Taking Counsel: Consumer protection and immovable property

  • 2009-10-01
It is an arguable question as to whether a person buying an immovable property for his personal needs, someone buying a house or a flat for his place of residence, for example, should be treated as a consumer. According to Article 6.350, part 1 of the Civil code of the Republic of Lithuania, under the consumer contract of purchase-sale, the seller, who is the person engaged in trade, or his agent, obligates himself to sell a good - a movable thing - to the buyer - a natural person for his personal, family or household needs, not related to business or profession, while the buyer obligates himself to pay the price. As follows from the wording of this Article, a consumer contract for purchase-sale does not cover contracts where the seller, who is the person engaged in trade, sells an immovable object. As a result, the consumer protection rules should not be applied for the contract of purchase-sale of an immovable property.

However, the Highest Court of Lithuania in its Review of June 10, 2009, of legal regulation and case law regarding consumer protection in consumer contracts stated a rather different opinion. According to this Review, the consumer contract is a contract on the acquisition of goods or services concluded between a natural person (consumer) and a person who sells such goods or services (supplier) for the purposes not related to the consumer's commercial or professional activities, i.e. for the satisfaction of the consumer's personal, family or household needs (Article 1.39, part 1 of the Civil code of Lithuania).

Furthermore, the Highest Court has emphasised that, as follows from Articles 6.305 and 6.306 of the Civil code, items which form the subject matter of a contract of purchase-sale may be both movable and immovable objects. Therefore, the basic protection, such as the requirement in the event of doubt over conditions of a contract, to interpret these conditions against the contracting party that has suggested thereof, and in favor of the party that accepted those conditions, shall be applied.  In all cases, the conditions of a contract shall be interpreted in favour of consumers and the adhering party (Article 6.193, part 4 of the Civil code). In addition, a consumer shall have the right to claim, within the judicial procedure, for invalidity of conditions in a consumer contract that are contrary to the criterion of good faith. Moreover, the conditions of a consumer contract which have not been individually negotiated shall be regarded as unfair if they cause a significant imbalance in the parties' rights and duties, to the detriment of consumer rights and interests (Article 6.188 of the Civil code).

It should be noted that the Reviews of the Highest Court of Lithuania do not have the power of precedent. However, some previous decisions of the Highest Court should be taken into consideration. For example, in the decision of August 11, 2008, the court stated that the contract of purchase-sale of the apartment, that has not been built yet, is contiguous to the consumer contract of purchase-sale if the buyer is a natural person who is buying the apartment for his personal or family needs (in this cases protection fixed in the Article 6.193, part 4 and 6.188 of the Civil code shall apply). In another decision of December 23, 2008, the court emphasized that the preliminary contract is regarded as a consumer contract if the buyer is a natural person, who is concluding a contract for his (her) personal or his (her) family needs, and a seller is a legal person, who concludes a contract as a part of his commercial activity. Therefore the possibility that the Highest Court might change its position and would not apply Articles 6.188 and 6.193, part 4 for the contract is rather low.

In conclusion, if a buyer is a natural person who is buying an immovable property for his personal or family needs, the seller should take into consideration the requirement to individually negotiate all of the provisions that might cause a significant imbalance in the parties' rights and duties (Article 6.188 of the Civil code), and the provision of Article 6.193, part 4, stating that, in the event of doubt over conditions of a contract, they shall be interpreted against the contracting party that has suggested thereof (the seller), and in favor of the party that accepted those conditions (the consumer).

Vytenis Skorupskas is a lawyer at Jurevicius, Bartkus & Partners, a member of Baltic Legal Solutions, a pan-Baltic integrated legal network of law firms including Glikman & Partnerid in Estonia and Kronbergs & Cukste in Latvia, dedicated to providing a quality one-stop shop approach to clients' needs in the Baltics.
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