General conditions in contracts in Greece
(By Inka Grecia)

GENERAL CONDITIONS IN FINANCIAL SERVICES: GENERAL CONDITIONS OF ADHERENCE AND JUDICIAL AND ADMINISTRATIVE ACTIONS OF CEASEMENT

A. DOCUMENTS

General Conditions, in general
In the modern massive transactions one can very easily observe that there is a wide use of general conditions of adherence, which bear the characteristic of being drafted in advance, particularly in the context of a pre-formulated standard. At this point a differentiation from the typical and traditional view of concluding contracts is to be spotted; there is no specific or individual negotiation between the parties of the contract on their special needs, on the contrary these contracts constitute indeed one-sided standard contracts formulated in advance for an undetermined number of cases in the future .
Therefore the consumer is totally incapable of influencing the substance of the terms included in the contract and his/her only choice is to conclude or not the pre-formulated contract on the sole basis of “ take it or leave it” . Massive transactions cannot afford individual negotiations; in some cases on products of vital significance or in markets without actual competition, consumer is deprived even of the aforementioned limited freedom of choice .
Hazards
The extent use of general conditions derives from and at the same time leads to a significant imbalance of the bargaining positions of the contracted parties. Due to them, the development of economic relationship between suppliers and consumers does not tend towards a greater equity; on the contrary the image of contractual relations is illustrated that there is an all-mighty supplier who imposes his interests against a protectless consumer. This inequality attributed to the use of general conditions of adhesion allows the supplier, by the drafting of unfair terms, to threaten the consumers’ legitimate interests and to condemn them to a defenseless situation because of their restricted bargaining strength . That is why there is a need for consumers’ protection, in order to safeguard his freedom of choice.
The use of terms in order to maximize the particular interests of one of the parties which lead to a significant imbalance in the contractual relations between the parties, undermines not only the interests of the consenting party but also the legal and economic order as a whole .
From the economic viewpoint this can be extremely harmful. “The economy can function correctly only if resources are optimally allocated. This is possible only if the market is competitive enough and if the relations between the economic operators are balanced. In economic terms, a risk should be borne by the person who is best able to prevent this risk or to insure himself against it; an obligation must be assumed by the person who is best placed to assume it”.
Unfair terms shift the burden of risks and obligations by externalising the costs in question. This has two major consequences: firstly, the prices of products and services do not reflect true costs, creating distortions to competition in favour of less efficient firms and leading to lower quality products and services; secondly, the costs incurred by society are higher, because the risks and obligations are borne by persons other than those who could bear them most efficiently from the economic viewpoint” .
The need to protect consumers against unfair terms in the single market is increasingly required since the conduction of a contract is drawn up in a language other than their own and furthermore it is governed by a different legal order than their own.
The need to protect consumers against unfair terms is all the greater now that consumers are increasingly required, because of the single market, to conclude contracts that are drawn up in a language other than their own and that are governed by a different legal order than their own.
Financial Services, in particularly.
In the sector of financial services there is a wide use of general conditions for many types of contracts. Especially in the field of retail banking , which concerns transaction of law quantity and is addressed mainly to consumers, general conditions are not only a commonplace, but they prevail totally. They usually share the form either of pre-formulated written terms destined for all transaction conducted by the creditor or of standard terms of contracts of adherence. All the aforementioned hazards seem to arise in the field of financial services, so that it is unburdened by unfair terms of great variety and dangerousness.
The terms most frequently encountered, concern exclusion or limitation of consumer legal rights in the event of non-performance on the part of the professional, followed by imposition of disproportionate penalties in case the consumer fails to perform. Unfairness is not only detected in the aforementioned cases, but also creditors include in general conditions terms excluding or hindering the consumers’ right to take legal action or exercise any other legal remedy by restricting or waiving creditors’ liability. The tactic of binding the consumers to terms that were not communicated to them before the conclusion of the contract is not rare. One meets furthermore terms designed to circumvent the law in force and “manipulate” the interpretation and the modification of the contract. The presentation of these examples reveals the abundance of unfair terms in operations linked to many fields of the financial sector, such as consumer credit, bank accounts, investments, cheques, payment cards, investments or capital transfers, contracts of guarantee, promissory notes, financial leasing and sureties.
With the aim to maintain a high-degree level of consumer protection in the crucial field of financial services, there is a need for legislation capable of combating abusive attitudes by financial suppliers against consumers. In the effort of serving this aim and contributing to the smooth operation of the single market, national and European legislation is trying to offer adequate solutions by adopting several provisions and mechanisms of protection.

