In two decisions, the Federal Supreme Court has for the first time dealt with the effects of a refund of the purchase price paid by the buyer via PayPal due to an application for PayPal buyer protection.
Problem definition:
The online payment service PayPal offers to process payments for internet transactions in such a way that private and commercial persons can make payments via virtual accounts using electronic money. In doing so, PayPal provides its customers under certain conditions with a procedure regulated in the General Terms and Conditions (namely the so-called PayPal Buyer Protection Policy) for cases in which the buyer has not received the ordered purchase item or the item deviates significantly from the item description. If a buyer's request for a refund of the purchase price under the PayPal Buyer Protection Policy is successful, PayPal will debit the seller's PayPal account and return the purchase price paid to the buyer.
In both appeal proceedings, the main issue was whether the seller was again entitled to claim payment from the buyer after the purchase price had been reversed.
Facts and course of proceedings:
In the proceedings VIII ZR 83/16, the first defendant, a civil law partnership, purchased a mobile phone from the plaintiff on the internet platform eBay at a price of approximately €600, which it paid via the online payment service PayPal. After the purchase price had been credited to the plaintiff's PayPal account, the plaintiff sent the mobile phone in an (as agreed, uninsured) package to the first defendant, who then informed the plaintiff that he had not received the mobile phone. The plaintiff's request for an investigation with the shipping service provider was unsuccessful. Thereupon, the first defendant applied for a refund of the purchase price in accordance with the PayPal Buyer Protection Policy. After the plaintiff failed to provide proof of the shipment of the mobile phone when requested by PayPal, PayPal booked the purchase price back from the plaintiff's PayPal account to the 1st defendant's PayPal account. The plaintiff's action for payment of the purchase price was successful at second instance. With its appeal, which was admitted by the Regional Court, the first defendant seeks to have the action for the purchase price dismissed.
In the proceedings VIII ZR 213/16, the defendant purchased a metal band saw from the plaintiff via the plaintiff's online shop and also paid the purchase price of just under € 500 via the online payment service PayPal. The defendant applied for buyer protection on the grounds that the saw delivered by the plaintiff did not correspond to the photos shown by the plaintiff on the internet. After being requested to do so by PayPal, the defendant submitted a private expert opinion commissioned by him, according to which the saw - which the plaintiff denied - was of "very poor quality" and "obviously a cheap import from the Far East". PayPal then demanded that the defendant destroy the metal band saw and subsequently charged the purchase price back to him, debiting the seller's account. In this case, the action for payment of the purchase price remained unsuccessful in both instances. With its appeal, which was allowed by the Regional Court, the plaintiff continues to pursue its claim for payment.
The decision of the Federal Supreme Court:
The VIII Civil Senate of the Federal Court of Justice, which is responsible for the law of sales. Civil Senate of the Federal Court of Justice has ruled that a seller's claim for payment of the purchase price expires if the purchase price paid by the buyer is credited to the seller's PayPal account as agreed. However, by using the PayPal payment system by mutual agreement, the parties to the purchase contract tacitly agree at the same time that the purchase price claim in question will be re-established if the seller's PayPal account is charged back after a successful application for buyer protection by the buyer.
In detail:
The agreement to use the online payment service PayPal to settle a purchase price debt is usually made by the contracting parties as an ancillary agreement upon conclusion of the purchase contract. In this case, the performance owed by the buyer is effected and the seller's claim to the purchase price thus expires when the amount in question is credited to the seller's PayPal account without reservation. From this point on, the seller can freely dispose of the credit balance, for example by having it debited to his bank account deposited with PayPal or by using it for payments via PayPal.
Nevertheless, after a successful application by the buyer for buyer protection, the seller is (again) entitled to payment of the purchase price. This is because with the side agreement to use the PayPal payment service, the contracting parties tacitly agree at the same time that the purchase price claim that has been settled (by means of PayPal) is re-established if - as happened in the cases at hand - the PayPal account of the seller is charged back in accordance with the PayPal Buyer Protection Policy.
This results from an interpretation of the contract that is in the interests of both sides, taking into account the respective General Terms and Conditions agreed between PayPal and the users of the payment service, in particular the so-called PayPal Buyer Protection Policy. Among other things, this expressly emphasises that PayPal "only" decides on applications for buyer protection. The (newer) version of the PayPal Buyer Protection Policy used in the VIII ZR 83/16 proceedings also states that it "does not affect the statutory and contractual rights between buyer and seller" and is to be "considered separately from them". In view of these provisions, there is no doubt that the buyer should be at liberty, instead of applying for buyer protection or even after an unsuccessful application, to take recourse to the state courts in order to demand the return of the purchase price paid in advance, for example, in the event that the seller does not perform at all or does not perform as owed. Against this background, it is only in the interest of the seller that, conversely, after a successful application by the buyer for PayPal buyer protection, the seller must again be entitled - by way of re-establishing his claim for payment of the purchase price - to resort to the purchase price claim and, if necessary, to resort to the state courts to enforce it.
The assumption of a tacitly agreed re-establishment of the purchase price claim is also required because PayPal only applies a simplified standard of review which is not able to ensure a proper consideration of the interests of both contracting parties - unlike the statutory warranty for defects law. Nevertheless, a successful application for PayPal buyer protection is advantageous for the buyer because he then receives the (prepaid) purchase price back without having to claim repayment from the seller - if necessary by taking legal action.
Based on these principles, the Senate dismissed the appeal of the defendants in the proceedings VIII ZR 83/16, as the Court of Appeal was right to assume that the plaintiff was once again entitled to payment of the purchase price after the chargeback of his PayPal account as a result of the application for PayPal buyer protection. This is not changed by the fact that the defendants did not receive the mobile phone according to their claim, because with the undisputed dispatch of the mobile phone, the risk of accidental loss in transit passed to the first defendant - in contrast to the case of a purchase of a movable item by a consumer from an entrepreneur (purchase of consumer goods), which is not the case here.
In contrast, the appeal in case VIII ZR 213/16 was successful because the Court of Appeal had denied the seller's claim to payment of the purchase price despite the chargeback due to the application for PayPal buyer protection. The Senate referred the case back to the Regional Court for a new hearing and decision so that it can make findings on the question of whether and to what extent the defendant can invoke statutory warranty rights against the plaintiff's re-established purchase price claim.
Judgments of the Federal Court of Justice of 22 november 2017 - VIII ZR 83/16 and VIII ZR 213/16
Lower courts:
VIII ZR 83/16
Essen Local Court - Judgment of 6 October 2015 - 134 C 53/15
Essen Regional Court - Judgment of 10 March 2016 - 10 S 246/15
and
VIII ZR 213/16
Merzig Local Court - Judgment of 17 December 2015 - 24 C 1358/11
Saarbrücken Regional Court - Judgment of 31 august 2016 - 5 S 6/16
Source: Press release of the Federal Supreme Court of 22.11.2017
GoldbergUllrich Attorneys at Law 2017
Attorney at Law Michael Ullrich, LL.M. (Information Law)
