Month: June 2024

If you have bought a faulty item, don't forget your right to compensation for the costs of rectifying the fault

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Today, consumerism is an integral part of everyday life. We are constantly exposed to new products, services and advertisements. Along with this abundance comes new challenges that force consumers to be vigilant.

According to Dainius Antanaitis, an attorney at AVOCAD, knowing one's rights as a consumer allows you to use the market more effectively, avoid scams and seek justice in unfair situations.

Commenting on recent case law, the lawyer recalls the main rules of the legal relationship between a trader and a consumer, which relate to the quality of the goods sold to the consumer.

First, the object sold must be of good quality, i.e. the characteristics of the object must be in conformity with the consumer contract. The fitness for the intended use of the object must not be understood as meaning that it is possible to use the object, even if this entails considerable inconvenience, disturbance of various kinds or additional costs.

Second, if a defect in the quality of the goods becomes apparent, the Buyer only needs to prove the defect itself. However, the existing presumption of the seller's liability for the quality of the goods to be sold obliges the trader (the seller) to prove that the defects in the goods occurred after the delivery of the goods to the buyer, due to the fault of the buyer.

Third, the seller, having information about the condition or characteristics of the thing to be sold which is relevant to the conclusion of the contract and in the exercise of his duty to ensure the quality of the thing, is under a duty of good faith to disclose that information to the buyer, whether or not the buyer requests such information. Failure to disclose that information to the buyer shall be regarded as bad faith on the part of the seller and, if the undisclosed condition or features of the object subsequently come to light, which make the use of the object inconvenient or impair the usefulness of the object, such condition or features shall be regarded as latent defects in the object.

Thus, if the consumer, having purchased the object, discovers defects in the object which, although they allow the object to be used for its intended purpose, cause inconvenience, disturbance or additional costs, it is sufficient for the consumer to provide evidence of the existence of the defects and not to have to prove the reasons for their occurrence, and even if the trader starts to defend that the consumer should have been aware of the fact that the object is being sold with such features, if the consumer was not previously aware of such features, they are considered to be latent defects.

How can the consumer resolve the problem of quality defects in this situation?

If the goods do not meet the quality requirements, the Civil Code gives the consumer the right to demand that:

  • the product is repaired or replaced;
  • a proportional reduction in the price of the product;
  • unilaterally terminate the contract, return the goods and collect the price paid.

Each of these remedies has its own conditions of application. However, the consumer will choose one of these remedies not only on the basis of these conditions, but also on the basis of his needs and wishes.

For example, a consumer decides to buy a specific home because of its location and architectural choices, and then furnishes, integrates appliances and furnishes it according to his needs.

However, the consumer's joy in their new home was overshadowed by the various shortcomings in the quality of the house (e.g. unusually high heat energy losses during the cold season, resulting in higher heating costs, leaking windows, the façade not only not maintaining its aesthetic appearance, but also the possibility of the house's protective function due to the normal forces of nature, etc.).

If the trader refuses or fails to remedy these deficiencies, the alternatives are to reduce the price or terminate the contract and refund the price. Thus, in the event that the consumer does not want to leave his new home and does not want to terminate the contract, he can opt for a price reduction.

In the case-law of the Court of Cassation, this remedy means that if the value of the defective item actually delivered is lower than the value of the quality item, this difference in value constitutes the amount of the price reduction available for the claim. In such a case, the seller should pay the buyer this difference in value.

However, in this context, another remedy is also available, which is provided for in the general provisions of the Civil Code on sale and purchase contracts, which provide that the buyer has the right to claim reimbursement of the buyer's costs incurred by the buyer for the rectification of the defects, if the defects were decided by the buyer to be rectified by the buyer.

It is therefore worth remembering that if a consumer receives a faulty item, he can either ask for a reduction in the price of the item, or for reimbursement of the costs incurred by the consumer in rectifying the faulty quality of the item.

 

Lover, cheat or business partner? How can I protect my investment in a jointly created business?

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A scandal centred on a famous sports trainer has been in the public domain lately. He has, according to women, defrauded a number of them and extorted significant sums of money, of varying amounts, under the guise of romantic promises and relationships.

The latter story is illustrative of the many variations of The Tinder Swindler. However, in the "Lithuanian" case, the situation is more ingenious - the protagonist not only took advantage of a romantic relationship to swindle the money, but also promised to use it for a specific purpose - to set up a joint business with the victims.

The story ended with no love, no money and no promised business, and the victims were left with financial losses and non-material damage to their mental and emotional health. According to publicly available information, the law enforcement authorities refused to open a pre-trial investigation.

The situation is aggravated by the fact that the money was extorted not only by promising to set up a business together, but also by the fact that such plans were laced with promises of love, which objectively makes it more difficult for the victims to weigh up the situation, the risks and the dangers logically.

