Aziz v Caixa d’Estalvis de Catalunya, Tarragona i Manresa (Catalunyacaixa)
Court of Justice of the European Union (First Chamber)
Citations:  EUECJ C-415/11; ECLI:EU:C:2013:164;  All ER (EC) 770;  3 CMLR 5.
This case concerned a preliminary ruling on the meaning of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts. It arose out of a Spanish case in which Aziz took out a mortgage which he secured using his existing property. The contract allowed the bank to call on the loan if Aziz defaulted on his payments. Clause 15 of the agreement also stated that the bank had the right to reclaim any debt, quantifiable immediately. When Aziz defaulted, the bank quantified the debt using a notary and began possession proceedings.
Aziz sought to have Clause 15 invalidated as unfair under the Directive. Article 3 of the Directive states that:
(1) A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer.
Spanish law did not have any provisions allowing relief if a mortgage term was unfair. Additionally, Spanish law did not allow final vesting of property under a mortgage to be reversed. This meant that even if they could declare the term unfair, Aziz would have no effective remedy. Interim relief was also not possible.
The Spanish Court submitted two questions to the European Court of Justice:
- Was Spanish national law compatible with the Directive?
- What does the Directive mean by an ‘unfair term’ in the context of default interest rates, quantification and mortgage acceleration?
The Court answered the questions as follows:
- Spanish law impaired the protection which the Directive sought to give consumers, and so was incompatible.
- Unfairness is to be considered by reference to the national law rules applicable to the case in the absence of an agreement between the parties. The national court must consider whether the contract places the consumer in a less favourable position than the default national law rules.
This Case is Authority For…
When a consumer objects to an order for payment, the national court must investigate on its own initiative whether the term falls within the Directive. If the Directive applies, the national court must then assess whether the term is unfair. The Directive precludes national legislation which prevents national courts from doing this. National rules must also not impair the effectiveness and enforcement of rights under the Directive.
Unfairness is determined by comparing the consumer’s position under the contract to their position if there had been no contract. Other factors which are relevant to whether a term is unfair include:
- The nature of the goods or services under the contract;
- The effect of the clause;
- Other remedies the consumer has under national law to mitigate the effect of the clause;
- The typical terms of other consumer contracts of that type;
Good faith exists if the seller, ‘dealing fairly and equitably with the consumer, could reasonably assume that the consumer would have agreed to such a term in individual contract negotiations’.
The court noted that the system ‘introduced by the directive is based on the idea that the consumer is in a weak position vis-à-vis the seller or supplier’ regarding his knowledge and bargaining power.