Matters relating to a contract: rescission and repayment claims

Claims which do not affirm and enforce a contract, but seek rescission of the contract and the recovery of money paid must surely fall within the Section, especially where the consumer brings or defends the proceedings on the basis of special legislation for the protection of consumers. More difficult is the case brought against a supplier who has not acted in good faith or who has failed to conclude a contract with the consumer. It is very doubtful whether such a claim by a consumer against a supplier who is alleged to have caused loss by failing to conclude a contract with the consumer would fall within Section 4. It has been held that claims which are founded on such legal obligations, predicated on the absence of a contract, do not raise matters relating to a contract, but are instead matters relating to a tort; and it has recently been confirmed that Article 15, which speaks of matters relating to a contract concluded by ... a consumer, could not extend to such a claim: there must have been a contract concluded by the parties.

However, where the non-contractual claim (for example, against the professional for its failure to comply with its duty under consumer protection law to explain the risks to the consumer prior to the conclusion of the contract) is indissociably linked to the contract which the parties did conclude, legal proceedings based on such liability for failure to comply with such pre-contractual obligations it may be brought in the court identified by Section 4. According to AU v Reliantco Investments Ltd,51 even if the claim is brought solely in respect of such pre-contractual liability it may fall within Section 4. In a case in which the consumer wishes to bring such a claim together with a claim to enforce the contract, this decision will prevent the fragmentation of jurisdiction and help the weaker party.[1] It appears that the conclusion of a qualifying contract opens the gate to Section 4; the actual claims which may then be brought are not restricted to contractual claims properly so called. After all, Article 15 does say matters relating to a contract concluded ...

The result should be that wherever the relationship between consumer and professional was that of parties to an actual contract, a disputed contract, an avoided contract, a failed contract, etc., the claim associated with that contract should have the potential to fall within Article 15. It would be convenient if this extended to a situation in which the parties tried but failed to conclude a contract, and that this is the fact which founds the claim, but as the law presently stands, such a claim does not fall within the Section.

Parties to the contract; parties to the proceedings

In order to claim the jurisdictional protection which Section 4 of Title II extends to a consumer, the consumer must also be party to the proceedings brought on the contract: the litigation privilege is for those who made the contract. In Shearson Lehmann Hutton Inc v TVE, a private investor, considered to be a consumer, had entered into a speculative investment contract which had turned out to be disastrous. However, by the time a claim was brought against the investment adviser, whose professional performance was alleged to be inadequate, the rights of the contracting party had been assigned to an entity which was in the business of enforcing such claims. It was held that the proceedings did not fall within Section 4, as the claimant was not the weak and disadvantaged party for whose benefit the jurisdictional rules had been framed. The point was reiterated in Schrems v Facebook Ireland Ltd,' where it was held that an individual who had taken an assignment of claims which consumers might have raised on the basis of their contracts with a social media company, did not have the protection of Section 4 when he sued in respect of the duties owed by the company.

It also follows that proceedings against rogue traders brought in the general interest of consumers, by bodies such as a Consumers Association, Offices of Fair Trading, or various financial services regulators, etc, will not be within Section 4. Thus, in VfK v Henkel, an Austrian entity charged with taking action to prevent the use of unfair terms in consumer contracts took proceedings[2] against a professional who was using such terms in his dealings with consumers. It was held that the proceedings brought by VfK fell outside Section 4, as the claim for relief was not being advanced by a consumer. There was no material sense in which the claim brought by VfK related to a contract made by a consumer, even though VfK was applying for orders in respect of contracts which the professional trader proposed to make with consumers. Neither did the particular institutional claimant need the special jurisdictional advantages from which a consumer claimant would have benefited.

  • [1] 2 5’ C-89/91, [1993] ECR 1-139. 3 Cf C-347/08 Vorarlberger Gebietskrankenkasse v tVGV-Sehwabische Allgetneine Versicherungs AG [2010] ECR 1-8661; C-433/01 Freistaat Bayern v Elijdenstein [2004] ECR 1-981; Hatzi v XL Insurance Co Ltd [2009] EWCA Civ 223, [2010] 1 WLR 470. Likewise, if the claimant consumer does not have a direct contractual relationship with the defendant, but has a contractual relationship with an intermediary who, in turn, has a contract with the professional, Section 4 is inapplicable: C-375/13 Kolassa v Barclays Bank pic EU:C:2015:37, [2016] 1 All ER (Comm) 733. 4 C-498/16, EL):C:2018:37, [2018] 1 WLR 4343. 5 The use of language is deliberate, as the identity of the body or bodies charged with bringing such proceedings is liable to change as the various regulatory regimes are reviewed and improved. 6 C-167/00, [2002] ECR 1-8111.
  • [2] Pursuant to Austrian legislation implementing Directive 93/13 on Unfair Terms in Consumer Contracts. 2 There plainly was a sense that it did relate to a contract made by a consumer, but in an entirely abstract way. 3 It followed that as the claim was not based on a contractual obligation, it fell within Art. 5(3), on which see Chapter 14, below. 4 Schlosser [1979] OJ C59/71, [157], considers hire purchase as tantamount to an instalment sale. 5 150/77,(1978] ECR 1431. 6 After all, although cheques are falling into disuse, the complexity of the financial arrangements actually made or brought about by a customer who pays with a cheque or credit card does not generally indicate sophistication on the part of the customer. 7 C-99/96 Mietz v Intership Yachting Sneek B V [1999] ECR 1-2277.
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