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In 2022, we will see quite a few – and have already seen some– changes of consumer protection rules, imposing significant new obligations on businesses. In our series of articles we bring a selection of this year’s legislative changes affecting consumer protection. The subject of our first article is the government decree applicable to contracts between consumers and businesses, which entered into force on the 1^st of January 2022, transposing the Directives (EU) 2019/770 and (EU) 2019/771 of the European Parliament and of the Council (the “Directives“) into Hungarian law.

Government Decree 373/2021 (30.VI.) on the detailed rules for contracts between consumers and businesses for the sale of goods and the supply of digital content and services (the “Government Decree”) is a new element of consumer protection legislation, which sets out additional rules for contracts between consumers and businesses for the sale of goods and the supply of digital content and services.

Although the Government Decree fulfils the transposition obligation of the EU Member States, we reckon that it lacks clarity and simplicity, and several of its provisions have already been incorporated in other laws. The legislator could have promoted transparency, for example, by placing several provisions in the general rules, and by refraining from taking over the provisions of the Directives to which Hungarian law already contains identical provisions. In light of the aforementioned, we review the Government Decree without the intention to cover it thoroughly, and we share our insights.

The structure of the Government Decree is the following:

(a) General rules

(b) Specific rules for goods

(c) Specific rules for digital content and services

We examined the legislation from a structural point of view, so in many cases we have drawn parallels between provisions which are related in content but were placed in different parts of the legislation. That is why we have found it more practical to go through the legislation in the following order:

[1.] Firstly, we make some observations on the general performance requirements for both goods and digital content and services, which are placed in the general provisions.

[2.] Afterwards, we have a look at the specific performance requirements for goods with a digital element and for digital content and services.

[3.] Next, we will discuss the rules on vicarious liability and defective performance that apply separately to goods and digital content and services.

[4.] And we are closing with some observations on the rules on warranties of goods, and the rules on termination and modification of contracts of digital content and services.

1. General performance requirements

            In spite of that the Government Decree and the underlying Directives cover the contracts for the sale of goods, digital content and digital services, the legislator – apparently inconsistently – provides for general requirements for the contractual performance of the service.[1] Most probably the legislator simply did not transpose the provision with sufficient precision, since neither the Government Decree nor the Directives cover services other than those mentioned above. However, for the sake of simplicity and clarity, the wording of the Government Decree will be applied in the following.

The Government Decree sets out a number of requirements that the service must meet at the time of performance. It is remarkable that the content of several conditions laid out in the Government Decree has already been regulated in the Act V of 2013 – on the Civil Code (“Civil Code”)[2] – for example, the requirement that the service must be “fit for any purpose specified by the consumer, brought to the attention of the business by the consumer at the latest at the time of the conclusion of the contract and accepted by the business;“[3]. However, the regulation also introduces new requirements, amongst others, the service must “provide the updates specified in the contract”[4].

2. Specific performance requirements

It is crucial that there is a clear distinction between the categories of goods with a digital element and digital content and digital services, as the regulation usually sets – see below – different requirements for these two categories. For practical reasons, instead of introducing the definitions of the Government Decree, we bring some examples for these categories instead:

• Smart TVs that include a certain video application that is advertised, or a smartphone that has standardized, pre-installed apps, such as an alarm clock or camera app, provided under the sales contract, are considered to be goods with digital elements.[5]
• The various types of music files, audio files, video files are digital content and digital services are the services that create, manage, store, share and enable the sharing of them, such as video and audio sharing services and hosting services.[6]

The Government Decree lays down special rules for goods containing digital elements and for upgrades related to them, among the specific requirements for contractual performance. The Government Decree states that “the business must ensure that the consumer is notified of and receives any updates to the digital content of the goods or the digital service associated with the goods – including security updates-, that are necessary to keep the goods in conformity with the contract, and ensure that the consumer receives them”.[7] The same rule can be found in the specific requirements for digital content and services.[8] This questions the justification of placing this obligation in the specific provisions, more so that, the general provisions already require the service to be provided with the updates specified in the contract.

Out of the specific rules on digital content and digital services, it is worth to be highlighted the provision stating that “…Unless otherwise agreed by the parties, the business shall, after the conclusion of the contract, provide the consumer with the digital content or service in the latest version available at the time of the conclusion of the contract without undue delay.”[9] The legislator does not define what constitutes an undue delay and what delay is justified. This vague requirement will certainly be specified by case law.

