Failure to provide information to the consumer and prevent contractual redress

A consumer who has entered into an off-premises service contract and, at the same time, has not been informed of the right to withdraw from the contract, is not obliged to pay if he exercises this right after the performance of the service. In such a case, the entrepreneur must bear the entire cost of performing the contract.

In a case examined by the Court of Justice of the European Union (see CJEU Judgment of May 17, 2023, C-97/22), a consumer concluded a contract with a trader at a distance for the renovation of an electrical installation. The trader did not inform him of the 14-day right to withdraw from the contract, which consumers have in the case of distance and off-premises contracts. After the work was completed, the entrepreneur issued a bill, but the consumer decided to withdraw from the contract and refused payment. The consumer argued that due to the failure to provide information about the right to withdraw from the contract and the performance of the work before the expiration of the withdrawal period (due to the failure to provide information extended by 12 months in this case), the trader has no right to demand payment for the services performed.

The national court that heard the case found that under German legislation implementing Directive 2011/83/EU of the European Parliament and of the Council of October 25, 2011 on consumer rights (OJ 2011, L 304, pp. 64-88, “the Directive“), a consumer is not obliged to pay for a service performed before the expiration of the withdrawal period if the trader did not inform him of this right.

However, the court questioned whether, in the situation described above, the Directive precludes any right of the trader to receive compensation even if the consumer exercised his right to withdraw from the contract after the service was performed. Indeed, accepting such a state of affairs could amount to unjust enrichment of the consumer, which contradicts the general principle adopted in CJEU case law prohibiting unjust enrichment. For this reason, the national court referred a preliminary question to the Court.

In the announced judgment, the Court confirmed that a consumer is completely relieved of the obligation to pay for services performed under an off-premises contract if the trader did not inform him of the right to withdraw from the contract, and the consumer exercised this right after the performance of the contract. The right of withdrawal is intended to protect the consumer when concluding an off-premises and distance contract, where there is a greater risk of psychological pressure or the element of surprise. Informing the consumer of this right before entering into a contract is essential and enables the consumer to make an informed decision to be bound by the contract.

On the issue of the economic gain achieved by the consumer and the prohibition of unjust enrichment, the Court recalls that the Directive aims to ensure a high level of consumer protection. In order to achieve the objective of consumer protection, the Directive introduces harmonization of certain aspects of contracts concluded between consumers and traders. Member States should not apply the rules in a way that causes them to deviate from the standard of protection provided for in the Directive (unless the Directive expressly provides otherwise). If the consumer would be obliged to bear costs that are not expressly provided for in the Directive, this objective would not be achieved. Consequently, the trader is not entitled to demand payment for the services rendered, including on the basis of a claim based on the construction of unjust enrichment.

The plaintiff in the case was the entity to which the entrepreneur ceded the claim arising from the performed construction contract. As a side note, the CJEU noted that the assignee may have a recourse claim against the entrepreneur who ceded to him the rights under the contract.