CONSUMER LAW IN PUERTO RICO: A CODE FOR THE RIGHTS OF THE CONSUMER. Summary: Introduction. Historical Background. The aim of this paper.

Transcription

1 1 CONSUMER LAW IN PUERTO RICO: A CODE FOR THE RIGHTS OF THE CONSUMER Pedro F. Silva-Ruiz* Summary: Introduction. Historical Background. The aim of this paper. Comments on some of the main aspects of Senate Bill (S.B. 1047: A Code for the Rights of the Consumer). Conclusions. Introduction 1. A Department of Consumer Affairs was created in by transferring 2 many powers granted to different governmental agencies to the new one. There are also many federal laws dealing with the consumer that are applicable in Puerto Rico The 1973 law did not define consumer. After all, we all are consumers! 4 3. No mention was made of the consumer contract ( contrato de consumo ), the adhesion contract ( contrato de adhesión ), and abusive clauses ( cláusulas abusivas or vejatorias or leoninas ). Notwithstanding, case law has referred to 1 *Retired Professor of Law. Lawyer and Arbitrator. Corresponding Member of the National Academy of Law and Social Sciences, Córdoba, Argentina, and Foreign Member of the Academy A of European Iusprivatist Lawyers, Pavia, Italy. Also called DACO, Law no. 5 of April 23, 1973, 3 LPRA 341, as amended. Section 3 of the law reads: The Department of Consumer Affairs shall have as its primary purpose to defend and implement the rights of the consumer. 2 See, 3 LPRA 341d and d-1, also 3 LPRA 341e. 3 For example, the Magnusson-Moss Warranty Act, 15 USC President J.F. Kennedy, in an address to Congress (March 1962) stated: Consumer, by definition, includes everyone of us. A.A. Alterini, Contratos (civiles-comerciales-de consumo). Teoría General. Abeledo-Perrot, Buenos Aires, Argentina, first edition, first reimpression, 1999, pp

2 2 some of them. 5 These important aspects of contemporary consumer life also need to be the subject of legislative consideration and regulation. 4. Consumers must be protected because we are not experts; we are also the weakest part of a consumer contract. Historical Background 5. Legislation enacting a Code for the Rights of the Consumer (Code) 6 was presented before the House of Representatives on February 25, After it was approved by the Senate, a pocket veto killed it An almost identical bill was introduced at the House of Representatives on February 23, , but neither was it approved by the legislative assembly Senate Bill (S.B.) was introduced on August 14, The appropriate Senate Committee approved it, with amendments, and recommended to the full Senate its approval last March 15, No action has thus far been taken by the Senate 11. The aim of this paper 8. The object of this paper is to comment some of the main aspects of S.B An outline of the bill is as follows: (i) Chapter I: Name and general rules (arts. 1-5); (ii) Chapter II: Definitions and rules of interpretation (arts. 6-9); (iii) Chapter III: 5 For example, Zequeira v. CRUV, 83 DPR 878, 880 (1961) ( adhesion contract ). 6 P. de la C (House Bill 4410). 7 Governor Calderón vetoed it. 8 P. de la C (House Bill 1079). 9 Governor Acevedo Vila s term. 10 P. del S (Senate Bill 1047) (2009): Código de Derechos del Consumidor. It was presented by Senator L. Soto-Villanueva. 11 As of October 31, 2010.

3 3 Rights of the Consumers (art. 10); (iv) Chapter IV: Protection of health security (art. 11); (v) Chapter V: Protection of legal, economical and social interests (art. 12); (vi) Chapter VI: Information and Publicity (arts ); Regulation of Publicity (arts ); Offer of Goods and Services (arts ); (vii) Chapter VII: Contractual Protection: Adhesion Contracts (arts ); Unsolicited sell at the domicile (art. 33); Contractual Clauses (arts ) and Abusive Clauses (arts ); (viii) Chapter VIII: Credit Operations (arts ); (ix) Chapter IX: Merchant s Responsibility (arts ); Penal and civil Liability (arts ); (x) Chapter X: Other rights of the consumer (arts ); (xi) Chapter XI: Dangerous Products (arts ); (xii) Chapter XII: Appearance in court for the Protection Rights of the Consumer (arts ); (xiii) Chapter XIII: Duties and Obligations of the State (arts ); (xiv) Chapter XIV: Compensation (arts ); and (xv) Chapter XV: Final Provisions (arts ). 12 Comments on some of the main aspects of S.B (A Code for the Rights of the Consumer) 10. The Code will establish minimum rights and legal norms for the protection of the rights of the consumer; also contract regulations between a consumer and a merchant Consumer cannot renounce the exercise of any right granted by the proposed Code. Its provisions would prevail over any norms, rules, usages or customs and also practices or stipulations to the contrary. 12.The legal rules adopted under the proposed Code are applicable to all consumers and merchants contracting under the laws in the force in Puerto Rico Our translation. 13 P. del S (S.B. 1047) (Code), art Code, art. 3.