B. NATIONAL LEGISLATION

I. The Notion of Unfair Terms
The Law 2251/1994 Article 2 adopted the Directive 93/13 on unfair terms in consumer contracts. At present after the adoption of 2741/1999 Law amending article 2 of the Law 2251/1994 the criterion for the assessment of any contractual term is that of the lack of individual negotiation; the article 3.2 of the Directive 93/13 is now fully and faithfully transposed by article 2 paragraph 10 of the Law 2251/1994, according to which a term shall always be regarded as not individually negotiated, where the consumer has not been able to influence the substance of the term.
A standard theory and jurisprudence has already been formulated about the notion of general conditions. General conditions must be a) contractual terms, b) in advance drafted, c) destined for constituting the substance of an undetermined number of contracts in the future and d) unilaterally imposed by one party to the other (one-sized). Also in the Greek law the idea prevails that mandatory provisions are excluded by the scope of the Law 2251/1994, since contracts embodying statutory and regulatory provisions are not supposed to contain unfair terms and because in this case we do not have actual contractual terms, since the contract is governed by a regulatory provision .

II. The incorporation and interpretation of general conditions in the contract.
In order to be inserted in the contractual relation, general conditions should fulfill the prerequisites of article 2 paragraph 1 and 2 that they have been drafted in plain and intelligible language and furthermore that the consumer have actually been given the opportunity to examine all terms. Only under the fulfillment of the two aforementioned prerequisites general conditions is incorporated in the contract binding on the consumer. The infringement of these obligations leads automatically to the unenforceability of the general conditions without being necessary to be examined whether they are unfair or not . At this point the Greek Law follows the choice to vest actually in consumers a right to information, as the principle of transparency that was initially introduced by the jurisprudence of BGH, requires .
As far as interpretation is concerned, in doubt the interpretation most favourable to the consumer should prevail. Paragraph 5 of Article 2 states that the need for consumer protection should be taken into account in the process of contractual interpretation. Criteria for the interpretation of a contract are also offered by articles173 of Civil Code and article 200 of Civil Code , which require an interpretation on the basis of good faith.

