European Union: Standard-Form Contracts For Legal Services Between Lawyers And Consumers Must Comply With Directive On Unfair Terms In Consumer Contracts

Last Updated: 5 February 2015
Article by Martin Favart

Most Read Contributor in Belgium, October 2017

On 15 January 2015, the Court of Justice of the European Union (the "ECJ") held that standard-form contracts for legal services between lawyers and consumers fall within the scope of Directive 93/13/EEC of 5 April 1993 on Unfair Terms in Consumer Contracts (the "Directive") (ECJ, 15 January 2015, case C-537/13, Birutė `iba v. Arūnas Devėnas).

The ECJ was asked to rule on preliminary questions submitted by the Lithuanian Supreme Court in the context of a dispute between Ms `iba and her former lawyer, Mr Devėnas. Ms `iba had entered into three standard-form contracts with Mr Devėnas for legal assistance with respect to matters of her private life, but subsequently refused to pay Mr Devėnas' fees. After both the first instance court and the appellate court had sided with Mr Devėnas, Ms `iba appealed to the Lithuanian Supreme Court. She argued that the lower courts had failed to take account of her status as a consumer, which should have led them to interpret the contracts at issue in a manner favourable to her.

The ECJ first observed that, pursuant to its Articles 1(1) and 3(1), the Directive applies to contracts concluded between a "seller or supplier" and a consumer which have not been individually negotiated. Accordingly, it was necessary to determine (i) whether a lawyer practising his profession may be classified as a "seller or supplier" within the meaning of the Directive; and (ii) whether a contract for legal services concluded by a lawyer with a natural person acting for purposes outside his/her business or profession, constitutes a consumer contract under the Directive with all the related safeguards for the natural person.

According to the ECJ, the idea behind the Directive is that the consumer is in a weak position vis-ŕ-vis the seller or supplier, as regards both his bargaining power and his level of knowledge. This leads to the consumer agreeing to terms drawn up in advance by the seller or supplier without being able to influence their content. Specifically regarding contracts for legal services, the ECJ considered that there is, as a general rule, some inequality between 'client-consumers' and lawyers owing in particular to the asymmetry of information between the parties. Lawyers, according to the ECJ, display a high level of technical knowledge which consumers may not have and the latter therefore may find it difficult to judge the quality of the services provided to them.

For this reason, the ECJ held that a lawyer who provides a legal service for a fee to a natural person acting for private purposes is a "seller or supplier" within the meaning of the Directive. A standard-form contract relating to the supply of such services is thus covered by the Directive.

Additionally, the ECJ stated that if a lawyer decides to use standard terms, it cannot be argued that the application of the Directive would undermine the specific nature of the relations with his client and the principles underlying the practice of the legal profession. The ECJ thus referred to an argument put forward by the European Commission according to which the exclusion of contracts concluded by 'client-consumers' with persons practising liberal professions, characterised by independence and ethical requirements, would deprive all those 'client-consumers' of the protection granted by the Directive.

Moreover, according to the ECJ, the fact that, in the course of their activities, lawyers are bound by an obligation of confidentiality in their relations with 'client-consumers' does not constitute an obstacle to the application of the Directive. In this regard, it noted that contractual terms which have not been individually negotiated, do not contain, as such, personal information relating to lawyers' clients, the disclosure of which might undermine the confidentiality of the legal profession.

Accordingly, the ECJ concluded that the Directive applies to standard-form contracts such as those at issue in the proceedings before the Lithuanian courts. The ECJ added that the Lithuanian Supreme Court should (i) take account of the specific nature of legal services in assessing under the Directive whether the contractual terms are plain and intelligible; and (ii) in case of doubt, give the contractual terms the interpretation that is most favourable to the 'client-consumer'.

With this judgment, the ECJ has once again widened the scope of the Directive beyond its more straightforward scope of application of consumer sales and commercial services. In 2013, the ECJ had already ruled that residential lease agreements between a landlord acting on a commercial basis and a tenant acting on a non-commercial basis also fall under the Directive (ECJ, 30 May 2013, case C-488/11, Dirk Frederik Asbeek Brusse and Katarina de Man Garabito v. Jahani BV).

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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