Abusive clauses in consumer contracts

On April 24, 2003 Resolution No 53 enacted by the Secretary of Antitrust, Deregulation and Consumer Protection (the “Resolution”) was published in the Official Gazette.

This Resolution includes an exhibit which describes certain clauses that have been determined to be “abusive” by the Secretary acting as the national authority of application of the Consumer Protection Law No 24,240 (“CPL”).

According to the Resolution, the inclusion of these clauses will not be allowed in consumer contracts and will be considered as “not agreed” in those contracts where they had been included.

To such effect, the Resolution provides for a 60 working day period for suppliers of goods and services to remove these clauses from the contracts where they had been included and to notify those consumers with contracts in force of this removal. They must also inform them that those clauses are considered as “not agreed”, in compliance with the Resolution.

The determination of these clauses as abusive arises from the judicial interpretation made by the Argentine courts in the last few years when analysing clauses with similar contents, under the guidelines contained in the CPL (particularly in section 37).

For that purpose, section 37 of the CPL states that the following clauses have no effect in consumer contracts: clauses that change the nature of the contract or limit liability for damage; clauses that determine the resignation of consumers’ rights or increase the rights of the other party; and clauses that impose the burden of proof on the consumer.

The list in the exhibit considers to be abusive, those clauses that:

a) Give the supplier the exclusive right of interpreting the meaning, extent and fulfilment of contract clauses and the respective obligations.

b) Grant the supplier the ability to solely modify the contract except when the following requirements are met:

(i) the potential modification was expressly foreseen in the contract;

(ii) the objective standards or criteria within which the modification can be made has been determined, and as long as they do not provide for modifications that could affect the balance between the parties;

(iii) the notification of this modification to the consumer is foreseen, with enough time according to the nature and conditions of the contract matter; and

(iv) the possibility that the consumer rescind the contract is foreseen if the modification is not accepted.

c) Authorise the supplier to rescind the contract without a cause, without any breach of the contract by the consumer, and that do not include:

(i) in undetermined term contracts, that the consumer must be notified within reasonable time according to the nature and conditions of the contract matter;

(ii) in determined term contracts, in addition to the above condition, the same right in favour of the consumer.

d) Subordinate the effectiveness of the contract to a unilateral act by the supplier, where the consumers had irrevocably expressed beforehand that they would accept the offer provided.

e) Impose any limitation on the consumers to exercise legal actions or other petitions, or in any way condition the exercise of their rights, especially when:

(i) it is stated that legal actions can be brought in a different jurisdiction than that of the consumer’s address at the time when the contract is executed, except when it is stated that proceedings will be brought at the consumers place of residence at the time that the actions are carried out;

(ii) the means of proof are restricted, or the burden of proof is imposed to the consumer when the law does not require it; and

(iii) the possibility to object motions, recusations or other petitions.

f) State that when the consumer is in arrears, referred to contract obligations, the supplierscan cancel those unfulfilled obligations by means of set off with other sums that the consumer may have given to the supplier as consequence of other contract or of the supply of other service or product, except when the set off is authorised by law, in which case the supplier must inform the consumer in the contract.

g) Exclude or limit the responsibility of the supplier inadequately, for damages caused to the consumer by the purchased product or the rendered service and/or in connection with any other legally enforceable refund or reimbursement.

h) Subordinate the exercise of the consumer’s ability to terminate the contract, to the cancellation of the sums owed to the supplier, in undefined term contracts or in defined term contracts that foresee the anticipated termination.

i) Allow the supplier to provide other products or services not included in the contract, without the previous and clear acceptance by the consumer and/or imposing consumer the obligation to inform that they do not accept them wihtin a certain term.

j) Impose the consumer a representative or attorney-in-fact to represent the consumer in exercising the rights arising from the contract, its accessories or in other legal transactions.

k) Infringe environmental protection regulations or allow their violation.

Before the Resolution was enacted, if the national authority of application of the CPL detected the existence of any abusive clauses in a contract, it summoned the supplier to modify those clauses within a certain term and to notify the consumers that those clauses were considered as not written.
From now on, if the clauses included in the exhibit to the Resolution are included in new contracts and/or not removed from contracts in force within 60 working days from the date when the Resolution was passed, an infringement to the CPL will be considered to have occurred. Therefore the following sanctions, according to the circumstances of each case, may be applied: (i) a warning; (ii) a fine ranging from five hundred pesos ($ 500) to five hundred thousand pesos ($ 500,000), and up to three times the advantage illegally obtained; (iii) the closing of the business or service for thirty days; (iv) a suspension for five years from the list of suppliers that can do business with the State; and (v) the loss of concessions, privileges, special tax or credit benefits that the supplier had.