A broad amendment to the Civil Code gives us a new, cohesive set of rules for the supply of digital content. Among other things, this legislation introduces a new type of contract, and special rights from defective contractual performance.
On 6 January 2023, Act No. 374/2022 Coll. has come into force, amending the Consumer Protection Act (Act No. 634/1992 Coll., as amended) as well as the Civil Code (Act No. 89/2012 Coll., as amended). This piece of legislation represents a complex overhaul of consumer law, transposing several EU directives into Czech law, among them Directive (EU) 2019/770 of the European Parliament and the Council of 20 May 2019 on on certain aspects concerning contracts for the supply of digital content and digital services. A separate part within the Civil Code (Sec. 2389a – Sec. 2389u) is now dedicated to these issues, as part of the larger legal framework for the transfer of a thing for use by a third party.
The changes which we describe below are brought about by an amendment known as the “consumer protection amendment”, but we should stress that the new rights and obligations apply not only in relations with consumers but, to a substantial part, also in B2B relations. By contrast, goods with digital elements are not being addressed by the amendment at all, i.e., electronic devices and appliances with built-in software continue to be governed by the previous legal rules.
Contract for the supply of digital content
The amendment introduces a new type of contract – the contract for the supply of digital content, by which the provider agrees to make available a thing (such as an app, an e-book, streaming services etc.) in digital form, or to provide a digital service (such as social media, cloud storage, etc.), and to do so promptly upon the conclusion of the contract, and in the latest version at the time. Correspondingly, the consumer becomes obliged to pay to the provider the relevant consideration. However, these rules also apply to established business models of today under which the consumer does not pay a price but instead provides personal data (typically in the case of social media). The above-mentioned EU Directive recognizes this model but stresses that personal data can never be considered a commodity.
Updates and modifications of digital content
The new law also introduces obligations in connection with the provision of updates: Providers must ensure that consumers are provided with (i) contractually agreed updates, as well as (ii) any updates which are necessary for the proper functioning of the digital content. The latter must be executed by the consumer, or else they forfeit their rights from defective performance with respect to those defects which occurred because the update was not executed.
One must, however, differentiate between updates and the provider’s decision to modify digital content. The specific modifications, and the justification for them (such as necessary technical changes, improved features, changed algorithms etc.), must be provided for in the terms of use/service, and must be communicated to the consumer in a timely, clear, and intelligible fashion. The consumer must not incur any additional costs associated with the modifications.
Rights from the liability for defects
The law differentiates between individual acts of supply, and continuous supply, of digital content. In the case of the latter, consumers may bring a claim on grounds of a defect which occurred at any time during the existence of the obligation. Conversely, in the case of an individual act of supply, the provider’s liability is limited to those defects which were present already at the time at which the digital content was made available (and which may be invoked for a period of two years following the moment of supply). Given that consumers will usually not be in a position to properly identify and determine the defects of digital content, it falls upon the provider to prove that its performance was free of defects. In both of the above-mentioned cases, the provider must remedy the defect. If (i) the provider fails to do so, (ii) the defect re-occurs after it was remedied, or (iii) the defect constitutes a material breach of contract, then the consumer may demand a reasonable discount on the price, or withdraw from the contract.
However, in actual practice, one frequently encounters cases in which digital content could not have functioned properly in the first place, due to the consumer’s technology being incompatible with the digital content. If this was brought to the consumer’s attention before the contract was made, then the provider need not evidence the absence of defects. However, the provider will still be liable vis-a-vis the consumer for defects which were caused by a faulty integration of digital content in the digital environment of the consumer, if this integration was performed by the provider (or if it was performed by the consumer, but based upon insufficient instructions).
Source:
Act No. 374/2022 Coll.
explanatory memorandum for Act No. 374/2022 Coll.