Termination of Undertakings to Desist

Currently, the implementation of the Consumer Rights Directive by 13.06.2014 is imminent, which demands a great deal from online and offline retailers. Efforts are being made intensively with respect to the new legal situation to develop new ordering procedures, fulfil information obligations, and redesign withdrawal instructions in order to be up to date by 13.06.2014. However, it is often overlooked that in the past undertakings to desist – for example, due to defective withdrawal instructions – were issued, which may not be compatible with the new legal situation and therefore almost inevitably lead to the loss of contractual penalties. The problem is generally relevant for all undertakings to desist. Below, we present a solution.

On the implementation of the Consumer Rights Directive and the associated need for adjustmentwe have already reported. The subject matter of the following article is unintended consequences arising from compliance with the new provisions.

If an (online) retailer was previously given a cease and desist letter due to inadequate fulfilment of information obligations or an incorrect withdrawal instruction, he may have issued an undertaking to desist in which he undertook to meet the existing obligations in the future and otherwise to pay a contractual penalty of at least four digits. This undertaking to desist leads to a corresponding contract with the party issuing the cease and desist letter, which is unlimited in duration and in principle cannot be terminated. This presents a serious problem if the content of the undertaking to desist is no longer compatible with applicable law following a change in the law. This is the case, for example, from 13.06.2014 onwards with regard to the use of a telephone number in the withdrawal instruction or the incorrect information on the bearing of return shipping costs (these may now be imposed on the consumer).

In this situation, the retailer bound by the undertaking would have to choose either to breach the contract and risk a substantial contractual penalty, or to ignore applicable law and thereby provoke cease and desist letters from competitors. Neither of these represents a satisfactory solution to the problem. For this reason, German law provides for the possibility of terminating a continuing obligation, as the described undertaking contract is, without notice if there is an important reason which makes it unreasonable for the obligated party to continue to adhere to the contract. This is precisely the case if the conduct to be abstained from in accordance with the undertaking to desist becomes permissible as a result of a change in the law. In this case, the undertaking contract must be terminated, at least with respect to these points, without observing a notice period.

Even in the event that an undertaking judgment exists or a settlement declaration was issued following the issuance of a preliminary injunction, there are ways to respond to the change in law. Circumstances that have arisen subsequently (for example, a change in law) can still be raised as a defence against such court orders. The correct legal remedy for this is an enforcement defence action.

Conclusion

All companies should regularly review the inventory of undertakings to desist issued by them and court decisions rendered against them. Whilst there is no immediate need for action in the case of court decisions, it is essential in the case of undertaking contracts that have been superseded by a change in the law to issue a notice of termination. Otherwise, the obligations under this contract must continue to be observed, as the change in law alone has no impact on the validity of the contract. The problem affects every form of undertaking to desist, not only those from competition law.