Contract Law

Ius Commune Casebooks for the Common Law of Europe

Hugh Beale, Bndicte Fauvarque-Cosson, Jacobien Rutgers, Denis Tallon, Stefan Vogenauer

• Publisher: Bloomsbury Publishing
• Year: 2010
• ISBN:
  9781847317384
• Edition: 2
• Topic: Law
• Subtopic: Contract Law
• Index: Law

This is the second edition of the widely acclaimed and successful casebook on Contract in the Ius Commune Series, developed to be used throughout Europe and aimed at those who teach, learn or practise law with a comparative or European perspective. The book contains leading cases, legislation and other materials from the legal traditions within Europe, with a focus on English, French and German law as the main representatives of those traditions. The book contains the basic texts and contrasting cases as well as extracts from the various international restatements (the Vienna Sales Convention, the UNIDROIT Principles of International Commercial Contracts, the Principles of European Contract Law, the Draft Common Frame of Reference and so on). Materials are chosen and ordered so as to foster comparative study, and complemented with annotations and comparative overviews prepared by a multinational team. The whole Casebook is in English.

The principal subjects covered in this book include: General (including the distinctions between Contract and Property, Tort and Restitution) ; Formation; Validity; Interpretation and Contents; Remedies; Supervening Events; and Third Parties.

Please click on the link below to visit the series website:
www.casebooks.eu/contractLaw.

PART ONE

INTRODUCTION

CHAPTER 1

THE EXTENT AND ROLE OF EUROPEAN CONTRACT LAW

1.1 European contract law

1.1.A Introduction

1.1.B Binding rules of European contract law

1.1.C Soft law

1.2 EU’s current plans concerning European contract law

1.2.A Introduction

1.2.B Common Frame of Reference (CFR)

1.2.C The process of creating the ‘Common Frame of Reference’

1.2.D The Draft Common Frame of Reference (DCFR)

1.2.E The optional instrument

1.2.F Europeanisation of contract law, a controversial enterprise

1.3 Constitutional issues of contract law

1.3.A Introduction

1.3.B The four freedoms and contract law; ex post assessment

1.3.C Ex ante assessment of the free movement of goods

1.3.D Horizontal effect of the free movements

1.4 Private international law issues

1.1 EUROPEAN CONTRACT LAW

1.1.A INTRODUCTION

In this chapter we will discuss the current situation concerning European contract law. In this respect a distinction must be made between binding rules of contract law and non-binding rules, also known as ‘soft law’. In what follows, the binding rules of European contract will be discussed first and then the non-binding rules.

1.1.B BINDING RULES OF EUROPEAN CONTRACT LAW

Binding rules of contract law are no longer created merely on a national level. They may also follow from international conventions, for instance the UN Vienna Convention on Contracts for the International Sale of Goods of 1980 (CISG). The manner in which these rules are applicable in a legal system depends on whether the country involved has adopted the doctrine of monism or dualism with respect to international conventions. Monism implies that international conventions are directly applicable in the legal system, whereas dualism means that in order for the convention to be applied in the legal system it must be transposed into national legislation. In France and the Netherlands, for instance, the CISG is directly applicable, whereas in Germany the CISG is incorporated by national legislation. In the UK the same would have applied, had it ratified the CISG.¹

In addition there are also European Union measures, for instance regulations and directives, which include rules of contract law. In the area of substantive contract law a number of directives have been adopted.² Most of these directives are sector specific, in the sense that they are confined to a specific type of contract or a particular problem. The effect on contract law of some of these European directives will be discussed in the specific chapters of this book. Apart from these directives, there also other rules of European law that may affect rules of national private law, for instance, the rules on competition law which are, inter alia, included in Article 101 TFEU (ex-Article 81 EC). The effect of primary European law will be treated in Section 1.3.

The fact that there are rules of contract law on many different levels, ie the international, the European and the national levels, is sometimes referred to as the ‘multi-level character’ of European contract law.

1.1.C SOFT LAW

In this respect a distinction must be made between soft law originating from institutions of the European Union and other private initiatives. There is no European Union soft law at present but it is contemplated, principally in the Communications issued by the European Commission with respect to contract law; these will be dealt with in Section 1.2.³

Within Europe, the best known rules of soft law that resulted from a private initiative are the Principles of European Contract Law (PECL). They were drafted by the ‘Commission on European Contract Law’. In an article entitled ‘My Life as a Lawyer’ Ole Lando, the chairman, writes about its start:⁴

I set out to try and unify the substantive contract law in the EU. My efforts started in 1976. I attempted to find scholars from the EC countries, who would be member of the Commission on European Contract Law (CECL). Many declined my invitation. Gradually, however, I succeeded in gathering a group of highly qualified lawyers … I also tried to persuade the European Commission to provide us with some means to hold our meetings. It took time, but Claus Ehlermann, who was now Director General of the Legal Service of the European Commission, saw to it that we got the funds. So in 1982 the CECL started to prepare the Principles of European Contract Law (PECL).

The goals of the PECL are set out in its first provision:

1.1 (Int) Article 1:101 PECL

1. These Principles are intended to be applied as general rules of contract law in the European Union.

2. These Principles will apply when the parties have agreed to incorporate them into their contract or that their contract is to be governed by them.

