Distance contract

What it means

A distance contract is a contract between a business and a consumer concluded without their simultaneous physical presence, exclusively through means of distance communication. Typical examples are a purchase in an online store, or an order placed by phone, email, social media or a catalogue with an order form.

Special consumer protection rules apply to these contracts, based on the European directive on consumer rights. Their purpose is to offset the fact that the buyer cannot see or try the goods before buying and has no direct contact with the seller.

There are two main rules: the seller's extended duty to provide information before the contract is concluded, and the consumer's right to withdraw from the contract without giving a reason, usually within 14 days. For goods, the period runs from receipt; for services, from conclusion of the contract.

How it works in practice

Before an order is placed, an online store must clearly state the seller's identity and contact details, the main characteristics of the goods, the total price including taxes and delivery, payment and delivery methods, and the conditions for withdrawal and complaints. The order button must clearly express the obligation to pay, for example with the words "order with obligation to pay".

After the contract is concluded, the consumer must receive confirmation on a durable medium, such as by email, together with the terms and conditions and a withdrawal form. On withdrawal, the seller must refund the payment, including the original delivery charge for the cheapest option offered, but may hold the refund until the goods are returned.

Returns must be recorded properly in the accounts and for tax: with a credit note, a revenue correction and, for VAT, an adjustment of the tax base. When selling to consumers in other EU countries above the common threshold, the VAT of the customer's country applies and the business can declare it through the OSS. An online store should also track its return rate as a cost.

What to watch out for

If the seller does not properly inform the consumer of the right to withdraw, the period is extended substantially, under European rules by up to twelve months. Missing or incorrect information can also lead to a fine from the supervisory authority, so it is wise to review the terms regularly against current legislation.

The right of withdrawal has exceptions, such as goods made to the customer's specifications, perishable goods, sealed goods unsealed after delivery for hygiene reasons, or digital content whose supply began with the consumer's consent. The exception must, however, be clearly stated in the terms, and for digital content explicit consent must be obtained.