So what legal options are there to protect your investment in a jointly created business?", says Karolina Laura Briliūtė, Associate at AVOCAD .

First of all, the decision of the law enforcement authorities to refuse to open a pre-trial investigation is not surprising in this case. It is likely and most similar to the fact that a pre-trial investigation for fraud was requested. According to the Criminal Code, fraud is the fraudulent acquisition, evasion or avoidance of an asset or property right, or the avoidance or cancellation of a financial obligation, for the benefit of oneself or others. Fraud is used with the intention of deceiving the owner, manager or person in whose possession the property is located, who, having been deceived, voluntarily transfers the property or property right to the perpetrator, believing that the latter has the right to receive it, or cancels the perpetrator's property obligation.

Although the situation is superficially similar to fraud, it should be borne in mind that criminal law and criminal sanctions are only used as an ultima ratio (last resort), when other legal means of restoring the right violated have been exhausted. Moreover, in the present case, the victims themselves freely contributed money to the perpetrator, incurred expenses for the purchase of various items, and rented premises for the filming and production of the content, and these circumstances should therefore be viewed unfavourably in the context of the decision on the application of criminal measures.

Moreover, circumstances such as shared holidays, travel and spending money together, in the eyes of the law enforcement authorities, are reasonably more likely to suggest a purely romantic relationship, where one of the persons invests more money in the relationship than the other. However, in such a case, there is naturally no legal basis for interfering in the relationship between the two individuals.

Firstly, if the other person proposes to start a business together and asks for funding to start the business (for example, as in this case, to buy certain clothes, items, film equipment, rent an apartment), the relationship is similar to a legal relationship of joint activity.

A joint venture/partnership agreement commits two or more persons (partners) to act jointly, by pooling their property, labour or knowledge, for a specific purpose or activity that is not contrary to the law. The legal form of a joint venture/partnership agreement can take a wide variety of civil relationships - any commitment between several persons, not contrary to law, to engage in a common activity or to pursue a common purpose by cooperating in a joint activity or to pursue a common purpose by cooperating in the use of property or intangible assets. The essential features of a joint venture agreement are: the co-operation of the property, intellectual or labour resources (contributions) of several persons; an obligation to use the co-operated resources to act jointly; and a common purpose and interest of the participants in the development of an activity or the pursuit of an objective.

It should be borne in mind here that a joint venture/partnership agreement must be in writing and, in cases provided for by law, in notarial form. Failure to comply with the form of the agreement renders the agreement null and void. Therefore, in cases where a romantic or other entity proposes to invest finances in a joint venture, it is advisable to initiate the signing of such an agreement, thus protecting oneself against potentially fraudulent actions.

In practice, there have been cases where a court has been asked to declare that a joint venture relationship existed between the parties and that a joint venture agreement had been concluded (certain documents existed, but were not formalised as a single contract). The courts refused to uphold such a claim without finding that there was a unanimous and purposeful intention of the parties to establish and develop a business relationship. Such interpretations only confirm that, even in a romantic relationship, the risks should be weighed and the contract should be drafted in a way that best reflects the intention of the parties in order to best protect the investment.

Finally, if the worst-case scenario were to be the case, where money was invested, but the love ended and the joint venture did not materialise, it is considered that the injured party would be able to rely on the defence of unjust enrichment.

According to the Civil Code, a person who, without legal justification, has acquired by his own acts or otherwise, intentionally or negligently, what he could not and should not have received, is obliged to return it to the person at whose expense it was acquired, except for the exceptions set out in this Code. A person who has been unjustly enriched at the expense of another person without legal justification shall be liable to compensate the latter for damages to the extent of the unjust enrichment.

These rules give effect to one of the fundamental principles of civil law - that no one can be enriched at the expense of another without a basis in law or contract. At the same time, it implies the right to recover from another person what he has unjustly saved or otherwise benefited at the expense of the creditor. In order for the obligation to repay to arise, the person must first have acquired the property without legal justification, i.e. the receipt of the object or money cannot be justified either by law or by a transaction.

In summary, for this remedy to be effective, the person must be prepared to prove that he or she has incurred the expenditure (buying things, renting an apartment, renting a car, etc.), not for romantic purposes, but as a result of material misrepresentation and deception, in the hope that he or she will derive a benefit from the transfer of the money, in this case, the proceeds of the joint business. It is well known that the law does not interfere in the personal (romantic) relationships of individuals, so the person who loses the funds must also be prepared for the risk that the courts may decide that the expenses were incurred in the interests of the couple and not award such losses.

Cancellation of a trip due to force majeure: are you sure you don't have to pay cancellation fees?

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Summer is the time for travelling. The fast pace of life is stressful and requires the extra cost of making your own travel arrangements. To simplify the whole process, we often opt for the services of a travel agency, which makes it easier to organise and saves time.

