According to Advocate General Wahl, Contractual Terms Which Provide, In Respect Of The Advancement Of A Loan In Foreign Currency, For The Use Of An Exchange Rate Which Differs From That Used For The Repayment Of The Loan
The Unfair Terms in Consumer Contracts Directive1 provides that consumers are not bound by unfair terms in a contract concluded with a seller or supplier. However, with regard to terms which define the main subject-matter of the contract and the adequacy of the price and remuneration, on the one hand, as against the services or goods supplied in exchange, on the other, the directive provides that it is not possible to assess the unfair nature of those terms when they are in plain intelligible language.
The contract further stipulated that the amount of the loan in CHF would be determined at the buying rate for that currency, applied by the bank on the date of advancement of the funds. However, under the contract the amount in HUF of each monthly instalment due was to be determined, on the day preceding the due date, on the basis of the rate of exchange applied by the bank for the sale of CHF.
Mr and Mrs Kasler challenged the term which allowed the bank to calculate the monthly instalments due on the basis of the selling rate for CHF before the Hungarian courts. They claim that this clause is unfair in so far as it provides, for the purposes of repayment of the loan, for the application of a different exchange rate to that used for the advancement of the loan.
In his Opinion delivered today, Advocate General
In that context, Advocate General Wahl takes the view that, in the case of a contract specifically denominated in foreign currency (such as that at issue in the present case), the terms determining the applicable rates of exchange, like those relating to the provision of the capital and the payment of interest, form part of the main subject-matter of the contract. They constitute one of the essential components of the mechanism of a loan in foreign currency since, in the absence of those terms, performance of the contract would be impossible.
Second, as regards the issue of whether those terms were drafted in plain intelligible language, the Advocate General is of the opinion that the examination of that criterion should not be limited purely to the words in which those terms are drafted. The plain and intelligible character of a contractual term must ensure that the consumer has information on the basis of which he will be able to assess the advantages and disadvantages of concluding the contract and the risks involved in the transaction. Consequently the consumer must understand not only the content of a term, but also the related obligations and rights.
So far as concerns the loan contract in question here, Advocate General Wahl takes the view that the contractual stipulations relating to the rate of exchange applicable to the advancement and to the repayment of the loan respectively appear to have been set out in plain language. He nevertheless considers that there may be doubts as to whether the consumer was in a position to understand that he would be subject to additional expense stemming from the difference between the selling price for the foreign currency and the buying price for that currency. In that regard, it is, in
Lastly, the Advocate General takes the view that, where the deletion of an unfair term would make performance of the contract impossible, as in the present case, the Directive does not preclude the national court from replacing the term at issue with a supplementary provision of national law, where such a replacement is possible under national law. Such an approach makes it possible to attain the Directive's objective, which consists, inter alia, in restoring a balance between the parties while preserving, as far as possible, the validity of the contract as a whole.
If such a replacement were not permitted and the court were required to annul the contract, the deterrent effect of the penalty of invalidity and the objective of consumer protection could be jeopardised. In the present case, the effect of such an annulment would be to render due the full amount of the balance of the loan. That, however, is liable to be beyond the consumer's financial capacities and, therefore, to penalise the consumer rather than the lender, who, in the light of that consequence, might not be encouraged to avoid including such terms in its contracts.
NOTE: The Advocate General's Opinion is not binding on the
NOTE: A reference for a preliminary ruling allows the courts and tribunals of the Member States, in disputes which have been brought before them, to refer questions to the
1 Council Directive 93/13/EEC of
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