The Harmonisation of European Contract Law Implications for European Private Laws Business And Legal Practice Studies of the Oxford Institute of Eu

CONTRACT LAW:IMPLICATIONS FOR EUROPEAN PRIVATE LAWS, BUSINESS AND LEGAL PRACTICE After an extended period in which the European Community has merelynibbled at the edges of national contr

CONTRACT LAW:

IMPLICATIONS FOR EUROPEAN PRIVATE LAWS,

BUSINESS AND LEGAL PRACTICE

After an extended period in which the European Community has merelynibbled at the edges of national contract laws, the bite of a ‘European contractlaw’ has lately become more pronounced Many areas of law, from competi-tion and consumer law to gender equality law, are now the subject ofdetermined efforts at harmonisation, though they are perhaps often seen asperipheral to mainstream commercial contract law Despite continuingdoubts about the constitutional competence of the Commission to embark onfurther harmonisation in this area, European contract law is now takingshape, with the Commission prompting a debate about what it might attempt

A central aspect of this book is the report of a remarkable survey carried out

by the Oxford Institute of European and Comparative Law in collaborationwith Clifford Chance, which sought the views of European businesses aboutthe advantages and disadvantages of further harmonisation The final report

of this survey brings much needed empirical data to a debate that has thus farlacked clear evidence of this sort The survey is embedded in a range of orig-inal and up-to-date essays by leading European contract scholars reviewingrecent developments, questioning progress so far and suggesting areas wherefurther analysis and research will be required

Volume 1 in the Series: Studies of the Oxford Institute of European and Comparative Law

Comparative Law

Editor

Professor Stefan Vogenauer

Board of Advisory Editors

Professor Mark Freedland, FBAProfessor Stephen WeatherillProfessor Derrick Wyatt, QC

Volume 1: The Harmonisation of European Contract Law: Implications forEuropean Private Laws, Business and Legal Practice

Edited by Stefan Vogenauer and Stephen Weatherill

Volume 2: The Public Law/Private Law Divide

Edited by Mark Freedland and Jean-Bernard Auby

Volume 3: Constitutionalism and the Role of Parliaments

Edited by Katja Ziegler, Denis Baranger and A W Bradley

The Harmonisation of

European Contract Law

Implications for European Private Laws,

Business and Legal Practice

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TJ International, Padstow, Cornwall

1 The Spectre of a European Contract Law

2 Harmonisation of European Contract Law: The State We Are In

2 Differences in Contract Law as a Barrier to Trade 14

3 The Growth in Standard Form Contracts and the Growing Use

4 National Laws Unsuitable for International Transactions 17

5 The Growth of International Commercial Arbitration 18

6 National Laws Cannot Solve the Problems which CurrentlyConfront Those Who Enter International Transactions 18III Why Object to the Creation of a European Contract Law? 19

1 Divergent Laws Do Not Act as a Barrier to Trade 21

2 Such Problems as Do Exist Do not Demand the Creation of a

3 English Law Reform and the Impact of European Private Law

v

The Dutch Experience

V The Way Forward for National Legislators: Three Codification

5 Contract Law Reform: The German Experience

6 Constitutional Issues—How Much is Best Left Unsaid?

II Constitutional Ground Rules and Practical Policitics 90

vi

Competence 95

7 The European Community’s Competence to Pursue the Harmonisation

of Contract Law—an Empirical Contribution to the Debate

IV Establishing Competence: the Perceived Views of European

1 Previous Attempts to Evaluate the Attitudes and

Expectations of Market Participants towards a European

2 The Business Survey Conducted in Early 2005:

8 Harmonisation of and Codification in European Contract Law

IV Recodification Initiative: from ‘Decodification’ to

9 Contracts and European Consumer Law: an OFT Perspective

II Contracts and the Harmonisation of Competition Law 172III Contracts and the Harmonisation of Consumer Law 173

vii

IV Conclusions 183

10 The Commission’s Communications and Standard Contract Terms

I European Private Law and Standard Terms and Conditions 185

II The Commission’s Communications from the Viewpoint of

III The Relation to Lex Mercatoria and the Work of

IV Elimination of Legal Obstacles to the Use of EU-Wide Standard

11 Non-Legislative Harmonisation: Protection from Unfair Suretyships

IV Disparity of Surety Protection Standards in Europe 202

V Harmonisation of Standards of Protection through HorizontalEffect of Fundamental Rights and Constitutional Principles? 203

12 Harmonisation of European Insurance Contract Law

1 First Generation of Insurance Directives—Freedom of

3 Four Major Judgments of the European Court of Justice 216

4 Second Generation of Insurance Directives—Freedom to

5 Third Generation of Insurance Directives—Completion of

III Current Status of European Insurance Contract Law 220

viii

V Reactions to a Harmonised European Insurance Contract Law 226

1 Views on the Current Status of European Insurance Contract

II What is an Optional Instrument in the Area of European

2 Relationship with Private International Law and the Legal

2 The Preparation of the Common Frame of Reference 243

14 Harmonisation of European Contract Law—the United Kingdom Government’s Thinking

15 Concluding Observations

ix

CO N TR I BU TO R S

Guido Alpa is Professor of Law at the University of Roma La Sapienza and

President of the Italian Bar Council

Baroness Ashton of Upholland is Parliamentary Under Secretary of State at

the Department for Constitutional Affairs

Hugh Beale is Professor of Law at the University of Warwick and a Law

Commissioner for England and Wales (Commercial and Common Law)