Once you have planned your trip with a tour operator, you sign a travel contract in which the tour operator undertakes to provide you with a holiday. And then life happens - you can't go.

Viktorija Dubovskienė, a lawyer at AVOCAD, points out that under the Civil Code, a traveller has the right to terminate an organised tourist travel contract without paying a termination fee:

  • if the tour operator changes the terms of the package travel contract before the start of the package tour;
  • if, because of the defects pointed out by the traveller, the package travel contract cannot be continued and the tour operator fails to remedy the defects within a reasonable period of time set by the traveller;
  • if force majeure events occur at or very close to the place of destination of the package tour, which may make it impossible to carry out the package tour or to take the travellers to the place of destination of the package tour.

Let's look more closely at the third case, where the contract with the tour operator is terminated due to force majeure circumstances at or very close to the destination, which make it impossible to carry out the trip and to take the tourists to their destination.

According to the lawyer, the case law of the Supreme Court of Lithuania states that the following features qualify the circumstances of force majeure (unavoidable and extraordinary):

  • First, these circumstances must exist on the date of termination. These circumstances did not exist at the time of the conclusion of the package travel contract, were not known to the traveller at the time of the conclusion of the contract and could not have been foreseen by the traveller.
  • Second, the force majeure circumstances must have a substantial effect on the execution of the package tour or on the transport of the tourists to the destination of the package tour. Substantial effect on the performance of the organised tourist trip or on the taking of tourists to the place of the organised tourist trip. This includes not only circumstances which render the performance of the contract impossible in general, but also circumstances which, without precluding such performance, make it impossible to perform the contract without endangering the health and safety of the travellers concerned, taking into account, where appropriate, personal factors relating to the individual situation of those travellers. This assessment shall be made on the basis of a prediction that, at the date of termination, the performance of the package travel contract in question is likely to be significantly affected from the consumer's point of view.

The assessment in question is necessarily prospective in nature, as the impact will only be fully realised through the implementation of the package travel contract. Moreover, the assessment must be objective and not be based solely on the consumer's fears, anxieties or feelings of apprehension.

  • Thirdly, force majeure circumstances can only justify the decision of the traveller concerned to cancel the contract without financial loss if they occur at the place of destination or in the immediate vicinity of the destination.
  • Fourthly, the tourist who relies on force majeure could not have controlled those circumstances and avoided their consequences, even if he had taken all reasonable measures within his power. This qualifying factor is to be decided in the light of the nature of the circumstance relied upon for the withdrawal (e.g. security disturbances - military, political, terrorist acts), a problem involving a serious risk to human health (outbreak of a serious disease) or a natural disaster (flood, earthquake or meteorological conditions).

The occurrence of force majeure does not require an official recommendation by the competent authorities to refrain travellers from entering the area concerned or an official decision classifying the area as a risk zone. However, if the competent authorities have issued such a recommendation, this shall constitute proof of force majeure.

If the establishment of the existence of the circumstances in question were to be linked only to the publication of official recommendations and decisions, i.e. if it were to be assumed that the right of the tourist to terminate the package travel contract is only triggered by the publication of such official recommendations (e.g. not to go to certain countries) and decisions (e.g, The right of a tourist to cancel a tourist travel contract when the circumstances of force majeure may make it impossible to carry out the trip (making it impossible to travel safely as agreed in the contract) would be unduly narrow and generally meaningless, which would be contrary to the principle of efficiency as well as to the principle of consumer protection.

Therefore, despite the fact that you are no longer able to go on the trip you want to go on due to what you consider to be force majeure circumstances which have a material impact on the performance of the package tour, you will have to weigh the above-mentioned indications in order for the termination of the contract with the travel agency to be considered justified and for you to have the right to claim a refund of the money paid for the package tour.

Joint and several liability for competition infringements. What do businesses need to know?

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In today's economy, the observance and enforcement of fair competition is not only essential to guarantee the protection of consumers' interests, but it is also a crucial process for market operators and national economic indicators," says Domantas Velykis, Junior Associate at AVOCAD.

According to him, unfair competition law infringements must be subject to proportionate and dissuasive penalties. And when is joint and several liability applicable for competition infringements?

In practice, it is not uncommon for a company that owns all the shares of another company to exercise decisive influence over such a subsidiary, which may result in the parent company taking decisions that determine the subsidiary's actions on the market, which may meet the criteria for an infringement of competition law. In order to ensure that a parent company exercising decisive influence and taking decisions for a subsidiary does not escape liability, the Court of Justice of the European Union (" CJEU") has established the rule that, once the circumstances of decisive influence have been established and proven, such companies are considered to be a single economic entity and, therefore, the parent company and the subsidiary are held jointly and severally liable for infringements of competition law.

