Protection of small and medium-sized businesses against general contractual conditions: the civil code as defence. Carlos F. Cervantes Lozano. Attorney at law. Associate University Professor. BC Valencia

Reflection on which measures are offered by our hundred-year old Civil Code to small and medium-sized businesses for their protection against general contractual conditions that can, in certain cases, turn out to be abusive, stems from article 2b of Directive 13/93, regarding abusive contractual clauses, which define the "consumer" as "any natural person who, under contracts regulated by the present Directive, is acting with a purpose which differs from their professional activity". In this way, the Community Directive, in comparison with the Spanish Consumers and Users Act [Ley de Consumidores y Usuarios] of 1989 and the Draft Bill on General Contractual Conditions from the Ministry of Justice, further reduces the subjective scope of what has come to be called, and not without some criticism, "Consumer Law" ["Derecho del consumo"] (vid Jesus Aguila-Real, "Proteccion de los consumidores y Derecho de los contratos" [Consumer protection and contract law], ADC, 1994).

Article 1 of the Spanish Consumers and Users Act anticipated community regulations, by adopting a restrictive criteria in determining its beneficiaries. Thus in article 1, paragraph 2 and 3, it states that: "For the purposes of this Act, consumers or users are natural or legal persons who acquire, use or enjoy, as final recipients, movable or immovable goods, products, services, activities or functions, whatever may be the public or private, individual or collective nature of those who produce, provide, supply or dispatch them. Those who acquire, store, use or consume goods or services, with the aim of including them in processes of production, transformation, merchandising or provision to third parties, without becoming the final recipients thereof, will not be considered as consumers or users".

This formal definition of what in the legal trade is a weak or powerless contracting party, often gives rise to serious prejudice in the right to defence of small and medium-sized entrepreneurs, who can attest on a daily basis to the rigidity of general contractual conditions, especially when the contracts that they hold with their suppliers are in many cases, not only of great importance from a quantitative point of view but also from a qualitative point of view, insofar as interruption in supply can have a marked effect on the business's production cycle. Expanding on this point, the reader might like to consider how difficult it is for a small or medium-sized business even to begin to approach the so-called balance of provisions or obligations, in its dealings with financial institutions, where the latter are so given to imposing general conditions on their customers.

Another negative effect relating to the subjective scope of the legislation covering general contractual conditions, albeit in a specific fashion, arises from financial leases or financial leasing agreements on property, since the Consumers and Users Act does not grant protection to the user/lessee. In fact, additional Provision 7, on the Supervision and Regulation of Credit Institutions Act 26/199 [Ley de Disciplina e Intervencion de las Entidades de Credito] of 29 July, which regulates this form of contract, requires that the asset which is the object of the contract is intended by the user for agricultural, farming, industrial or commercial use, as a result of which, the user is, therefore, denied the status of final consumer, since the intention must be to use said property for a merchandising or production process.

A more open criterion than that given by the Consumers and Users Act can be found in the Draft Bill on general contractual conditions, since, in article 1, it includes the weak or powerless party to the contract, whether this be the final consumer or a small or medium-sized business, within its scope of protection. Thus, the matter of corroborating whether or not a consumer is involved in a contractual relationship is avoided and the question of whether or not general conditions are applicable is tackled, with such conditions, if they exist, applying from that point on, a system which in our opinion is far more just.

In comparing the three texts to which reference has been made, it is soon evident that the one which goes the furthest towards specifying the party protected against general conditions, is Directive 13/93, insofar as it goes beyond the concept of the final recipient given under the Consumers and Users Act, and establishes the need for the consumer to be a natural person. It must not be forgotten, however, that Derived EC Law, which Directive 13/1993 represents, establishes a set of regulations with only a minimum content, which the recipient States could amplify by means of increasing the subjective scope of protection under their national laws. Having said this, it is relevant to note that as Jesus Alfaro says (Las Condiciones Generales de la Contratacion - General Contractual Conditions, Madrid, 1991, pages 155 and ff.), "The Consumers and Users Act represents, ..., a unique case in comparative law insofar as entrepreneurs are not protected from the use of general conditions when a regulation for the control thereof is contained in legislation", thus, and de lege data, in our current legislation, control of general conditions is carried out once the subjective element of the legal relationship has been analysed, i.e. once the nature of the final recipient of the product has been verified, with the purchaser of goods or services acquired for the purpose of inclusion in a production process being excluded from protection.

Most recent legislation covering general conditions fails to protect small and medium-sized businesses, on the grounds of the false principle by which members in the market, by dint of occupying this position, are in a situation of equality and have sufficient means of organisation to handle their business dealings without the need for any type of different protection. Therefore, the sometimes indiscriminate application of general conditions to small and medium-sized businesses in their business dealings with any parties occupying a pre-eminent position in the market, leads us to try and make reference, albeit brief, to the legal means offered to this type of business by the legal system, to combat any unfavourable consequences that they may suffer as a result of the general conditions which they are obliged to accept on a daily basis in their dealings with suppliers.

The fact that it is impossible to use the means of protection offered by the special laws to the final consumer leads us to concentrate our attention on the articles in the Civil Code which try to ensure a certain equality between contracting parties, since these could serve the purpose of reacting against a condition which is considered abusive. The existence of this type of regulation in our hundred year-old Code demonstrates its preoccupation with trying to alleviate the effects of mass contracting, which when this text was first published was still in its infancy. It is necessary to emphasise the importance of its inclusion in the Code, particularly bearing in mind that this was enacted at a time when individualist and liberal principles were having maximum effect on Economy and Law.

Although there is the possibility of recourse to general principles, such as that of exercising rights in accordance with good faith, prohibition of abuse of law (these principles are also recognised in the current article 7 of the Code), or the prohibition of unjust enrichment, we can also bear in mind the following articles of the Civil Code which could serve us for the aforementioned purposes: article 1.102 of the Civil Code, which establishes the nullity of the waiver of action to demand liability for fraud or deceit; article 1.200 of the Civil Code, which establishes the unlawfulness of offsetting debts when these arise from deposit; article 1.214 of the Civil Code regarding attributing the burden of proof of obligations to the party claiming the fulfilment thereof; article 1.172 of the Civil Code regarding attributing the right to allocate payment exclusively to the debtor; article 1.256 of the Civil Code, which establishes that fulfilment of the contract cannot be at the discretion of one of the parties to the contract; article 1.288 of the Civil Code, which establishes the so-called "contra stipulatorem" principle, insofar as it imposes the unfavourable interpretation against the party which has caused the obscurity in the agreement; article 1.476 of the Civil Code, regarding nullity of the seller's exemption from liability for bad faith in the event of eviction and article 1.275 of the Civil Code, regarding nullity of contract which is unethical or with illicit cause.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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