4 4 13.The administrative or judicial procedures can be brought by the competent administrative agency, including the Department of Consumer Affairs, at the request of the consumer or any person with interest in the subject The right and other rules to be established by the Code should be literally interpreted in favor or protection of the consumer The proposed legislation defines a good number of terms, for example: 17 (i) Abusive clauses stipulations detrimental to the consumer; are contrary to good faith and raise a significant and unjustifiable balance against the consumer; 18 (ii) Merchant all private persons, physical or moral, that in a regular way, sell, offer to sell, produce, import, distribute, or sell goods or services to the consumer. This includes persons that transfer goods or services gratuitously, with intent to obtain eventual profit or gain; (iii) Consumer the physical person contracting for his own benefit or that of his family or social group, without the intention to resell the goods or services for a profit 19. (iv) Adhesion Contract a document written unilaterally by a merchant, or other person under his instructions, without a substantial participation of the consumer, stating the terms and conditions applicable to the acquisition of a product or rendering of a service, notwithstanding said document does not have all the ordinary clauses contract usually has. 15 Code, art Code, art Code, art. 9; also, art For the European Union, see art. 3.1 of the European Directive 93/13/CEE. 19 The argentinian law uses the phrase destinatario final or final addressee instead of the phrase without the intention to resale the goods or services (Argentina, Ley law no of 1993: Defensa del Consumidor).

5 5 (v) Consumer Contract the contract made by a merchant with a consumer within the sphere of its commercial activity. 16.Article 10 of the Code declares that the basic rights of the consumer are: (i) (ii) free selection of goods and services; that the information about the goods and services be truthful, sufficient and clear, including their prices, warranties and conditions of the contract; (iii) equal and undiscriminatory or abusive treatment of every consumer by all merchants; (iv) (v) the protection against false and abusive publicity; adequate access to the judicial and administrative processes for the protection of their individual and collective interest; and others. 17.The contract is the instrument for the creation of obligations 20. It exist from the moment one or more persons consent to bind himself or themselves, with regard to another or others, to give something ( cosa ), or to render some service A contract is not define in traditional Civil Codes (i.e., French, Spanish, Puerto Rico). The proposed European Contract Code drawn by the Academy of European Private Lawyers of Pavia, Italia, on the contrary, starts with a definition of a contract: Art 1. Sec. 1. The contract is the agreement of two or more parties, to establish, regulate, alter or extinguish a legal relationship between said parties. It can also produce obligations or other effects on only one of the parties. See, Academy of European Private Lawyers, Code Europeen des Contrats (in four languages), preliminary draft, Coordinator G. Gandolfi, Milano, Dott. A. Giuffré, editore, 2004 (p. 521 version in English). Also see, G. García-Cantero. Estudios sobre el Proyecto de Código Europeo de Contratos de la Academia de Pavía, Ed. Reus, Madrid, España, 2010, p. 53 ss. For a panoramic view of contract law in the common law, see M.A. Chirelstein, Concepts and Case Analysis in the Law if Contracts, Foundation Press, USA, 2010, pp The Unidroit Principles of International Commercial Contracts of 2004 does not define a contract. On the other hand, the Civil Code of Louisiana states that a contract is an agreement by two or more whereby obligations are created, modified, or extinguished (art. 1906). 21 See, art of the Civil Code of Puerto Rico (CCPR), 31 LPRA The CCPR is the Spanish Civil Code of , in force in Puerto Rico since January 1, The 1930 edition of said CCPR is now in force, as amended. Pedro F. Silva-Ruiz, The Puerto Rican Legal Order: A Mixed System, in the book European Legal Traditions and Israel, ed. Rabello, The Hebrew University of Jerusalem, Jerusalem, Israel, 1997, p. 819 ss.

