Consumer and entrepreneur, terms and conditions of sales and forbidden business practices

A consumer is any individual, who strikes a deal with an entrepreneur, or deals with him in other ways, which do not directly pertain to the consumer‘s area of entrepreneurial activity or occupation.

A consumer contract, according to customer protection legislation, is defined as an arrangement, where one party is the consumer, and the other the entrepreneur. Individuals claiming an appropriate entrepreneurial certification, as well as individuals carrying out entrepreneurial practices without a license are both considered as an entrepreneur in this case.

A customer is considered a consumer, if he buys goods or orders services for personal needs (e.g. if he buys an electric appliance, clothes, shoes, food, a gift for his friends or family, orders construction repair for his flat, mowing the lawn in front of his family house).

A transaction of goods and/or services between two consumers or entrepreneurs is not considered a consumer contract

An individual, who buys goods for his business or other profitable enterprise (on a company ID) is not considered a consumer.

A customer who buys goods for his employer (e.g. office supplies, which the employer then uses for his entrepreneurial activities) is also not considered a consumer.

Examples:

If a consumer sells a product to another consumer, for example on an internet-based auction portal, internet bazaar, craigslist, through a classified ad or personally (for example between neighbors) as a one-time sale or irregularly (e.g. selling an old version of product after buying a new one, old clothes, basically selling anything the consumer doesn’t need for financial gain), this doesn’t constitute a consumer contract and the legal arrangement between both sides is guided by general regulations pertaining to purchase contracts (the customer will have less rights in cases of warranty claims, etc.).

However, if the selling party, for example on an internet portal, presents itself as a consumer, but from the character and amount of its sales it is clearly deducible, that he is in fact an entrepreneur (e.g. when he supplies several mobile phones into his selling portfolio each day), he is considered as such and the consumer has stronger customer rights, corresponding to the consumer contract legislation.

Furthermore, if an entrepreneur buys goods for use in his business effort, for example through an internet shop, this does not constitute a consumer contract, and the buyer cannot therefore exercise rights derived from consumer contract legislation (unless the store owner grants him this right) 

CONSUMER CONTRACTS

Varying consumer rights according to type of sale

It is necessary to differentiate, if the consumer purchases goods or services:

1. in a common (brick and mortar) store, or
2. if he closes the deal through long range communication devices (i.e. without the physical presence of both parties), or
3. if he closes the deal outside of usual commercial premises.

Consumer rights differ, in accordance with the place where the consumer facilitates the purchase.

A common store is considered to be not just your usual brick and mortar store, but also permanent sales booths and stalls in shopping malls (provided the customers approach these booths by themselves, as opposed to being roped in by salespeople), farmers markets, sales expos and so on.

Concerning purchases in common stores, the customer has less rights than in the case of long range sales or sales outside commercial premises. That’s because in a common store the consumer usually does not feel rushed and has the possibility to examine or even try out the product, compare prices and quality of the product with the competition without the need to decide immediately, as is the case during showcase presentations or street vending.

When completing a purchase in a common store, the consumer does not have the right to withdraw from the contract within a 14 day period, without stating a reason.

Goods bought in a common store, that do not have defects for which the customer can make claims (and if need be even withdraw from the contract), cannot be returned without stating a reason for their return, unless the salesman willingly grants this right to the customer (the terms and conditions of such a return are then determined by the selling party).

A contract closed through long range communication devices is for example a contract facilitated through the use of internet, by phone, teleshopping, a contract realized through the sending of an order form from a catalogue and so on. The most important point here is, how the contract was closed, not how the goods were accepted.

Example:

If a customer orders goods online, and subsequently picks them up in a brick and mortar store, he has  rights corresponding to a contract closed online.

Contracts closed outside of commercial premises are, for example contracts entered into with door to door salesmen, street vendors or contracts closed at showcase presentations

Contracts, which were closed in premises usual for the entrepreneur’s business can also fall into this category, provided that these contracts have been closed immediately after the entrepreneur addressed the consumer outside of these premises.

 

Example:

A sales representative unexpectedly stops the consumer on the street and subsequently leads him to his office, which is located nearby, where he closes a deal with the customer. In this case, the contract falls into the category of contracts closed outside of commercial premises, and the customer has more rights.

Contracts closed outside of commercial premises, also include tours and tours organized by the entrepreneur for the purpose of advertising and selling goods or rendering services (despite the fact, that the entrepreneur may have his place of business registered at the place of the showcase presentation and regardless whether the contract is closed at or during the showcase presentation, or later, for example in the place of business of the entrepreneur)

Timesharing, or consumer contracts, wherein the consumer gains the right to use lodging facilities for accommodation and eventual other services for more than one time period, if the contract is closed for a period longer than one year, or alternatively he participates in an exchange system relating to timesharing, is specified in the civil code § 1852 through § 1867. This legislation will not be used for standard contracts relating to tours or accommodation.

The content of consumer contracts

Regardless of the manner of sale, legislation states that all consumer contracts cannot be less favorable to the consumer than is defined by law.