Ulf Bernitz is Professor of European Law at Stockholm University and

Director of the Oxford/Stockholm Wallenberg Venture in European Law

Aurelia Ciacchi is a Fellow of the Centre of European Policy and Law (ZERP)

and a Lecturer in Comparative Law at the Hanse Law School, Bremen

Sir David Edward is Emeritus Salvesen Professor of European Institutions at

the University of Edinburgh and a former Judge at the European Court ofFirst Instance and at the European Court of Justice

Martijn W Hesselink is Professor of European Private Law at the Universiteit

van Amsterdam

Ewan McKendrick is Professor of English Law at the University of Oxford

and a Fellow of Lady Margaret Hall

Dirk Staudenmayer is Head of Unit at the European Commission, Health and

Consumer Protection Directorate General He is Honorary Professor at theUniversity of Münster

Sir John Vickers is Drummond Professor of Political Economy at the

Univer-sity of Oxford and a Fellow of All Souls College He was DirectorGeneral/Chairman of the Office of Fair Trading from 2000 to 2005

Stefan Vogenauer is Professor of Comparative Law at the University of

Oxford and a Fellow of Brasenose College He is Director of the OxfordInstitute of European and Comparative Law

Stephen Weatherill is Jacques Delors Professor of European Community Law

at the University of Oxford and a Fellow of Somerville College He is aDeputy Director of the Oxford Institute of European and Comparative Law

Daniela Weber-Rey is Partner at Clifford Chance LLP in Frankfurt and Head

of the German Financial Institutions Group She is a Member of the AdvisoryGroup on Corporate Governance and Company Law at the EU Commission

Reinhard Zimmermann is Director of the Max Planck Institute for Foreign

Private Law and Private International Law in Hamburg and Professor ofPrivate Law, Roman Law and Comparative Legal History at the University ofRegensburg

Series Editor’s Foreword

F O R EW O R D

This book is the first volume of the ‘Studies of the Oxford Institute of pean and Comparative Law’, a new series that is meant to provide a forum forpublications arising from the research pursued at the Institute The Institute isone of the Research Centres of the Law Faculty of the University of Oxford Itwas established in 1995 and inaugurated 10 years ago, on 17 January 1996,originally as the ‘Centre for the Advanced Study of European and Compara-tive Law’ The function—I hesitate to say the ‘mission’—of the Institute is tofacilitate and promote the Faculty’s work in the areas of European andcomparative law In doing so, it can build on the Faculty’s traditional strength

Euro-in both fields and add a further dimension Euro-in focusEuro-ing on the Euro-intersection ofthe two disciplines, which have become increasingly intertwined in recentyears The Institute aims to achieve this by contributing in various ways to theresearch and teaching of the Faculty in European and comparative law, and bysupplying a supporting structure of specialised staff and relevant activities Asfar as research is concerned, the Institute’s activities mainly consist in organ-ising conferences, symposia and workshops, which are frequently held jointlywith one of our partner institutions, both within Oxford and abroad, andboth within academia and beyond The ‘Studies of the Oxford Institute ofEuropean and Comparative Law’ will serve as a focal point for making theresults of these events accessible to a wider audience, thereby replacingprevious mechanisms of dissemination through publications produced byvarious publishers and bodies, both in print and electronically

It is hoped that the present volume provides a good example of the kind ofresearch pursued at the Institute and of future publications to be expected inthis series European contract law is, like so many issues of European andcomparative law these days, a topic which is very much on the agenda of bothdisciplines On the one hand, it has become impossible to conduct a mean-ingful comparison of the domestic contract laws in Europe without takinginto account the existing body of EC contract law On the other hand, thisbody is still emerging, and it does so on the basis of thorough comparison ofthe rules and principles of the Member States’ contract laws It makes sense,therefore, to tackle the subject of European contract law with comparatistsand experts in European law joining forces

The close link between the two disciplines and the rich diversity of the workundertaken within the Institute should also become apparent in the followingtwo volumes in this series Volume 2, edited by Mark Freedland andJean-Bernard Auby, will compare the divide between public law and privatelaw in England and in France, and will show, inter alia, how the influence ofEuropean law has helped to overcome the strong divergence that used to

prevail on this issue between the two jurisdictions Volume 3 will be edited byKatja Ziegler, Denis Baranger and Anthony Bradley It will look at consti-tutionalism and the role of Parliament in France, Germany, the UnitedKingdom and the European Union.

