Abusive clauses in certain consumer contracts

Resolution No 9/2004 issued by the Technical Coordination Secretariat was published in the Official Gazette on January 20, 2004. This regulation complements the resolution by the former SCDyDC Resolution No 53/2003 (modified by SCT Resolution No 26/2003), and defines those clauses that will be considered abusive in consumer contracts in relation to the providing of prepaid medical coverage, mobile telephone services and financial and banking services (the “Contracts”).

In the case of Contracts for a specified term that are in progress at the time the Resolution comes intor force, their duration may be adapted to the terms established by the Resolution.

In addition, an extension has been established until May 1, 2004 in the term laid down in section 2 of the former SCDyDC Resolution No 53/2003 for those Contracts containing abusive clauses to have them removed, and notify such removal to the consumers with contracts in force.

As a common rule for the three types of Contracts, the Resolution considers those clauses that grant the provider the power to unilaterally modify the contract to be abusive, except in the case of those that are open-ended which in addition meet the following requirements:

a) possible changes are expressly foreseen in the contract;

b) the change does not alter the purpose of the contract, nor does it represent a reduction in the services committed to when it was signed;

c) changes should be of a general nature, not referring to one particular consumer (this requirement is not applicable in the case of Contracts for the providing of financial or banking services);

d) objective and parameters should be laid down indicating when changes can take place, as long as they do not authorize changes that affect the balance of the relationship between the parts; and

e) as long as the changes are required to be notified to the user with not less than 60-day notice prior to the introduction of the change, and it is foreseen that consumers not accepting the change in their contract shall be able to rescind it without charge.

The Resolution deals with each type of Contract in a separate exhibit. Each exhibit includes some special abusive clauses in relation to the different types of Contract, in addition to the general clauses detailed above.

Exhibit I - Prepaid Medical Coverage

In this type of Contract the following clauses are also considered abusive:

a) those that authorize the provider to rescind the contract without due cause, when there has not been non-compliance by the consumer;

b) those that establish the termination of the services arising from a contract entered into between the provider and a third party, when such services originate in contracts of a corporate or similar nature, or derived from an employment relationship between the consumer and the third party contracting with the supplier, either because such a contract has been rescinded or dissolved, or because the relationship between the consumer and the third party giving rise to the services has been terminated, and it is not laid down that the consumer shall have the right to be provided with cover through a direct contract with the provider.

In such a case, the only requirements that can be laid down for the consumer to be able to gain access to one of the plans offered by the provider, by means of payment of the price established for the scheme in question, shall be that:

i. the consumer should not be in arrears on the obligations assumed directly between the consumer and the provider;

ii. the consumer should have been a beneficiary of the services for a given period, which cannot be in excess of 2 years;

iii. the notice that the consumer should give to the provider to contract the services directly should be delivered within a given period of not less than 30 days from the termination of the corporate or similar service.

In these situations, when the status of the consumer has not been established in the contract, it will be understood that the consumer shall have the right to continue the relationship with the provider under the terms established.

Exhibit II - Mobile communications services

In these contracts, clauses authorizing the provider to rescind the contract without non-compliance by the consumer shall also be considered abusive. Except in the case of open-ended contracts, which shall only be able to be rescinded without reason after no less than 60-day notice has been provided to the consumer.

Exhibit III - Financial and banking services

In the case of these Contracts, abusive clauses shall be deemed to be those that:

a) include provisions for automatic renewal in contracts with a duration in excess of 60 days, that do not establish the obligation of the provider to notify the consumer giving no less than 60-day notice of the renewal charges or other charges of a variable nature foreseen by the contract; an exception is made for term deposits of whatever length;

b) authorize the provider to rescind the contract without justification, without non-compliance by the consumer, except in the case of those open-ended contracts which shall only be able to be rescinded without justification following no less than a 60-day notice to the consumer, unless rules regulating the activity lay down a different term;

c) include taking out insurance as an additional obligation as a conseuence of the nature of the service, and the provider does not offer the consumer the possibility of choosing between different insurance companies.