The Court of Justice of the European Union recently ruled in an interesting case about guarantees in consumer contracts.  A dispute arose between LACD GmbH (manufacturer) and BB Sport GmbH & Co. KG (retailer) concerning the lawfulness of a statement attached to clothing marketed by LACD.  BB Sport did not believe that the wording of LACD’s guarantee complied with the requirements of the German Civil Code.  The wording said:

“Every LACD product comes with our lifetime guarantee. If you are not completely satisfied with any of our products, please return it to the specialist dealer from whom you purchased it. Alternatively, you can return it to “LACD” directly but remember to tell us where and when you bought it.”

BB Sport sought an injunction prohibiting LACD from using such statements. The German courts took the view that the outcome of the dispute depended on the interpretation of point 14 of Article 2 of Directive 2011/83 (the EU Consumer Rights Directive) and point 12 of Article 2 of Directive 2019/771 (the EU Sale of Goods Directive) and referred the case to the CJEU.  They asked these questions:

• Can any other requirements not related to conformity set out in the guarantee statement under point 14 of Article 2 of [the EU Consumer Rights Directive] and any other requirements not related to conformity under point 12 of Article 2 of [the EU Sale of Goods Directive] apply where circumstances specific to the consumer, in particular his or her subjective attitude towards the item purchased (in this case, the consumer’s personal satisfaction with the item purchased), have a bearing on the guarantor’s obligation, without it being necessary that those personal circumstances relate to the condition or features of the item purchased?
• If the answer to the above is yes, must it be possible to establish the absence of requirements based on the circumstances specific to the consumer (in this case, the consumer’s satisfaction with the goods purchased) in the light of objective circumstances?’

The Court highlighted the fact that the EU Sale of Goods Directive does not apply to contracts concluded before 1 January 2022. In this case the relevant contract was concluded in August 2018 and so the court had to fall back on the older EU Consumer Rights Directive.

Article 2 of the EU Consumer Rights Directive defines the concept of “commercial guarantee” as:

“any undertaking by the trader or a producer (the guarantor) to the consumer, in addition to his 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”.

The Court pointed out the words “any other requirements” can include not satisfying the consumer’s subjective expectations about the goods purchased.

It also highlighted the fact that EU law requires consumers to be provided with pre-contractual information, including information about commercial guarantees.  This means that all traders must provide the consumer concerned, in a clear and comprehensible manner, with information concerning, where applicable, the existence and conditions of commercial guarantees, before the consumer is bound by a contract or offer.

In addition, the court said that interpreting a statement about ‘the satisfaction of the consumer concerned with the product purchased’ as a commercial guarantee is consistent with the objectives in the Directive of providing a high level of consumer protection. This allows the consumer to understand the contract that they plan to enter into, so that they can make an informed decision about whether to go ahead, and also to be able to claim from the trader the reimbursement of the price paid by making a mere statement of non-satisfaction. 

In addition, the Court said that the undertaking by a trader to take back the goods purchased if the consumer concerned is not satisfied is an expression of that trader’s freedom to conduct a business.

Finally, the Court said that the failure to satisfy the consumer’s subjective expectations regarding the goods cannot be subject to objective verification. Therefore, if a consumer says that they are not satisfied (or words to that effect), it must be regarded as sufficient.

The Court therefore ruled that the concept of ‘commercial guarantee’ includes, as ‘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’, an undertaking made by a guarantor to the consumer concerned in respect of circumstances specific to the consumer, such as his or her personal satisfaction with the goods purchased, without it being necessary to verify objectively whether those circumstances exist to give effect to that commercial guarantee.

The judgment makes clear that it is possible to ensure a high level of consumer protection as well as allowing traders to offer a wide guarantee and conduct their business as they wish.  While the judgment will only have persuasive effect for judges following Brexit, consumer law in the UK requires guarantees to be clearly worded, as does the CAP Code.

Retailers may well be nervous about this, and perhaps understandably so. Although reputable retailers tend to be laser-focused on customer service and aware of their consumer protection obligations, if manufacturers are able to raise the bar at will, this can impose additional responsibilities on the retailer and create confusion for customer service staff. By offering a lifetime satisfaction guarantee, manufacturers are effectively giving consumers cancellation rights well in excess of what they are entitled to under consumer laws. Consumers making in-store purchases have legal rights in relation to faulty or misdescribed products.  They can cancel online purchases without cause, subject to certain limitations and time limits. But a lifetime satisfaction guarantee effectively allows consumers to express their dissatisfaction at any time during the life of the product – with retailers required to give effect to this. Retailers should be mindful of such manufacturer guarantees and will need to be especially careful to ensure their customer service staff are aware of them – and how to deal with them.