Earlier this week, Porsche minted its first big NFT collection, which stood out for two reasons. First of all, the lack of demand caused the car company to stop the mint [priced at .911 ETH ($1,500)], reducing the offer from the proposed 7,500 NFTs to 2,363. The price on OpenSea is now well above the mint price. The other new feature was a clear statement about the buyer’s right to a refund, a topic we’ll explore here.

EU right of return

European law has a well-known requirement that there is a 14-day cooling-off period for online purchases and mail order, allowing consumers to return items for no reason.

Therefore, Porsche explicitly included wording to this effect at the checkout. And the more detailed terms also involve a refund of blockchain gas fees.

However, there is invariably a time difference between agreeing to buy a new NFT and minting the NFT. When the user agrees to continue with the mint, there is additional wording from Porsche that the right to a refund no longer applies.

How does it work?

EU chill legislation (which the UK also put in place before Brexit) doesn’t cover everything. For example, it excludes consumables and custom items. You can’t order food online, eat it, and then ask for your money back just because you feel like it. The same goes for other consumables like flights, hotels, concerts, and streaming video.

Likewise, personalized items such as a tailored suit cannot be returned. Porsche NFTs involve a selection of basic designs with customizations selected by the user. Therefore, the personalization classification is likely to apply. And the customization only begins when minting begins.

What happens if the NFT refund wording is omitted?

There have been a ton of NFT crashes, so what about all those NFTs that didn’t include wording? There is a clause in EU law that the failure to inform the consumer of a right of withdrawal extends the refund period to one year.

Since the NFT market was much healthier a year ago, that could be a problem for some NFT issuers.

But it is not clear if the redemption law applies to NFTs. By design of the NFT, there are at least three possible exceptions: if the NFT involves consumables, if it is customizable (not random), and the digital content exception.

Some NFTs include the right to attend events, which is a clear exception. However, is there a right to a refund before the event takes place?

While many NFTs include random features, that’s not the same as something built to consumer specifications, such as Porsche NFTs.

The legislation includes a specific exception related to digital goods that involve a performance where the performance has begun. That’s clearly intended to include streamed video, but it could cover NFTs with particular features.

By the way, when the goods and services are sold by an individual, not as part of a trade, the right of withdrawal does not apply. Therefore, NFT resales will often be a clear exception.

Web3 is proving fertile ground for lawyers, and this is another area likely to be challenged in court.

Hat tip for Oliver Scherenberg LinkedIn post