3. These Principles may be applied when the parties:

a. have agreed that their contract is to be governed by ‘general principles of law’, the ‘lex mercatoria’ or the like; or

b. have not chosen any system or rules of law to govern their contract.

4. These Principles may provide a solution to the issue raised where the system of law or rules of law applicable do not do so.

The European Commission on Contract Law as such no longer exists,⁵ but its work was taken over by the Study Group on a European Civil Code (SGECC).^5a This Group drafted principles in the area of contract law and beyond. Its chairman, Christian von Bar, describes its aim in his foreword to the volumes that include Principles of European Law:⁶

1.2 (Int) Study Group on a European Civil Code, Foreword

The Study Group on a European Civil Code has taken upon itself the task of drafting common European Principles for the most important aspects of the law of obligations and for certain parts of the law of property in moveables which are especially relevant for the functioning of the common market. It was founded in 1999 as a successor body to the Commission on European Contract Law, on whose work the Study Group is building.…

… the results of the research conducted by the Study Group on a European Civil Code seek to advance the process of Europeanisation of private law. We have undertaken this endeavour on our own personal initiative and merely present the results of a pan-European research project.

Another group which is involved in writing principles is, for instance, the Acquis Group. Their aim is formulated in the Introduction to the Acquis Principles:⁷

1.3 (Int) Introduction to the Acquis Principles

The European Research Group on Existing EC Private Law was founded in 2002, as a successor to smaller networks founded in the 1990s, with the primary aim of formulating principles of existing European Community contract law. The short name, Acquis Group, confirms that these principles are formulated on the basis of the acquis communautaire, in particular Treaties, Regulations, and Directives, as applied and interpreted by the courts.

In this respect the Unidroit Principles of International Commercial Contracts (UNI DROIT PICC, 2nd edn, 2004) should also be mentioned. Their focus is beyond just the European Union. Their aim is included in the Preamble:

1.4 (Int) UNIDROIT PICC, Preamble

These Principles set forth general rules for international commercial contracts.

They shall be applied when the parties have agreed that their contract be governed by them.

They may be applied when the parties have agreed that their contract be governed by general principles of law, the lex mercatoria or the like.

They may be applied when the parties have not chosen any law to govern their contract.

They may be used to interpret or supplement international uniform law instruments.

They may be used to interpret or supplement domestic law.

They may serve as a model for national and international legislators.

It will be seen that these purposes resemble those of the PECL, and indeed the two sets of principles are very similar in many ways, perhaps in part because a number of members of each group were also members of the other group. However, there are some significant differences of substance between the two sets of principles; we will note these where appropriate.

1.2 EU’S CURRENT PLANS CONCERNING EUROPEAN CONTRACT LAW

1.2.A INTRODUCTION

Arguably the European Parliament started the discussion about a European Civil Code, by adopting a resolution in 1989 and another in 1994. In both, the European Parliament called on the European Commission, the Council and the Member States to start working on a Code of European Private Law. It is not clear whether this is the same as a European Civil Code. In its 1989 resolution, the European Parliament stated:⁸

1.5 (EU) European Parliament

The European Parliament…

A. whereas the Community has to date harmonized many individual aspects of private law but [not] whole branches of it,

B. whereas the legal coverage of individual subjects does not meet the needs and objectives of the single market without frontiers, particularly as formulated since the entry into force of the Single Act,

C. whereas the most effective way of carrying out harmonization with a view to meeting the Community’s legal requirements in the area of private law is to unify major branches of that law,

…

E. whereas unification can be carried out in branches of private law which are highly important for the development of the single market, such as contract law, without this, of course, exhausting the possibilities for unification,

…

1. Requests a start to be made on the necessary preparatory work on drawing up a common European Code of Private Law, the Member States being invited, having deliberated the matter, to state whether they wish to be involved in the planned unification; …

In 1994, it stated:⁹

1.6 (EU) European Parliament

The European Parliament…

A. whereas the Community has already harmonized several areas of private law, …

B. whereas Parliament, in its resolution of 1989 … asked that a start be made on the necessary preparatory work for the drawing up of a Common European Code of Private Law,

C. whereas the Commission has not yet undertaken this preparatory work,

D. whereas the progressive harmonization of certain sectors of private law is essential to the completion of the internal market,

1. Calls on the Commission for work to be commenced on the possibility of drawing up a Common European Code of Private Law; …

4. considers that support should continue to be given to the Commission on European Contract Law, better known as the Lando Commission, in its work on harmonization of contract law; …

These resolutions did not have an immediate effect, but ‘did help to keep the idea alive.’¹⁰

Despite these calls of the European Parliament, the European Commission has not started to work on a European Civil Code, but it has started a discussion on the future of European contract law by the publication of the Communication from the Commission to the Council and the European Parliament on European Contract Law in July 2001.¹¹ Apparently the reason for this Communication was a conclusion reached during the European Council in Tampere in 1999. In its Presidency Conclusions, the Council elaborated on substantive private law rules under the heading of A Genuine European Area of Justice:¹²

1.7 (EU) European Council

VII Greater convergence in civil law

39. As regards substantive law, an overall study is request...