The ins and outs of contracts beyond a company's premises
Every business should have a big red circle around July 1, 2000 as this is the day when the new "Act on Protection of Certain Consumer Rights and Responsibility for Damages Caused by a Dangerous Product" enters into force. Don't let the title of the act lull you into a false sense of security if you don't sell products that are normally considered dangerous. Those "certain consumer rights" that are being protected relate to new (and not so new) ways of doing business, including shopping over the internet. Most importantly, the act places certain obligations on companies when they do business with consumers "outside of an enterprise's premises" and "at a distance." The act also gives consumers a "cooling-off period" to reconsider whether they really wanted to enter into that contract.
One of the greatest ambiguities of the act and the worry of any business dealing directly with consumers is when a contract is deemed to be entered into "outside of an enterprise's premises."
The easy answer to this question is that this happens when the parties meet at a place that is not primarily intended for doing business with consumers. Nowadays, it is popular to offer products at specially organized presentations, a customer's home or office and other places that a potential client may be found (my daughter is a devoted client of the balloon vendors at the Warsaw Zoo). In such case, the act requires that a seller proposing to enter into an agreement at an "off-site" location present the client with personal identification and certain company registration documentation. When the seller acts as a representative of the producer or a main distributor of goods or services, he must also present a power of attorney. The seller must also confirm the terms of an agreement with a document stating the date, the subject matter and the price. Balloon vendors should take heart. The act does not apply, among other exceptions, to small, ordinary purchases with a value of not more than O10.
Documentation identifying the business and the seller is just one side of the coin. The other, more worrisome side for business is the absolute, non-waivable right of a consumer to withdraw from an agreement executed outside the entrepreneur's premises within 10 days. The consumer does not have to provide any explanation for her decision and may not be forced to pay any contractual penalty for withdrawal. Moreover, before signing the agreement the seller has to inform the consumer about this right and provide the consumer with a form of the notice of termination on which the name of the company and its address are indicated. If the consumer is not informed about the withdrawal right and how to take advantage of it, she may terminate the agreement within 10 days from the time she obtained the information about her rights in this respect, but not later than three months after the execution of the contract.
Remember that I mentioned that the act did not apply to my balloon vendor? The act provides for a number of exceptions. Companies offering insurance, real estate (excluding repair services) and investment services are not affected by the act (although the European Union is working to prepare a new directive on distance marketing of consumer financial services). The act also does not apply to agreements that typically do not involve large sums of money, such as home delivery of food and, as mentioned earlier with my balloon vendor, ordinary sales up to O10. In addition, agreements with a continuing and periodic nature have been excluded from the act if the consumer could have familiarized himself with the company's offer at an earlier time.
Unfortunately, business reality does not conform to the simple manufacturer/seller and door-to-door salesman dichotomy. The vast majority of sales to consumers are made through middlemen such as supermarkets, clothing stores, and a whole range of other retailers. This manner of conducting business allows the producer or main distributor of goods or services to ultimately sell them to consumers outside of its premises. It also gives rise to the question of whether the consumer is entitled to withdraw from a contract executed with a middleman within a 10-day term.
While not specifically addressed in the act, the key seems to be in the definition of an "enterprise's premises." The act defines an enterprise's premises as a place designated to serve the public and marked in accordance with applicable law on commercial activity. One may draw the conclusion that when the seller does business in premises that are specially prepared to admit clients, the consumer may not withdraw from an agreement pursuant to the act. It seems to be irrelevant whether the seller is the producer of goods or merely a distributor or an agent. If the seller operates a business and executes an agreement in the premises of her enterprise, the client will not be able to change his mind and give the goods back within the statutory 10-day period.
The intention behind the act was to protect the consumer, not to make everyday trade more difficult and burden entrepreneurs with the risk of withdrawal from all agreements with consumers. Consumers change their minds, and pursuant to the act, they have a specific right to do so under certain circumstances. Entrepreneurs have to accept the fact that the sales made during a picnic promotion may not be so encouraging in 10 days' time.
If you found yourself wondering why this all sounds vaguely familiar to you, you are probably not experiencing deja vu, but rather remember the "Legal Side" column of Feb. 14-20, in which we generally discussed a draft of the act. Needless to say, all companies should carefully review the consumer rights granted in the enacted version of the act with respect to sales "outside of a entrepreneur's premises." As for the specific rules when it comes to to distance sales, watch this space, as we will review these in an upcoming article.
Judith Y. Gliniecki is of counsel with and the head of the technology group at Hunton & Williams' Warsaw office. She gratefully acknowledges the assistance of Alexandra Minkowicz-Flanek in the preparation of this article.