Rights that are guaranteed by law cannot be limited by contract.

Example:

If the consumer buys something from an online store, whose terms and conditions state, that there can be no returns, or warranty claims on its products, this contradicts the law, and is therefore invalid. Even if the consumer agrees to the terms and conditions, this doesn’t prevent him from exercising his right for a warranty claim later.

All information must be conveyed to the consumer in a clear and understandable fashion, in the language in which the contract is drawn.

If the contract can be interpreted in various ways, the interpretation most favorable to the consumer will be used.

Forbidden arrangements, are those, which constitute an imbalance of rights and responsibilities to the detriment of the consumer.

The entrepreneur may not demand another payment from the consumer, without his agreement, other than the one about which the consumer has been informed prior to the finalizing of the contract, and on which they agreed in the contract.

The contract has to entail information conveyed to the consumer prior to its completion, unless the two parties agree otherwise.

The Entrepreneur has informational responsibilities as stated by law. He has to convey information to the customer, prior to the purchase.

The entrepreneur has to convey information as clarified in §1811 civil code (e.g. information about himself, his goods, prices, possible payment means and costs, deliveries, warranty claims, contract duration and its termination, digital content function and its compatibility with hardware and software) sufficiently in advance before closing the deal.

 

If the transaction in question is a sale using means of long range communication devices or outside of usual commercial premises, the civil code states in §1820 additional informational duties for the entrepreneur, which he has to convey to the consumer sufficiently in advance prior to finalizing the contract (e.g. phone call charges, if they are different than regular rates, information on the right to withdraw from the contract, information about the existence, manner of and conditions of extrajudicial settlements of consumer complaints, including the information whether it is possible register the complaint at a state regulatory authority.

When finalizing contracts online (unless the contract is finalized by the use of e-mail) the entrepreneur has to convey to the consumer information stated in §1826 of the civil code, as for example the language in which the contract can be finalized, individual technical steps leading to finalizing the contract including means of correcting data already filled in etc.

If the contract is finalized by means of telephone, the entrepreneur has to convey information about himself and the reason for his call at the beginning of the conversation.

If the entrepreneur delivers goods or services to the consumer without him ordering, the consumer does not have to return delivered goods or services at his own cost, or in any other way notify the entrepreneur.

Example:

The consumer receives a gift in the mail, which was not ordered by him/her, along with an appeal to pay up or return the gift, the consumer can keep the item, without having to pay the stated price.

TERMS AND CONDITIONS OF SALES AND FORBIDDEN BUSINESS PRACTICES

Sales terms and conditions and additional clauses

Upon entering into a contract with larger institutions, such as banks, insurance companies, telephone operators, energy suppliers and so on, the contract usually comes with terms and conditions, whose content the customer cannot influence.

The civil code then clearly states, that, for the protection of the weaker party, terms and conditions, which the other side could not have reasonably expected (e.g. unreasonably high contract fines), are deemed invalid, unless the customer specifically accepted them.

If there is reasonable cause to expect the need for subsequent changes of terms and conditions, the contract can state, that the entrepreneur may be able to change them in a reasonable manner.  The way in which the consumer will be notified of this change has to also be agreed upon, as well as the fact that the consumer may withdraw from the contract without sanctions within a notice period long enough for the consumer to procure similar services from a different supplier.

Terms and conditions along with additional contract clauses are considered valid, provided the consumer has been acquainted with their meaning.

The consumer has to understand contract clauses and terms and conditions. The entrepreneur has to explain the meaning of the regulations to the consumer.

If the contract contains a clause, which can be read only with special difficulty, or a clause which is unintelligible for the average individual, this clause is valid only in the case, that it is not inconvenient for the consumer, or when the meaning of it has been sufficiently explained to him.

If the contract contains a clause, that is especially disadvantageous to the consumer, without valid reasoning, and especially in cases, where the clause differs significantly from usual conditions in similar contracts, this clause is considered invalid.

Example:

A contract with a mobile operator contains a clause, which states, that if the consumer doesn’t pay his phone bill on time, he has to give up his mobile telephone, which he had before entering into this contract, to the operator. Such a clause would then be invalid.

Also invalid is any contract, in which one party takes advantage of distress, inexperience, feeblemindedness, agitation or carelessness of the other party and promises fulfilment, whose property value is in gross imbalance to mutual fulfilment. (e.g. a loan with extremely high interest).

Unfair business practices

The consumer protection law forbids the usage of unfair business practices when offering or selling goods and services.

An unfair business practice is considered, if the actions of the entrepreneur concerning the consumer are in contrast to requirements of business expertise and if these actions are able to considerably alter the consumer’s actions in such a way, that he would make a decision, which he would not have made under normal circumstances.

Unfair business practices are especially considered as those which are misleading and aggressive. If an entrepreneur uses unfair business practices, it is a possible to appeal to The Czech Trade Inspection Authority.

