ECJ Clarifies Assessment Of Fairness Of Consumer Contract Terms

On 16 January 2014, the Court of Justice of the European Union ("ECJ") responded to a preliminary question from a Spanish court relating to unfair consumer contract terms (Case C-226/12, Constructora Principado SA v. José Ignacio Menéndez Álvarez).

Under the property purchase contract at issue, the consumer was responsible for paying various surcharges such as a tax on the increase in the value of urban land and various utilities. After paying these charges, the consumer claimed that they should be reimbursed because of the unfair nature of this contractual term which had created a significant imbalance in the rights and obligations of the parties. Under general Spanish law, the seller has the obligation to pay these charges.

The Spanish Court sought guidance from the ECJ as to the interpretation of the term "significant imbalance", which is one of the general criteria, set out in Article 3(1) of Council Directive 93/13/EEC on unfair terms in consumer contracts (the "Directive"), for defining an unfair term.

The referring court essentially sought to determine whether obliging consumers to pay for expenses that, by law, are to be borne by the seller is, in itself, enough to demonstrate the existence of a significant imbalance when determining the fairness of a contractual term.

The ECJ applied the test for significant imbalance contained in its earlier case law, under which the national court must look at the rules that would apply in the absence of an agreement between the parties. If, based on that analysis, the consumer may be said to have been placed in an unfavourable position, a significant imbalance may exist.

The ECJ held that a national court must not, therefore, limit its assessment to a simple quantitative economic evaluation based on a comparison of the total value of the transaction which is the subject of the contract and the costs charged to the consumer under that clause. Rather, a significant imbalance may occur solely as the result of a sufficiently serious impairment of the legal situation of a consumer through the contractual provision denying him his legal rights or limiting their enforcement.

Reiterating its judgment in Banif Plus Bank v. Csaba Csipai and Viktória Csipai (judgment of 21 February 2013 in case C-472/11), the ECJ...