III. Unfair Terms.
Paragraph 6 of Article 2 provides that general conditions resulting to the imbalance in the parties’ rights and obligations arising under the contract to the detriment of the consumer are prohibited and are deemed as null and void. At this point it should be remarked that the Greek adoption of the Directive 93/13 differentiates from the original Directive, as it does not set the “significance” imbalance as a criterion. Even a simple – not necessarily a significant – imbalance enables the consumer to invoke the unfairness of the contractual term , so that the offered protected is being widened and freed from strict preconditions. The minimal character of the directive that allows more stringent provisions in favor of safeguarding consumer legitimate interests justifies this wider protection.
The general definition of unfairness according to paragraph 6 of article 2 is supplemented by an indicative list of 31 terms that are regarded as unfair. This list is regarded as a black list, which means that the contained terms are automatically deemed as unfair . The listed terms are per se unfair and the courts have not the power to permit them by applying the criteria of the general definition of paragraph 6 of article 2.
The adoption of a black list composes another differentiation between the Greek Law and the approach enshrined in the Directive 93/13; in so far the latter has adopted a “gray” list, whose terms may normally and accordingly to the specific conditions be regarded as unfair. By adopting the form of the black list the Greek Law efforts to guarantee a wider protection of consumer rights.
Regarding the results of unfair terms, the Law 2251/1994 states that unfair terms are null and void without being able to bind to consumers. The rest contract is regarded as still valid; that arises the question of what legal rule could apply in the absence of the unfair term. If the term in question is considered to be unfair and invalid, the solution to this gap should be given by the supplementary substantive law or by the interpretation criteria deriving from the requirement of good faith according to article 200 of the Greek Civil Code .
It is totally accepted that the courts should be ex officio entitled to rule on the unfairness of the contractual term to the extent that it is necessary for their decision. The aim of this ex officio examination is very crucial for the ensuring of consumer protection in an adequate and sufficient level.
Protection outside the system of the Law 2251/1994
Apart from the aforementioned protection offered by the Law 2251/1994 there are also provisions from the Greek Civil Code that can be applied in order to combat the use of unfair terms. One should start from the basic article 281 of the Greek Civil Code, according to which the exercise of a right is prohibited if such exercise obviously exceeds the limits imposed by good faith or bonos mores or by the social and economic purpose of the right. Indeed the aforementioned system provided by the Law 2251/1994 is regarded by theory, as a specification of Article 281 in the field of consumer protection. One can also refer articles 178 and 179 of GCC that prohibits terms and contracts infringing the requirements of bonos mores.
Financial Services and Jurisprudence
Financial services do fall within the scope of the Law 2251/1994; there is no exclusion in the Greek adoption of the Direction 92/13. On the contrary protection offered by the Greek Law can be regarded as wider as far as the notion of consumer is concerned. Greek legislation uses the criterion of the “final user” instead that of “purposes outside trade, business or profession”, which is suggested by the Directive 93/13. The Greek interpretation of the notion consumer has thus a wider range, which affords a higher protection without prejudice to whether the acquirer of the services is acting for purposes outside or not his trade, business or profession . There are plenty of courts’ decision focusing on the validity or not of terms used by creditors in pre-formulated contracts using and interpreting the aforementioned legislation proving by this manner its effectiveness or weaknesses. At this point one should present some characteristic results of this jurisprudence on different topics and terms included in contracts of financial services:
- Evidence: Financial suppliers include in their contracts terms according to which a) the consumer is presumed to have accepted all the registrations and debit, if he does not dispute the debited sum or does not oppose objections within 20 days from the reception of the monthly account or notice b) extracts from the bank’s books is agreed to constitute full evidence of the bank’s claim against the debtor.
As far as point (b) is concerned, it is judged that this term is unfair since it is contrary to the provisions of article 2 paragraph 6 and 7 section KF of the Law 2251/1994 as it shifts the burden of proof to the detriment of the consumer and restricts excessively his means of evidence. Due to this term a substantial imbalance is arising since the Bank can provide proof for the credits and debits incurred simply by the demonstration of the extract without needing to submit any documentation .
As far as (a) is concerned, there are some contradictory courts’ decisions varying from invalidity to validity. Finally the Supreme Court has ruled that this term is also contrary to the provisions of the Law 2251/1994 by shifting the burden of proof to the detriment of the consumer and restricting excessively his means of evidence.
- Overdue payment: “In case of delay of payment of any installment or part of it, the Bank has the right to terminate the contract and to request by all legal means the total of the outstanding loan amount, along with the corresponding default interest up to the date of payment” .
The aforementioned term in dispute is contrary to a) the provisions of the article 2 paragraph 7 section l of Law 2251/1994 as it constitutes a substantial obligation of the consumer with no valid justification and b) to the good faith, since a delay in the payment of a single installment may not justify the termination of the loan agreement. Actually this term constitutes a “clause de decheance” , which does not conform to the general principles of the Civil Law. There has been also contradictory point of views, but the theory that these terms are invalid seems to prevail.
- Excessive guarantees: “The debtor shall assign and transfer to the Bank the rent for the real estate as long as it is leased out by the debtor, as additional security for the bank in respect of the loan it is granting”.
The term is considered to be unfair as it demands the provision of excessive guarantees from the consumer contrary to article 2 paragraph 7-section KST of Law 2251/1994. According to this decision excessive guarantees are deemed as unfair and controversial to the Consumer Protection Law .
- Guarantor: “ The guarantor declares that waives of the benefits and objections provided by articles 862-868 of the Civil Code and guarantees to the Bank the timely payment by the debtor of every credit balance deriving from the contract. He bears the same liability as principal debtor”.
Many courts’ decisions are dealing with matters on guarantor’s legal position. The waiving of the guarantor’s rights from the benefits provided for in the provisions of articles 862-868 of the civil code is in principle legal, as these provisions are not mandatory. This waiver is acceptable under the precondition that it does not apply to cases where fault or severe negligence of the creditor is established . Nevertheless, the validity of such terms will be assessed also on the basis whether the creditor is demanding excessive guarantees limiting his liability and causing a significant imbalance .
One of the main benefits offered by the law is the benefit of division consisting in the right of the guarantor to refuse to pay the debt until an unsuccessful effort of the creditor’s execution of a right against the debtor occurs. Also this right is not part of the mandatory law.
- Commission: The typical term has the following form: “ Regarding the loan, the Bank shall keep an account in its books, in which withdrawals, contractual and default interests, commission and bank expenses occurring in relation to the loan shall be registered in debit balance sheet, whereas the payments of the debtor, imputed, with the following order, to expenses, commissions, interests and finally to the capital”.
The term is considered to be illegal and invalid as far as it refers to the registration in books of the bank of the commission it collects. Of great significance is the No. 1969/8-8-1991 Act of the Administrator of the Bank of Greece, according to which the collection of commission with regard to loan, in which the credit institutions freely determine the interest rate, is prohibited. Therefore the aforesaid term is illegal.
- File commission: Creditor is imposing a financial burden amounting to 60€ called “file commission” in addition to the interest imposed on the loan.
The financial burden under examination constitutes a commission, since it entails all the characteristics of commission; the amount has been pre-determined and it is not related to the interest rate and the other expenses, which are imposed on consumers for the provision of the loans . This is contrary to the aforementioned prohibition of collecting commissions according to the Act of Administrator of the Bank of Greece. Actually there is a breach of the principle of transparency, as it confuses the consumer to what is covered by interest and what by commission excluding all possibilities for the consumer to compare with provisions offered by other banks.
Similar is the term that in addition to the interest rate imposed on the loan imposes the payment of a lump sum, which amounts to 1% of the loan amount as “financing expenses ”. Therefore this financial burden is also illegal.
- Law 128/1975 : According to this law a contribution is imposed burdening all credit institutions operating in Greece in favor of a joint account for the repaying of interest to export businesses. Creditors are trying through general terms to shift this burden to borrowers, although the contribution of the Law 128/1975 burdens in any case the credit institutions and not the customers. Such a term infringes not only the mandatory provisions of the Law 128/1975 (article 1) and the system of the Law 2251/1994, but also the provision of article 174 of the GCC, according to which an act inconsistent with a prohibitive provision of the law is null, unless otherwise deduced.
- Jurisdiction: “The courts of Athens are competent for litigation from the present contract”.
The Supreme Court has reformed the previous decisions, which judged that this term is valid on the grounds of the rational administration in the system of providing credit cards. The new judgment takes into consideration that such a term condemns the consumer in a difficult situation to exercise all his legitimate rights.
- Loss or theft of the card
“In case of loss or theft of the card the cardholder is liable towards the Bank for any damages provoked through the use, unless he reports immediately the theft or loss to the bank, so that the danger is then transferred to the bank”.
The term has not been pronounced as unfair for the reason that the contractual relationship operates as a system of a contract of a paid mandate where the parties’ liability is divided according to each party’s tort .
Administrative Actions.
Although the Directive allows the Member States to choose between a legal procedure and an administrative one, Greece has opted for the legal procedure, which means that only courts are empowered to prohibit the use of unfair contractual terms. The only element of “administrative” is that consumer associations are entitled to exercise a class action against companies that use unfair terms in their contracts.

