Consumer rights

Virtual rights for virtual goods?

Did you know?

The term implied in a contract for the sale of goods that the goods supplied shall be of “merchantable quality” may not apply to “digital goods”.

In Hong Kong, there are various laws that protect consumers by involving certain terms in contracts for the sale of goods. For example, if the contract contains no express term as to the quality of the goods supplied, there is an implied term under the Sale of Goods Ordinance that the goods sold are of “merchantable quality”. Although this condition may be excluded by agreement in business-to-business contracts, it cannot be excluded by businesses when dealing with consumers.

However, the Sale of Goods Ordinance and many other consumer protection laws were enacted before the internet age, meaning the law is unclear as to whether it applies. to “digital goods” such as music files and video games, where no tangible product is provided. Case law on the meaning of the word “property” in other common law jurisdictions suggests that these laws can only apply to tangible physical property. Legislation in these jurisdictions has stepped in to fill the gaps, but Hong Kong still lags behind, potentially leaving consumers’ statutory rights in the same state as those of digital goods: intangible and virtual.

Why is this important to you?

If you buy a music album and receive a digital file, is this a purchase of digital goods? What if you listened to the same album on a streaming service? If you are purchasing virtual sneakers for your metaverse avatar, is this a purchase of digital goods or just part of the service provided by the metaverse operator? As shopping habits increasingly move online or into the digital space, and especially with the growing popularity of “metaverses”, the need for clarity and regulation in this area will become increasingly evident.

Sellers should have a clear idea of ​​their intention to temporarily “sell” or “license” their digital products, and ideally, expressly define their contractual obligations (such as warranties, refunds, and exchange policies) to manage uncertainty legal in this area.

Buyers should beware that consumer protection laws may not apply to such a purchase, instead reviewing the terms of the contract they are entering into. They should buy digital content from reputable companies with clear warranties, to avoid relying on and wading through a legal quagmire of statutory or common law implied terms.