In two decisions, the Federal Court of Justice has for the first time addressed the implications of a refund of the purchase price paid by the buyer via PayPal, based on an application for PayPal Buyer Protection.
Issue:
The online payment service PayPal offers to process payment transactions for online businesses in such a way that private individuals and commercial entities can make payments via virtual accounts using e-money. Under certain conditions, PayPal provides its customers with a procedure, regulated in its General Terms and Conditions (specifically the so-called PayPal Buyer Protection Policy), for cases where the buyer has not received the ordered item or where it significantly deviates from the item description. If a buyer's application for a refund of the purchase price is successful according to the PayPal Buyer Protection Policy, PayPal refunds the paid purchase price to the buyer by debiting the seller's PayPal account.
In both appeal proceedings on points of law, the crucial question was whether the seller is again entitled to claim payment from the buyer after the purchase price has been charged back.
Facts and Course of Proceedings:
In case VIII ZR 83/16, defendant 1, a civil law partnership, purchased a mobile phone from the plaintiff on the eBay internet platform for approximately €600, which she paid via the online payment service PayPal. After the purchase price had been credited to the plaintiff's PayPal account, the plaintiff dispatched the mobile phone in an (as agreed, uninsured) parcel to defendant 1. Defendant 1 subsequently informed the plaintiff that she had not received the mobile phone. An investigation request by the plaintiff to the shipping service provider remained unsuccessful. Thereupon, defendant 1 applied for a refund of the purchase price in accordance with the PayPal Buyer Protection Policy. After the plaintiff, upon PayPal's request, failed to provide proof of dispatch of the mobile phone, PayPal charged back the purchase price from the plaintiff's PayPal account to defendant 1's PayPal account. The plaintiff's action for payment of the purchase price was successful in the second instance. With her appeal on points of law, admitted by the Regional Court, defendant 1 seeks the dismissal of the action for payment of the purchase price.
In case VIII ZR 213/16, the defendant purchased a metal band saw from the plaintiff via her online shop and also paid the purchase price of just under €500 through the online payment service PayPal. The defendant applied for buyer protection, arguing that the saw supplied by the plaintiff did not correspond to the photos shown by her online. Following a corresponding request from PayPal, the defendant submitted a private expert opinion he had commissioned, according to which the saw – which the plaintiff disputes – was of “very poor quality” and “obviously a cheap import from the Far East”. Thereupon, PayPal instructed the defendant to destroy the metal band saw and subsequently charged back the purchase price to him by debiting the seller's account. In this case, the action for payment of the purchase price remained unsuccessful in both instances. With its appeal on points of law, admitted by the Regional Court, the plaintiff continues to pursue its claim for payment.
The decision of the Federal Court of Justice:
The VIII Civil Senate of the Federal Court of Justice, which is responsible, among other things, for the law of sales, has ruled that a seller's claim for payment of the purchase price is indeed extinguished when the purchase price paid by the buyer is credited to the seller's PayPal account as agreed. However, by consensually using the PayPal payment system, the parties to the sales contract simultaneously implicitly agree that the relevant claim for payment of the purchase price will be re-established if the seller's PayPal account is debited back following a successful application for buyer protection by the buyer.
In detail:
The agreement to use the online payment service PayPal for the discharge of a purchase price debt is generally made by the contracting parties as an ancillary agreement upon conclusion of the sales contract. In this case, the performance owed by the buyer is rendered, and thus the seller's claim for payment of the purchase price is extinguished when the relevant amount is unconditionally credited to their PayPal account. This is because, from that moment, the seller can freely dispose of the balance, for example, by having it transferred to their linked bank account with PayPal or by using it for payments via PayPal themselves.
Nevertheless, following a successful application for buyer protection by the buyer, the seller is (again) entitled to a claim for payment of the purchase price. This is because, with the ancillary agreement to use the PayPal payment service, the contracting parties simultaneously implicitly agree that the claim for payment of the purchase price (discharged via PayPal) will be re-established if – as occurred in the present cases – the seller's PayPal account is debited back in accordance with the PayPal Buyer Protection Policy.
This results from a contract interpretation that appropriately considers the interests of both parties, taking into account the General Terms and Conditions agreed upon between PayPal and the users of the payment service, particularly the so-called PayPal Buyer Protection Policy. This policy expressly emphasizes, among other things, that PayPal “merely” decides on applications for buyer protection. Furthermore, the (newer) version of the PayPal Buyer Protection Policy used in case VIII ZR 83/16 states that it “does not affect the statutory and contractual rights between buyer and seller” and is “to be considered separately from them”. Specifically, with regard to these provisions, there is no doubt that the buyer should be free to resort to the state courts, either instead of an application for buyer protection or even after an unsuccessful application, for example, to demand reimbursement of the advance purchase price in the event of performance not rendered at all or not as owed by the seller. Against this background, it is solely in the interest of fairness that, conversely, the seller, after a successful application for PayPal Buyer Protection by the buyer, must also be entitled – by way of re-establishing their claim for payment of the purchase price – to revert to the claim for payment of the purchase price and, if necessary, to invoke the state courts for its enforcement.
The assumption of an implicitly agreed re-establishment of the claim for payment of the purchase price is also necessary because PayPal applies only a simplified standard of review, which, unlike statutory warranty law for defects, cannot ensure an appropriate consideration of the interests of both contracting parties. Nevertheless, a successful application for PayPal Buyer Protection is advantageous for the buyer, as they then receive the (advance) purchase price back without having to claim repayment from the seller – if necessary, by way of legal action.
Based on these principles, the Senate dismissed the defendant's appeal on points of law in case VIII ZR 83/16, as the appellate court had, in its outcome, rightly assumed that the plaintiff was again entitled to a claim for payment of the purchase price following the debiting back of his PayPal account as a result of the application for PayPal Buyer Protection. This is not altered by the defendants' assertion that they did not receive the mobile phone, because with the undisputed dispatch of the same, the risk of accidental loss during shipment passed to defendant 1 – unlike would be the case in a consumer goods purchase (purchase of a movable item by a consumer from an entrepreneur), which is not present here.
In contrast, the appeal on points of law in case VIII ZR 213/16 was successful because the appellate court had denied the seller's claim for payment of the purchase price despite the chargeback due to the application for PayPal Buyer Protection. The Senate remitted the case to the Regional Court for a new hearing and decision, so that it can make findings on whether and to what extent the defendant can invoke statutory warranty rights for defects against the plaintiff's re-established claim for payment of the purchase price.
Judgments of the Federal Court of Justice of november 22, 2017 – VIII ZR 83/16 and VIII ZR 213/16
Lower Courts:
VIII ZR 83/16
Local Court of Essen – Judgment of October 6, 2015 – 134 C 53/15
Regional Court Essen – Judgment of March 10, 2016 – 10 S 246/15
and
VIII ZR 213/16
Local Court Merzig – Judgment of December 17, 2015 – 24 C 1358/11
Regional Court Saarbrücken – Judgment of august 31, 2016 – 5 S 6/16
Source: Press release of the Federal Court of Justice dated november 22, 2017
GoldbergUllrich Law Firm 2017
Attorney Michael Ullrich, LL.M. (Information Law)