C. EUROPEAN LEGISLATION
The directive 93/13 EEC on unfair terms in consumer contracts.
The adoption of this directive serves the aim to eliminate unfair terms drawn up in contracts between a professional and a consumer as well as to contribute to a progressive establishment of the internal market without internal frontiers. There was a need for the operation of such a directive, since the legislation of the Member States had shown many disparities, which resulted to a distortion of the competition in the European market and endangered the vision of the realization of the internal market.
The elimination of unfair terms has been crucial not only for the legislative harmonization among the Member States, but also for the safeguarding of the consumer protection, which has been acknowledged as a main objective for the EU. In order to achieve these goals, the Directive 93/13 on unfair terms has formed the following system.
The legislators of the Directive have been aware of the fact that it is important for the effectiveness of the protection to adopt uniform rules of law, which will apply to all contracts concluded between suppliers and consumers. There are exclusions from the scope of the Directive, which refer only to contractual terms reflecting mandatory provisions or regulations.
Assessing the unfair nature of a contractual term takes into account:
- The nature of the goods or services covered by the contract.
- The circumstances surrounding the drawing up of the contract.
- The other terms in the contract or in another contract to which it relates.
Apart from the general definition of unfair terms, a “grey” list of unfair terms is annexed in the Directive, which may be deemed as unfair. This list is naturally of an indicative value and can be very useful for the judicial assessment of unfair terms.
Another protective element for the consumer is that the interpretation of those terms in doubt has to be favorable for them, and furthermore the interpretation has to take into consideration the need for consumer protection.
The result of the use of unfair terms infringing the provisions of the legislation is that they do not bind the consumer in a contract signed with a professional. This is actually the substance of the protection and Member States have been carrying the responsibility in which they implement all the necessary measures, so that the consumer would not lose the protection granted by the Directive.
As far as financial services are concerned, they do fall within the scope of the Directive under the precondition that they entail the characteristics of an unfair term. Because of their special nature the Directive has included some exclusions in paragraph 2 of the Annex, according to which:
Subparagraph (g ) is without hindrance to terms by which a supplier of financial services reserves the right to terminate unilaterally a contract of indeterminate duration without notice where there is a valid reason, provided that the supplier is required to inform the other contracting party or parties immediately.
(b) Subparagraph (j) is without hindrance to terms under which a supplier of financial services reserves the right to alter the rate of interest payable by the consumer or due to the latter, or the amount of other charges for financial services without notice where there is a valid reason, provided that the supplier is required to inform the other contracting party or parties thereof at the earliest opportunity and that the latter are free to dissolve the contract immediately.
Subparagraph (j) is also without hindrance to terms under which a seller or supplier reserves the right to alter unilaterally the conditions of a contract of indeterminate duration, provided that he is required to inform the consumer with reasonable notice and that the consumer is free to dissolve the contract.
(c) Subparagraphs (g), (j) and (l) do not apply to:
- transactions in transferable securities, financial instruments and other products or services where the price is linked to fluctuations in a stock exchange quotation or index or a financial market rate that the seller or supplier does not control;
- contracts for the purchase or sale of foreign currency, traveller's cheques or international money orders denominated in foreign currency;
(d) Subparagraph (l) is without hindrance to price-indexation clauses, where lawful, provided that the method by which prices vary is explicitly described.
All these exclusions are justified on the grounds that financial services have some special characteristics, so that a uniform appliance of the protective rules may not be tolerated.
At this point one has to make a reference to the minimal nature of the Directive, which enables the Member States to adopt more stringent provisions orientated at the higher protection of the consumers. The aforementioned exclusion of the financial services has not been adopted into the national Greek Law, which is permitted, since the offered protection seems to be wider .