6 6 Contracts are either negotiated or by adhesion. They constitute the general rule; the parties decide after negotiation as they are both usually in a position to be able to do so the content (obligations) of the contract. On the other hand, adhesion contracts 22 are those in which one of the parties unilaterally establishes the content of the contract. The other party agrees without modifications One author is of the opinion that there is a distinction between an adhesion contract and a consumer contract. The first one is characterized by the way it is drawn up. The second one is definitively not only characterized by the adhesion of one party to the contract drawn unilaterally by the other party, but by the final consumption of goods and services. Thus, a contract may be both adhesion and consumer. But a contract may only be a consumer contract and not of adhesion General clauses or conditions of contracts ( condiciones generales de la contratación or cláusulas generales de la contratación ) and adhesion contracts imply each other. The clauses predetermined unilaterally the content of the future adhesion contracts; these contracts specify the general clauses of the particular 22 The term contract of adhesion was coined by the French jurist Saleilles. (De la Declaración de Volonté, 1901). See Vera Volgar, The Contract of Adhesion: A Comparison of Theory and Practice, 20 American J. of Comparative Law 53, (1972). Saleilles defines the contract of adhesion as preformulated stipulations in which the conditions are dictated to an undetermined number of acceptants and not to one individual party. According to the Supreme Court of Puerto Rico, adhesion contracts are those in which only one of the parties prescribes the conditions of the contract to be accepted by the other. Zequeira v. Urban Renewal and Housing Corp., 83 DPR 847 (1961). And in Maryland Casualty Co. v. San Juan Racing Association, 83 DPR PRR 538 (1961) it was of the opinion that the adhesion contract is one in which the economically strongest party imposes specific conditions or the full scheme of the contract to his advantage and in detriment to the other contracting party who, been economically weaker, has no freedom of choice other than to accept those conditions or scheme or refuse to enter into the contract (from the annotations to 31 LPRA 3372). 23 See, Luis Díez-Picazo, Fundamentos del Derecho Civil Patrimonial, vol. 1: Introducción. Teoría del Contrato, ed. Civitas, Madrid, España (Spain), 1993, pp. 139 and 223; and José R. Vélez-Torres, Derecho de Contratos, Universidad Interamericana de Puerto Rico, San Juan, Puerto Rico, 1990, p. 7. Also see, Luis Díez-Picazo, Contratos de Consumo y Derecho de Contratos, 59-1 Anuario de Derecho Civil 11-28, Madrid, España, Ricardo L. Lorenzetti, Tratado de Contratos, vol. 1, Rubinzal-Culzoni, eds., Buenos Aires, Argentina, 1999, p. 141.

7 7 contractual relations between the merchants and the individual adherent consumer. Thus, the destiny of the general clauses is to be submitted to the adhesion by the consumers The proposed Code would order that the content of the goods and services described in the publicity for the general public are considered included or incorporated in the contract with the consumer 26. Furthermore, the clauses conditions or stipulations included in a consumer contract must comply with the following requirements: (i) clarity and simplicity, without reference to texts or documents unless they are given to the customer, either previously or simultaneously to the signature of the contract; (ii) delivery of the supporting documents of the transaction and (iii) good faith, which in all cases means the exclusion of abusive clauses. If there is any doubt about the meaning of any contractual clause, the interpretation most favorable to the consumer prevails The Code has a long list of abusive clauses 28. Some examples are: (i) clauses written unclearly; (ii) clauses reserving the merchant the right of the interpretation of the contract; (iii) the unconditional ties of the consumer to the contract notwithstanding the breach of the contract by the merchant; (iv) the unilateral right of the merchant to determine whether or not the goods or services are in conformity with the stipulations of the contract; and many others (over 25). 25 Pedro F. Silva-Ruiz, Contratos de Adhesión, Condiciones Contractuales Generales (Condiciones Generales de los Contratos de la Contratación) y las Cláusulas Abusivas, in the book A. L Europe Du Troisieme Milenaire, Mélanges offers á G. Gandolfi, Dott. A. Giuffré, ed., Milano, Italy, 2004, first volume, p. 581 ss. Of the same autor, Las Condiciones Generales de la Contratación y Cláusulas Abusivas (derecho puertorriqueño), in the book Las condiciones generales de la contratación y cláusulas abusivas, Fundación BBV and ed. Civitas, Madrid, España, primera edición, 1996, p. 273 ss. 26 Code, art Code, art Code art. 36. For Argentina, see M.L. Estigarribia, Las Cláusulas Abusivas en la Contratación con Consumidores en la Legislación Argentina, Facultad de Ciencias Económicas, Universidad Nacional del Nordeste, Chaco, Argentina, 2003, 4 pp. (S-036) (in file with the autor of this paper).

8 8 22.Abusive clauses are declared null and void 29. The integration of the contract, if possible, follows. 23.The Code declares that the state recognizes the rights of the consumer as fundamental to the human being Claims brought under the provisions of the Code could be file either in court or in the Department of Consumer Affairs or any other administrative agency with jurisdiction 31. Monetary compensations should be granted for damages 32. Conclusions 25.S.B. 1047: A Code for the Rights of the Consumer should be approved without delay. For two consecutive terms, of four years each for eight years total, plus almost two additional years, Puerto Rico has been waiting for said legislation. It is questionable that the Senate has delayed its approval. 26.This Code increases substantive law provisions as well as it will also reinforce public policy regulations in favor of the consumer. pfsr, Code, art Code, art Code, art Code, art. 71.