Consumer protection, warranty and provision of digital content and services

05/07/2022

There is now an amendment in Parliament that will change substantially some aspects of consumer protection and the rules on guarantees. The provision of digital content and digital content services will now be explicitly regulated.

The government amendment is based on EU directives to be transposed into Czech law. The directives are based on the principle of "full harmonisation", which means that different legislation is not allowed, even if it is e.g more favourable to consumers. The unification of rules should help to connect the EU market.

Quality guarantee

Under current legislation, there is both a statutory guarantee and a so-called contractual guarantee (quality guarantee). Until now, there has been some doubt as to when the statutory guarantee and when contractual guarantee is to be used. Therefore, only the contractual (quality) guarantee will remain. The latter can only be granted over and above the scope of the statutory rights arising from defective performance, so that the consumer is not misled as to what he is legally entitled to and what the seller is providing 'in addition'. The seller will have to inform the consumer, free of charge, of the legal rights and the warranty rights.

The amendment clarifies what a quality guarantee actually is. It is a unilateral act of the seller (or e.g. manufacturer, importer), by which he undertakes to provide the buyer with a certain performance if the object of performance does not have certain characteristics. The warranty may include the right to withdraw from the contract (i.e. refund the purchase price), right to repair or other remedial services. It is up to the seller to decide whether to commit to a quality guarantee.

The warranty may also be assumed through claims made in advertisement. If there are differences between different warranty statements made by the same provider, the longest warranty period will prevail.

Exercise of rights arising from defective performance

The amendment extends the criteria for compliance by the seller with the consumer contract. The existing criteria for "lack of defects" of the goods have been further developed and clarified (these are still mainly the compliance with the agreed or declared description, type, quantity, functionality, compatibility, suitability for the usual purpose, delivery with the agreed accessories and instructions for use; the goods must also conform in quality or workmanship to theprovided sample).

However, a new type of defect is also introduced. It will include lack of durability. Goods will be defective if they do not have the durability which is normal for goods of the same kind and which the consumer can reasonably expect, considering, for example, the seller's advertising.

Time limit for exercising rights under defective performance

As before, a 2-year period, starting from the date of receipt of the goods, applies for the claim of defects. Until now, however, it has been possible to assert a claim of defect within 2 years of receipt - this included defects which originated within this period and which did not exist at the time of receipt (obviously not defects caused, for example, by improper handling by the consumer). The big change is that the consumer will now only be able to claim the defects that appeared in the goods within 2 years of receipt but already existed at the time of receipt.

However, if the defect manifests itself within 1 year of receipt, there will be a rebuttable presumption that it existed at the time of receipt. The burden of proof will be on the seller as a professional to prove that he did not perform defectively.

If the defect manifests itself during the second year after receipt, the burden of proof will be on the consumer to prove that the item was already defective at the time of receipt. How will the consumer prove this? E.g. by an expert's report, for example, the lack of durability of the goods paired with the information on the usual durability of other similar items.

Breaking the hierarchy of rights under defective performance

According to the current legislation, there is a hierarchy of remedies: the consumer must primarily demand the replacement or repair of the goods or the delivery of a new goods without defects (unless this is unreasonable). Only if this is not possible, or if the defect persists even after repair, can the consumer withdraw from the contract. If the consumer does not use either of these options, they can eventually claim a reasonable discount on the purchase price.

This rather complex hierarchy will now be abolished. If the defect is of a serious nature (material breach of contract), the consumer will be able to withdraw from the contract without having to claim a discount on the purchase price, and without having to request repair or replacement. In particular, this will be the case if the seller fails to remedy the defect within a reasonable time or without significant inconvenience to the buyer, or if the defect is repeated.

Digital Services and Content Agreement

In addition, obligations involving the provision of digital content or digital content services will be expressly regulated. Digital content is data created and provided in digital form, such as audio and video files, computer programs, applications, digital games, e-books and other electronic publications. A digital content service is a service that allows a user to create, process or store or access data in digital form, or a service that allows sharing or any other interaction with data in digital form uploaded or created by that or another user of the service, whether or not it is software-as-a-service technology. A digital content service is, for example, a video, audio or other file sharing service, word processing, digital games or games offered in a cloud computing environment and social media. Digital content and digital content services are generally provided for remuneration, but in the case of social media, remuneration includes personal data provided by the user.

If digital content is provided on a tangible medium ('digital goods'), it is subject to the same regime as the (consumer) purchase of goods. Digital goods would be, for example, "smart" phones, watches, appliances or computers. On the other hand, things that serve only as a medium (DVD, CD, flash drive) are not. Conversely, digital content services or digital content that are not provided on a tangible medium may be provided under various types of contracts.

The digital content or digital content service may be provided in a one-off performance (e.g. making a new e-book available) or it may be a continuous performance over a period of time (e.g. providing a computer program for a certain period of time with the expectation that it will be updated at certain intervals).

Provider's liability for updates

The provider will be responsible for ensuring that the digital content or service retains the characteristics it had on receipt for a certain period after receipt - and for as long as the consumer can reasonably expect. Often this period will be 2 years (i.e. the time when the consumer can complain about defects to the seller), but it can be longer. If the performance is carried out for more than 2 years, the buyer has a right in respect of any defect that occurs or manifests itself within that time. Liability for "retention of features" will include, for example, liability for updating digital content or digital content services.

A specific feature of the provision of digital content and digital content services will be the extension of the rebuttable presumption (as compared to "classic" consumer contracts) that the performance was defective. The user will be able to complain about a defect that appears or occurs in the digital content during the duration of the obligation. In the case of a one-off performance, the user may complain of a defect that appears in the digital content within two years of the disclosure. The burden of proving that the digital content has been provided or is provided without defects shall be borne solely by the provider.