D. PROPOSALS
The Directive 93/13 should be appraised both for its provisions and its implementation having a great impact on the national legislations and jurisprudence. One has to take into consideration that the whole legal doctrine has been changed after its adoption. Nevertheless, at this point it is essential to make some remarks about some problematic sectors in the matters of unfair terms, which have not been eliminated despite the quality of the Directive.
Especially in the financial services unfair terms are like the Hydra: cut off one head and others grow in its place. Indeed the only risk (and it is a minor one) run by the professional when a consumer challenges a term before the court is that this term may be declared invalid. Moreover, when an action for an injunction is brought against a professional the only risk he runs is that he may have to replace the offending term by another one .
Because of these conclusions there is a need for the reinforcement of the civil penalties, in order to ensure the genuine and effective protection and to prevent the professional from using them in the future. There must be a discussion about the sanctions; in case provisions of the consumer protective legislation is violated.
At present there has been a proposal that the criminalisation of unfair terms could operate effectively; we do not share the same opinion. Criminalisation could lead to more distortions and insecurity in the market. We favour the reinforcement of civil or administrative measures. For example we refer court’s power to award the violators to pay in damages or the creation of administrative positions such as a consumer ombudsman with special power.
The second option of our proposal includes the reinforcement of dialogue among the professionals and consumer associations about the validity of the terms in use in pre-formulated contracts. The dialogue having a precautionary nature can essentially contribute to the elimination of unfair terms on the basis of agreements and respect to the legal status.
Finally, in the effort of offsetting the drawbacks posed by the constant use of unfair terms the example of Spain is of great significance by the creation of a register of contractual terms that have been declared unfair. This register has a function not only inter partes but also erga omnes to the extent that anybody can invoke the unfairness of these terms before other Spanish courts and instances. Although there might be difficulties in adopting this measure in our legal system, one has to admit that this register is very effective and ensures a higher level of protection.