In the EU, competition law is characterised by strict levels of fines and the application of joint and several fines. The scope for joint and several liability has been particularly extended by the CJEU in the 2021 case The Goldman Sachs Group Inc. v Commission. The parent company owned only 33% of the shares in the subsidiary, but these shares conferred 100% of the voting rights. This subsidiary owned the shares of two other companies which committed competition law infringements by participating in the electricity cable cartel. The European Commission's investigation of the infringement revealed that the parent company was able to exercise a decisive influence over the two infringing subsidiaries, resulting in a joint and several fine of as much as €37,303,000 being imposed on the three legal entities. Following an appeal against the imposition of such a penalty, both the General Court of the European Union and the Court of Justice of the European Union upheld the lawfulness of the imposition of such a joint penalty.

In Lithuania, the legal regulation establishing the right of the Competition Council to impose joint and several liability has entered into force only at the end of 2020. The Competition Law provides that where two or more natural or legal persons carrying out economic activities act as a single economic entity, the parent company and the subsidiary shall be jointly and severally liable for infringements of this Law, as well as the other persons carrying out economic activities forming the economic entity. This aligned the national legal framework with the application of joint and several liability inherent in European Union competition law and the case law of the CJEU interpreting it.

Until this period, the possibility of joint and several liability for competition law infringements had been established exclusively in case law, first by the CJEU and later, with exceptions, by the Lithuanian administrative courts.

The CJEU has established the rule that the concept of an economic entity covers all entities engaged in an economic activity, irrespective of that entity's legal status and the way it is financed, and must be understood as meaning an economic unit, even if that unit is legally composed of several natural or legal persons, so that, if a legal person constituting an economic unit commits an infringement of competition law, the other legal persons constituting the economic unit may also be jointly and severally liable for the infringement.

Of particular importance for the application of joint and several liability is the development of the presumption of decisive influence in the case law of the CJEU - where a parent company owns all or almost all of the shares of a subsidiary that has committed an infringement of the competition rules, the parent company is able to exercise a decisive influence over the market behaviour of the subsidiary, and therefore there is a rebuttable presumption that the parent company in question does in fact exercise a decisive influence over the behaviour of its subsidiary.

In order to impose joint and several liability for competition law infringements, it is sufficient to establish and prove that the parent company owns the entire capital of the subsidiary, and the burden of proving that the presumption of decisive influence is rebuttable rests with the infringing parties. In order to rebut this presumption, the person liable must rebut the actual exercise of decisive influence not only by reference to the relationships within the scope of company law, but also by assessing all relevant economic, organisational, legal and even personal relationships. The grounds for rebuttal of such a presumption are problematic, but are recognised as proportionate to the objectives of joint and several liability for competition law infringements.

Having examined the case law of the administrative courts, the most important conclusions for businesses when joint and several liability for competition law infringements is excluded, which are not directly related to the rebuttal of the presumption of decisive influence, are as follows:

  • when considering the application of joint and several liability for infringements committed before the amendment to the Competition Law entered into force on 1 November 2020, the administrative courts have systematically stated that at the time the infringements were committed, the Lithuanian legislation did not provide for the possibility of applying joint and several liability, and that therefore, joint and several liability is not applicable, in accordance with the principle provision of the Constitution that punishment may be imposed or applied only on the basis of the law;
  • if the competition law infringement committed before 1 November 2020 does not fall within the scope of Article 101 TFEU, i.e. The courts may not rely on the case law of the CJEU, which in such a case has only the value of an additional, non-binding source of interpretation of the law, and therefore, the courts of the Republic of Lithuania may interpret the application of joint and several liability in competition law in the national context, in accordance with the court's prerogative to individually develop the practice of application of joint and several liability in the Republic of Lithuania for infringements of the law on competition;
  • in the case of an infringement of competition law committed before 1 November 2020, i.e. when this type of liability is not provided for by the law, the application of joint and several liability to an undertaking, for example, a parent company and a subsidiary, violates the principle of individualisation of the fine, as the provisions of Articles 35 and 36 of the Law on Competition in force at the time of the commission of the infringement could not be interpreted in such a way that the legal entities constituting the undertaking could be subject to a joint (joint) fine rather than an individual fine.

In view of the above amendment to the Competition Act, which will enter into force at the end of 2020, administrative courts will not be able to apply the above reasons for not imposing joint and several liability on competition law infringements committed after 1 November 2020. Therefore, it should be appreciated that parent companies seeking to avoid joint and several liability for infringements of competition law committed by their subsidiaries later than 1 November 2020 will, in principle, only have the possibility to seek to rebut the presumption of decisive influence by proving that the subsidiary was not subject to decisive influence. However, the case-law of the administrative courts on the application of joint and several liability for competition law infringements committed after 1 November 2020 has not yet been established, and it is therefore left to await such case-law.