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Recent Guidelines of the Hungarian High Court on

By: Dr. Mrk PNDI

Fsthy & Mnyai Law Office

Budapest, Hungary

Protection of Consumers against General Terms and Conditions

As all over the world the big global companies especially in the sectors of utility services, public transport, telecommunication industry etc. often use general terms and conditions in their business relationship with customers also in Hungary. Therefore protection of these customers stands in the core of civil law regime. The goal of this protection is that unfair terms are not used in contracts concluded with consumers by a seller or supplier and that if, nevertheless, such terms are still used, they will not bind the consumer and the contract will continue to bind the parties upon those terms if it is capable of continuing in existence without the unfair provisions.

According to Section 209 of the Civil Code a standard contract condition or a contractual term of a consumer contract which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith and honesty, it causes a significant and unjustified imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer. For the purposes of the Civil Code consumer means any person who is a party to a contract concluded for reasons other than economic or professional activities.

Section 209/A of the Civil Code sets forth that an unfair contractual term that has been incorporated into the contract as a standard contract condition may be contested by the injured party. Moreover, under Section 209/B a contractual term that has been incorporated into the contract as a standard contract condition may also be contested in the court of by an organization described in specific other legislation. The court may declare the unfair term null and void in favor of all of the parties with which the party imposing the condition has a contractual relationship.

This article is dedicated to the analysis of challenging general terms and conditions by specifically authorized organizations (actio popularis or claim of public interests). Among others, the public prosecutors office, the minister, the notary, the social organizations enhancing consumer protection rights etc. belong to these special organizations.

Background

The category of unfair general terms and conditions were enacted into the Civil Code in 1997, and then amended creating a new structure since 2006, mostly based on Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts. The annex to the Directive contains a non-exhaustive list of terms that may be regarded unfair. A similar list can be found in Hungarian law, too. As a matter of fact, a very important difference can be discovered between the term consumer used in the Directive and in the Hungarian Civil Code. The definition of Hungarian term is described in the above paragraph showing that not only individuals can be interpreted as consumers. On the other hand, for the purposes of the Directive consumer means any natural person who in contracts covered by the Directive is acting for purposes which are outside his trade, business or profession. Still, the wider meaning of the term consumer in Hungarian legislation is absolutely in harmony with the Directive because the latter expressly allows that member states may adopt or retain the most stringent provisions compatible with the Treaty establishing the European Economic Community, in the area covered by the Directive, to ensure a maximum degree of protection for the consumer.

Recent Guidelines of the Hungarian High Court

The High Court elaborated some guidelines to be followed by lower courts in its sense when talking about an actio popularis to factors should first be examined by the courts: whether or not the legal action (i) is introduced by authorized organizations and (ii) challenges the validity of general terms and conditions used in consumer contracts. If the answer is yes to both questions, the courts should take into consideration the following aspects.

In the statements of claim it is not the invalidity of the contract but the invalidity of the unfair terms of the contract attacked should be requested to be declared null and void by the court.

If the party contracting with the customer has modified or overruled the terms in question before the judgment of the court is rendered that does not exclude the substantive examination of the invalidity. The adequate and effective protection of the customers rights requires that passing a judgment affecting any and all consumers could not be obstructed such a way.

The courts do not have to insist on merely the facts and reasons put forward by the plaintiff introducing the actio popularis. A term of the contract may also be ruled unfair and null and void upon the evidence obtained by the courts ex officio, even in the course of the proceedings at second instance.

The courts should not apply the general legal consequences of invalidity laid down in Section 237 of the Civil Code (restoration of the state of affairs having existed prior to the conclusion of the contract or if the state of affairs having existed prior to the conclusion of the contract cannot be restored, the court shall declare the contract valid for the period up to the date of judgment), but the special legal consequences of Section 209/B of the Civil Code. (The court may declare the unfair term null and void in favor of all of the parties with which the party imposing the condition has a contractual relationship.) An unfair term cannot be declared valid by substituting a new term determined by the court.

The legal consequences to be applied in case of determination of unfairness are listed in Section 209/B (1)-(4) of the Civil Code with mandatory nature adjusting them to the given development phase of the unfair term concerned.

The courts can only order publishing an announcement on the invalidity if such petition was included in the statement of claim. In this case the judgment shall contain the wording drawn up by the court.

Remarkable Examples of Court Practice

BH2006.19: A general contractual term is unfair if it sets forth that the contractor shall be entitled to the commission fee even if the real estate is purchased by a party other than the potential buyer mediated by the contractor.

BH2007.46: A general term of a property insurance contract stipulating that the purchase value of the property in new condition will be paid only if the purchase of replacement in new condition has taken place is unfair.

BH2009.323: The unfairness of a contractual term has to be examined uniquely within the framework of the very legal transaction.

BH2010.70: A union syndicating consumer protection organizations is not entitled to introduce a claim in public interest if its charter does not contain among its goals the direct protection of consumer interests but only syndicating those organizations which operate in order to protect consumer interests.

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