With the first day of 2022, the amendment to the Civil Obligations Act enters into force (Amendment). The reason for this legislative initiative lies in the requirement to implement the Directive (EU) 2019/771 of the European Parliament and of the Council of 20 May 2019 on certain aspects concerning contracts for the sale of goods, amending Regulation (EU) 2017/2394 and Directive 2009/22/EC, and repealing Directive 1999/44/EC.
The main objective of the latter Directive 199/44 /EC, as well as of the current Directive (EU) 2019/771, was to harmonize the rules on seller’s liability for lack of conformity in consumer sales contracts. However, Directive 199/44 /EC left room for Member States to maintain more or less stringent provisions than those laid down therein. Such approach has resulted in different levels of consumer protection in the Member States, what proved to be a significant limiting factor in cross-border trade. Therefore, provisions diverging from those laid down in the Directive (EU) 2019/771 are no longer allowed unless otherwise provided for in the Directive.
Even though the aforementioned directives cover consumer sales contracts, when transposing them into domestic legislation, the Croatian legislator expanded their scope on non-consumer contracts by incorporating them into the Civil Obligations Act, a lex generalis in relation to the Consumer Protection Act but leaving particular features for consumer contracts as well as commercial ones.
Amendment took place after Article 399, entirely covering the liability for lack of conformity, up to (including) Article 429, and referring to the following:
- Scope of the seller’ liability – It is now expressly stated that these provisions apply on both consensual and real (“hand in hand”) sales contracts. They also cover contracts for the supply of goods that are yet to be produced or manufactured, regardless of whether it is a sales contract, a contract on performing work or other contract. Even though contracts for the supply of the digital content or services are exempt from application, an exception is envisaged for the so-called goods with digital elements (e.g., smartphone with pre-installed apps). Goods with digital elements are a completely new concept introduced by this Amendment for which the rules on the passing of risk are especially set out depending on whether it is a one-time or continuous supply of digital content/services. The moment of passing of risk is also specifically envisaged for goods to be installed or assembled. In addition, the Amendment intervened in the issue of the burden of proof, both in civil and consumer contracts, and especially in the contracts for the sale of goods with digital elements with continuous supply of digital content/services.
- The concept of the lack of conformity – Amended Article 401 completely redefines the concept of the lack of conformity. Thus, in order to comply with requirements for conformity, goods have to meet both subjective (Article 401, paragraph 1, items 1-4; the goods shall be fit to requirements stipulated by the sales contract) and objective criteria (Article 401, paragraph 2, items 1-6; the goods shall be fit to requirements which the consumer may reasonably expect given the regular circumstances). However, it is possible to deviate from the objective criteria in case the consumer has been specifically informed that a particular feature of the goods is deviating from the objective requirements for conformity and has expressly accepted that deviation when concluding the contract. Also, the Amendment sets out the supply with necessary updates, including security updates, as a special objective requirement for conformity of the goods with digital elements.
- Buyer’s rights – Buyer’s rights in case of lack of conformity have remained unchanged in terms of content, and therefore the buyer is still entitled to require the seller to repair or replace the goods, to receive a proportionate reduction in price or to terminate the contract. However, according to the Amendment, the buyer can no longer make requests of his own choice, but is obliged to first require the repairment/replacement of the goods (i.e., fulfillment of the contract), and only in the alternative reduction in price or termination of the contract. With this significant change, the legislator actually reduced the level of consumer protection in Croatia compared to the previous regulation. The buyer is, as he was before, entitled to redress, but the novelty is that the seller against whom the buyer has exercised rights on this basis, can exercise the same rights against his seller if the conditions for his liability are met.
- Commercial guarantee – The previous guarantee for the correctness of the goods has been replaced by the concept of commercial guarantee. It is defined as any undertaking by the seller or a producer (the guarantor) to the consumer, in addition to the seller’s legal obligation relating to the guarantee of conformity, to reimburse the price paid or to replace, repair or service goods in any way if they do not meet the specifications or any other requirements not related to conformity set out in the guarantee statement or in the relevant advertising available at the time of, or before the conclusion of the contract. Thus, if the conditions laid out in the commercial guarantee statement are less advantageous to the consumer than those laid down in the associated advertising, the conditions laid out in the advertising will be binding.
Harmonization of rules on liability for lack of conformity in the way it is approached by the European legislator will, without doubt, contribute to the harmonization of the level of consumer protection in the Member States and thus improve the functioning of the European Union’s internal market. The Amendment is a much-needed modernization of the previous regulation of liability for lack of conformity that referred more to “classic” goods as opposed to digital ones. That being the case, it is a complete, comprehensive, far-reaching amendment that will be of great importance for day-to-day contractual relationships.