3. Rules on vicarious liability and defective performance

The rules on both goods and digital content and services will grant consumers a wider range of possibilities to withdraw from contracts and to obtain a price reduction in the event of defective performance. According to the rules of the Civil Code, in the event of defective performance, the repair or replacement of the product can be requested in the first place.[10] So far, the so-called second-stage warranty rights – discount, withdrawal from the contract, reparation or having repaired by the buyer – have been available in three cases:

• the seller refuses to provide repair or replacement
• the seller is unable to fulfil that obligation within a reasonable time and without any significant inconvenience to the customer
• repair or replacement no longer serves the customer’s interest.[11]

This scope was extended by the Government Decree: for example, the consumer is now also entitled to a proportionate reduction in price or to the termination of the sales contract if there is a repeated lack of conformity or if the severity of the lack of conformity justifies it.[12][13] It is not clear what justifies the inclusion of this provision in the special rules, as it is found both in the special provisions for goods and in the special provisions for digital services.

The relevant provisions of the Government Decree set out the same case of defective performance[14], both for goods and for digital content and digital services. There is one difference in terminology and a substantial one in content. For goods, the legislator uses the term incorrect installation, whereas for digital content and digital services, the legislator uses a different concept: incorrect integration. In the case of goods, the business is liable for the installation carried out by it or under its responsibility only when the installation forms part of the contract of sale. This difference in content makes sense by the very nature of these services, as the integration of digital content and services is always necessary, while the installation of goods is not so. Despite these divergences, a more transparent and coherent structure would have been achieved if the legal provisions governing the specific case of defective performance had been placed uniformly among the general provisions. It would have been sufficient to place the genuine derogations in the special rules, thus facilitating the application of the Government Decree.

4. The rules on warranties of goods, and the rules on termination and modification of contracts of digital content and services

Many of the warranty provisions for goods have already been regulated in Government Decree 151/2003 (IX. 22.) on the mandatory warranty for certain consumer durables („Government Decree 151/2003”). Thus, for example, the warranty declaration has had to be written in plain and unambiguous Hungarian[15], and the name and address of the company[16] and the data identifying the goods[17] has had to be indicated on the warranty certificate so far as well. The above examples justifiably raise the question why the legislator did not try to avoid the duplication of regulations and to transpose the directives in a well thought-out way.

Among the rules on the termination of contracts for digital services, we highlight the provisions on consumer data[18]. In this regard, the Government Decree applies the rules of the General Data Protection Regulation (commonly known as the GDPR) to consumers’ personal data and lays out strict rules for consumers’ other non-personal data. With the provisions on consumers’ data, the legislator’s presumed aim is to crack down on businesses that pretend to market for free, but in fact provide digital services in exchange for consumers’ data (so-called ‘pay with data’)[19]

Dr. Máté Zalán Szili

Photo credit: pexels.com

This article contains general information and is not intended for use as legal advice or legal opinion. Although we have made every effort to provide accurate, up-to-date information in this article, it is possible that the article may not contain the most recent legal or other information due to any changes in the legal environment. The information provided here does not create a client-lawyer relationship between the website visitor / article reader and Tivadar Law Firm. If you would like to ask for our assistance in a specific case, we are at your disposal via the contact details below.

 

 

[1] Government Decree 373/2021 (30.VI.) 5.§ (1)

[2] Act V of 2013 – on the Civil Code 6:123

[3] Government Decree 373/2021 (30.VI.) 5.§ (2) b); and Civil Code 6:123.§ (1) a)

[4] Government Decree 373/2021 (30.VI.) 5.§ (2) d)

[5] Government Decree 373/2021 preamble

[6] Government Decree 373/2021 preamble

[7] Government Decree 373/2021 (30.VI.) 8.§ (1)

[8] Government Decree 373/2021 (30.VI.) 17.§ (3)

[9] Government Decree 373/2021 (30.VI.) 17. § (1)

[10] Civil Code 6:159. § (2) a)

[11] Civil Code 6:159. § (2) b)

[12] Government Decree 373/2021 (30.VI.) 22. § (1) c) and d)

[13] Government Decree 373/2021 (30.VI.) 12. § (2) b) and c)

[14] Government Decree 373/2021 (30.VI.) 9. § and 19. §

[15] Government Decree 151/2003 (22.IX.) 3. § (2); and Government Decree 373/2021 (30.VI.) 16.§ (4), (5)

[16] Government Decree 151/2003 (22.IX.) 3. § (3) a); and Government Decree 373/2021 (30.VI.) 16.§ (4) b)

[17] Government Decree 151/2003 (22.IX.) 3. § (3) b); and Government Decree 373/2021 (30.VI.) 16.§ (4) d)

[18] Government Decree 373/2021 (30.VI.) 25. §

[19] Ernst & Young Tanácsadó Kft. – Szigoróbb szabályok érkeznek a digitális szolgáltatások és az okoseszközök kereskedelmében