THE COURT OF JUSTICE OF THE EUROPEAN UNION’S NEW RULING IS IMPORTANT FOR THE PRACTICE OF CONTRACTS BASED ON SO CALLED “GENERAL TERMS AND CONDITIONS”
The Court of Justice of the European Union ("CJEU") has once again ruled on the validity of jurisdiction clauses included in the general terms and conditions of contracts ("GTC"). Such clauses serve to designate the state wherein the courts will have jurisdiction to hear cases arising out of given contracts. As a rule, if validly agreed, these clauses preclude pursuing claims in other states. The recent ruling confirms that under certain conditions, a jurisdiction clause contained in GTC available online can be considered agreed upon, even if one of the parties was not fully aware of the wording or even the existence of that clause.
Jurisdiction clauses in GTC
In both professional (B2B) and consumer (B2C) trade, it is common for transactions to be concluded using the standard contractual terms (GTC) of one of the parties. These terms are not separately negotiated between the parties. They can either be accepted, expressly or implicitly, by the other party or the transaction does not take place. Frequently, the GTC document forms an annex to a written contract. Increasingly, however, the GTC of one party are referred to via a link inserted into contracts leading to the website where these terms are published. Such a link can often be found in the contract document, but it can also be located in other documents, such as the confirmation of an order placed or confirmation of an order accepted, or other correspondence exchanged between the parties in connection with a transaction.
A clause conferring exclusive jurisdiction to the courts of the state preferred by the party that drafted the GTC is one of the typical provisions. Clearly, such a provision may constitute a significant impediment to a party pursuing claims, which could significantly benefit the other. Therefore, the formal conditions for the validity of such a clause are of no small importance for the day-to-day practice of transacting business.
Formal requirements for the validity of a jurisdiction clause
Where a jurisdiction clause designates the courts of an EU Member State as having jurisdiction, the formal requirements for its effectiveness are set out in EU Regulation 1215/2012, customarily referred to as “Brussels I bis”. This regulation generally envisages four forms that such a clause can take:
- written form, with communication by electronic means providing a durable record being equivalent to the written form,
- another form, but with confirmation in writing,
- a form that accords with practices established between parties,
- a form according with a form of usage in international trade or commerce that the parties know or should have been aware.
As the situations described in the last three points are relatively rare, most often the validity of a jurisdiction clause depends on whether the requirements of the written form have been met. These issues are therefore a relatively frequent subject of court rulings. This applies in particular to the validity of clauses contained in the GTC of one of the parties.
Earlier CJEU rulings
As early as the 1970s, the CJEU confirmed that a jurisdiction clause itself does not have to be inserted into a signed contract to be binding (Salotti case 24/76). Indeed, in the case of a contract concluded in the traditional written form, a precise reference to a GTC document including such a clause is sufficient. Such a reference does not have to mention a jurisdiction clause itself as part of the GTC. However, that condition for the effectiveness of such a reference is that the text of the GTC is actually communicated to the other party prior to the conclusion of the contract (Hőszig case 222/15).
The CJEU has also addressed the topic of contracts concluded online (El Majdoub case 322/14). Namely, it pointed out that a jurisdictional clause that is part of the GTC of one party may be deemed formally agreed to, if these terms are accepted by the other party by clicking the appropriate field on the website (so-called click-wrapping), where a transaction is concluded, provided, however, that the consenting party was able to print and save the text of these terms before concluding the contract. Whether or not the consenting party has actually taken the opportunity to review the conditions or record them is irrelevant to compliance with the formal requirements.
The ruling in Tilman case 358/21
In this recent case, the CJEU ruled on contracts concluded in writing, but referring via a link inserted in the contract documents to GTC available online (the ruling in Tilman case C-358/21 was delivered on 24 November 2022). In such situations, the CJEU held that the absence of additional acceptance of these conditions expressed by clicking on the website (as it was in the El Majdoube case) does not preclude the formal requirements from being considered fulfilled. The mere inclusion of a link to the GTC in the written contract is sufficient provided that this link functions and can be activated by a party exercising ordinary diligence. In this scenario, it is also indifferent whether the other party made use of such an opportunity.
The CJEU stressed that the key point in this case was that it involved a B2B transaction. If the party accepting the GTC had been a consumer, the outcome might have been different. Thus the answer given in this case should generally be understood as limited to transactions concluded between business operators.
The ruling in Tilman comes as no surprise. There had already been rulings by the national courts of member states in a similar vein. In these rulings, further requirements were proposed for the manner in which the GTC containing a jurisdiction clause has to be made available. These are in particular:
- the name of the GTC document indicated in the contract documents must be identical to the name of the document to which the link actually leads, and
- the requirement that a link leads to a site where finding the relevant document does not involve difficulties for a diligent person, in particular it does not require poring over a number of documents.
These further conditions were not expressly mentioned by the CJEU in the ruling under discussion. Without going into the question of to what extent these additional requirements can actually be derived from the Brussels I bis Regulation, it seems reasonable to take them into account in the day- to-day practice of transacting business based on GTC documents with jurisdiction clauses.
The recent Tilman judgment and previous CJEU rulings provide important guidance for business operators. These include
- in B2B relations, for a jurisdiction clause to be effectively agreed upon, it should be sufficient to include an explicit and clear reference in the contract with the use of a link to the online GTC containing such clause. If no separate contract is concluded, inserting such a reference in the order document, order acceptance or even in other correspondence, e.g. in the footerof an e-mail, may be considered a way to communicate the clause to the other party. In any case, however, such practice should be well thought over in advance and consulted on with lawyers;
- before entering into any transaction, one should carefully review the links included in the contract documents, order placed, order acceptance, or other correspondence exchanged in connection with the transaction and the contents of the documents that these links lead to; the contents of the linked documents or the fact that a link does not work should be recorded and documented;
- in order to ensure that the jurisdiction clause included in the GTC linked in the contract concluded with another business operator is effective, it is advisable that the linked site is designed in such a way that the relevant GTC applicable to the contract in question can be easily found; where possible, the link should lead directly to the relevant GTC. It is also important that it can be documented that a specific version of the GTC was available at the link prior to the conclusion of the contract and that the link indeed worked.