knowledge 19 June 2019 |

Expanding Consumer Rights – Two New Directives on the Sale of Goods and Digital Content

On 15 April 2019, the European Council adopted two Directives: a directive on contracts for the supply of digital content and services ¹ (the “Digital Content Directive”) and a directive on contracts for the sale of goods ² (the “Sale of Goods Directive”).  These Directives form part of the European Commission’s Digital Single Market Strategy, and aim to reduce transaction costs for businesses through harmonisation and increase the level of protection and legal certainty for consumers when buying from across the EU.

Currently, Irish consumers are protected in their dealings with traders under various pieces of legislation, including the Sale of Goods Act 1893, the Sale of Goods and Supply of Services Act 1980, the Unfair Terms in Consumer Contracts Regulations 1995 ³ , the Consumer Protection Act 2007, and the Distance Selling Regulations 2013 ⁴.  The Digital Content and Sale of Goods Directives will expand these protections, and will necessitate amendments to the existing legislative framework.

The Digital Content Directive will introduce new protections for consumers when they purchase digital services or digital content, or where they exchange personal data for digital services or content that goes beyond the minimum personal data necessary for the service to be provided.  The definition of digital services and digital content are broad enough to cover social media services, software as a service and various computer applications.  However, certain services, such as healthcare, financial services and open-source software, are expressly excluded.  The Digital Content Directive also applies to tangible media which serve exclusively as a carrier of digital content (such as CDs and DVDs).

The Sale of Goods Directive applies to contracts for goods, including goods that have digital elements that are necessary for them to function properly.  It does not apply to contracts that fall within the scope of the Digital Content Directive and Member States can make provisions to exclude contracts for living animals and second-hand goods sold at public auction from its scope.

Some of the main features of these Directives include:

• Conformity requirements: goods, digital content, or services must be fit for the purposes for which goods, digital content or services of that type would normally be used, and fit for any particular purpose for which the consumer requires them and which the trader has accepted.  They must be supplied along with the accessories and instructions that the consumer may reasonably expect to receive, and any accessories and instructions that are required by the contract.
• Burden of proof: the seller, and not the consumer, must prove that a defect in digital content did not exist at the time of delivery.  In relation to goods, any defect in conformity which is identified within one year of delivery is presumed to have existed at the time the goods were delivered.  Member States have the discretion to extend this period to two years.
• Mandatory requirements:  it is not possible to contract out of the Directives, although some of the conformity requirements can be waived with the consent of the consumer.
• Remedies: the Digital Content Directive provides remedies for failure to supply the digital content or service and failure to conform to the requirements set out in the Directive. These remedies include bringing the content or service into conformity, price reduction, or termination of the contract. The remedies set out in the Sale of Goods Directive for failure to conform to the requirements of the Directive include repair, replacement, price reduction or termination of the contract.
• Guarantee: the Sale of Goods Directive also provides for a two-year minimum guarantee of remedy for defects discovered after the delivery of goods, with the ability for Member States to introduce longer time limits.  If the contract is for goods with digital elements, then the guarantee must extend to cover defects discovered during the period in which the digital content or services are supplied under the sale contract.  There is also flexibility for Member States to introduce measures that would allow consumers and traders to agree shorter time limits for second-hand goods.

The Digital Content Directive and the Sale of Goods Directive must be adopted by Irish legislation before 1 July 2021, which will necessitate amendments to existing Irish consumer protection legislation, and in particular, to the Sale of Goods Act 1893 and the Sale of Goods and Supply of Services Act 1980.  The Directives and national implementing measures will apply from 1 January 2022.