtue of the following articles:
    -articles 1 (1) and 3 (2) of Directive 93/13/EC (implemented into national law by §(1) and §(3) of article 3 of the Unfair Contract Terms in Consumer Contracts Law 93(I)/96), since they were not a product of individual negotiation but instead were pre-formulated and the defendant did not discharge his burden to prove the opposite;
    -article 3 (1) of Directive 93/13/EC (implemented into national law by article 5(1) of the Unfair Contract Terms in Consumer Contracts Law 93(I)/96), due to the significant imbalance it creates between the rights and obligations of each party.
  • Decision

    (1) Are terms setting out an obligation on the seller/supplier, but not specifying the consumer's rights in case of default, or specifying such rights in an incomplete manner, regarded as unfair?

    (2) Are terms setting a significantly unequal deadline for the seller/supplier vis-à-vis the consumer regarded as unfair?

    (3) Are terms providing for an insignificant loss of profit in case the seller/supplier does not perform his obligations, which have not been individually negotiated, under the contract regarded as unfair?

    (4) Are terms setting out an important right of the consumer but not disclosing important information about the exercise of such right regarded as unfair?

    (5) Are terms not specifying in detail costs and expenses borne by the consumer regarded as unfair?

    URL: http://www.mcit.gov.cy/mcit/cyco/cyconsumer.nsf/All/88BA10DE0055F81EC2257F5400399B2A/$file/%CE%91%CF%80%CF%8C%CF%86%CE%B1%CF%83%CE%B7%202015-54%CE%9A%CE%A1%20%CE%95H%20Hi-Spec%20Properties%20Ltd.pdf?OpenElement

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  • Result
    The court found that terms 3, 9, 10 (d), 11, 15, 17 and 24 of the Contract are unfair.