• A business practice is considered as unfair when:

1. untrue information is used
2. information itself is true, but can mislead the consumer considering circumstances and context of use
3. entrepreneur omits important information which, taking into account the whole context, can be rightfully required; information which is stated incomprehensibly or ambiguously is considered as an omission as well
4. presents their product or service with the intention of misrepresenting other products or services or to distinguish features from other entrepreneurs. This includes comparative advertising and introduction to the market
5. commitment which is included in the Code of Conduct, and which is binding on the entrepreneur, is broken.

Offering and selling of products breaking laws of intellectual property is considered an unfair business practice, and the storing of these with the intention of selling or offering them for sale. Unauthorized use of protected marking in a commercial relationship is considered as an unfair business practice as well.

Essential obligations include the duty of ensuring that their products are visibly and comprehensibly marked by producer’s trademark or that of the importer or supplier. If it is necessary in view of the type of product, name of product, information about weight, amount, size or shape and other information must be visibly displayed too. It is also important that information about the main materials be displayed. Not fulfilling any of these obligations is considered an unfair business practice.

Products must be visibly and comprehensibly labeled.

If it is necessary to act with regards to special instructions, when using the product, especially if instructions must be followed according to the manual, the seller is obligated to acquaint the consumer with the rules, unless the rules are generally known.

The vendor is obligated to inform the consumer about the price of products or services, in compliance with Price Regulations and Regulations of the European Community. This information must be clearly written with the price of products or services.

Information about price must not seem to be:

1. lower than it actually is,
2. dependent on irrelevant circumstances,
3. containing deliveries of products, services or work, which are in fact paid for separately
4. going to be reduced, increased or unchanged, if it is not,
5. marking other relationships between price and utility of the offered product or service and price and utility of comparable product or service.

The vendor is obligated to properly inform the consumer about the range, condition and way of application of the law of defective performance together with information about where consumer can complain.

Important information, which must be given to the consumer is identification data about the vendor.

Example:

An example of unfair business practice is so-called bait advertising, when the entrepreneur offers to buy products or services for a particular price without ensuring that there will be enough goods in the store, often with the purpose of attracting more customers. Similarly in some second-hand car dealers there could be advertisements for a car in good condition for a good price, although it has already been sold, and the dealer does not have similar cars for sale.

Another example of an unfair business practice is when the vendor untruthfully claims that products will be sold only for a particular period of time or for a particular period of time if some conditions will be met or if he untruthfully claims he intends to end the business or move the premises with the intention of pressuring customers to make an immediate decision.

Another forbidden practice, which can be often seen on promotional events, is when the vendor provides incorrect information about the possibility of getting a similar product or service with not as good conditions as the usual market conditions.

• A business practice is considered aggressive

A business practice is considered aggressive, if considering all the circumstances, the seller annoys, forces (including the use of force or inappropriate behavior) and limits the customer’s ability to decide freely.

An aggressive business practice also includes being contacted by the entrepreneur even though you have rejected him once already.

A business practice is, according to Annex n.2 of the Law of consumer protection, always considered aggressive and therefore banned if the entrepreneur:

1. makes an impression that the consumer cannot leave the premises or the place of sale or offering a product without signing a contract,
2. personally visits consumer in his place of residence, even though consumer has asked him to leave his residence and not to come back, with the exception of claiming debts in a way that accords with the law.
3. repeatedly makes unsolicited proposals to the customer via phone, fax, e-mail, or other means of distance communication, with the exception of claiming debts in a way which accords with the law.
4. requests the consumer to submit papers, which are irrelevant when applying the rights ensuing from the insuring contract or when he does not respond to correspondence in order to discourage the consumer from applying rights ensuing from the contract
5. by means of advertising directly encourages children to buy an offered product or service or to make an adult person buy this product or service
6. requires from the consumer an immediate or delayed payment for the product or services, that were given to the consumer, even though the consumer did not order them, or if the entrepreneur requires the return or deposit of the unwanted products, only if it is not a substitute delivery according to a contract
7. proclaims that if the consumer will not buy the product or service, the consumer´s job, existence or establishment will be endangered
8. makes a false impression that the consumer has won or will win, if the consumer will act in a specific way, even though there is no prize or advantage or for the consumer to win or get that advantage, for which he must expend a financial sum or other expenses.

Other duties of the seller

There are many more duties of the seller in the consumer protection law that the consumer might demand. For example:

• The duty to sell products with the right weight, ratio or amount, in the prescribed, approved or usual quality, for the right price.
• Properly inform the consumer in the Czech language about the attributes and ways of using the sold products.
• Point out the possible defects of the product if the product is on sale for a lower price because of those defects. The seller is also required to sell these products separately.
• If the transaction is being held outside of the usual place of business (instead of the usual butcher´s, the transaction is being held at a farmers´ market) the seller must inform the buyer where he can file a complaint
• If it is possible, the seller must show the buyer the product, if the buyer demands it
• If the service is not given right away, the seller must give the consumer a document, stating that the transaction was successful
• If the buyer wants to receive a proof of purchase, the seller must give it to him.