The present volume is also characteristic of the Institute’s work in that thecontributions contained in it are based on papers given at a conference whichbrought together academics and practising lawyers from all over Europe (onwhich more at the end of the first chapter) The conference had the same title

as this book: ‘The Harmonisation of European Contract Law: Implicationsfor European Private Laws, Business and Legal Practice’ It was hosted by theInstitute in conjunction with its major benefactor, global law firm CliffordChance Clifford Chance has been supporting the Institute’s activities fromits very first days, and it is more than appropriate to acknowledge theircrucial support here Neither the conference nor the ensuing publicationwould have been possible without their help for which we are more thangrateful

Some further words of thanks are due Professors Mark Freedland, StephenWeatherill and Derrick Wyatt, all of whom are institutionally linked with theInstitute in one way or another, kindly agreed to serve on the Board of Advi-sory Editors for this series so that an appropriate balance between Europeanand comparative law would be struck Richard Hart was most supportive andshowed enormous patience in the process of establishing the new series,particularly in the run up to this first volume Finally, Vanessa Mak, GraduateTeaching Assistant at Oriel College, Oxford, did a sterling job in preparingthe papers for publication

Stefan Vogenauer

Director of the Institute

Oxford January 2006

Table of Cases

Decisions of the European Court of Justice

Alliance for Natural Health [2005] ECR I–0000 94, 100

Alsthom Atlantique SA [1991] ECR I–107 102

Bagnasco v Banco Popolare di Novara et al [1999] ECR I–135 186

CMC Motorradcenter [1993] ECR I–5009 102

Cofidis SA v Jean-Louis Fredout [2002] ECR I–10875 47

Commission of the European Communities v French Republic [1986] ECR 3663 216

Commission of the European Communities v Germany [1986] ECR 3663 216

Commission of the European Communities v Ireland [1986] ECR 3663 216 Commission of the European Communities v Kingdom of Denmark [1986] ECR 3663 216

Commission v Germany [2003] ECR I–5369 94

Commission v United Kingdom [1997] ECR I–2649 32

Courage Ltd v Crehan [2001] ECR I–6297 173

Faccini Dori v Recreb [1994] ECR I–3325 51, 62 Francovich v Italy [1991] ECR I–5357 34

Freiburger Kommunalbauten [2004] ECR I–3403 65

Germany v European Parliament and Council [2000] ECR I–8419 49, 93, 108 Giloy [1997] ECR I–4291 68

Grimaldi v Fonds des Maladies Professionnelles [1989] ECR 4407 57, 62 Ingmar GB Ltd v Eaton Leonard Technologies Inc [2000] ECR I–9305 186 Keck and Mithouard [1993] ECR I–6097 102

Leur v Bloem [1997] ECR I–4161 68

Marleasing v La Comercial Internacional de Alimentación [1990] ECR I–4135 51

Ministero delle Finanze v IN.CO.GE’90 [1998] ECR I–6307 51

Netherlands v Parliament and Council [2001] ECR I–7079 100

Nold v Commission [1974] ECR 491 204

Océano Grupo Editorial SA v Rocio Murciano Quintero (and others) [2000] ECR I–4941 (ECJ) 47, 51 R v Secretary of State ex parte BAT and Imperial Tobacco [2002] ECR I–11543 94, 100, 242 Roman Angonese [2000] ECR I–4139 106

Simone Leitner [2002] ECR I–2631 57, 110 Swedish Match [2004] ECR I–0000 100

Ter Voort [1992] ECR I–5485 204URBSFA v Bosman [1995] ECR I–4921 106Wagner Miret v Fondo de Garantía Salarial [1993] ECR I–691 51

Decisions of the English and Scottish courts

Allsports v OFT [2004] CAT 17 [1043] 172Barclays Bank plc v O’Brien [1994] 1 AC 180 198Courage Ltd v Crehan (No.1) [1999] EWCA Civ 1501, [1999]

UKCLR 110 173Director-General of Fair Trading v First National Bank plc [2001]

UKHL 52, [2002] 1 AC 481 37, 175, 176Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd

[2002] EWCA Civ 1407, [2003] QB 679 38Investors Compensation Scheme v West Bromwich Building Society

[1998] 1 WLR 896 16Lloyds Bank v Bundy [1975] QB 326 198, 201London Borough of Newham v Khatun et al [2004] EWCA Civ 55,

[2005] QB 37 176National Westminster Bank v Morgan [1985] 1 All ER 821 198, 201Royal Bank of Scotland v Etridge (No 2) [1994] UKHL 44, [2002]

AC 773 198, 200Smith v Bank of Scotland; Mumford v Bank of Scotland 1996

SLT 392 198, 200White v Jones [1995] 2 AC 207 (HL) 37

Decisions of the US Supreme Court

Gonzalez v Raich, 545 US _(2005) 100

Decisions of the European Court of Human Rights

Goodwin v United Kingdom (1996) 22 EHHR 123 203Mikulić v Croatia (2002) 1 FCR 720 203Pretty v United Kingdom (2002) 35 EHRR 1 203

Table of Domestic Legislation

Austria

Consumer Protection Act 83

Finland Consumer Protection Act 179

France Code civil 41, 150, 160, 162, 163, 166, 168 Art 1110 201

Book I 160

Book III, ch III 165

Book V 160

Code de commerce 163

Code de la consommation/French Consumer Code 66, 202 Arts 341–44 199

Declaration of Rights (1789) 162

Germany Act concerning Trade and Industry 84

AGBG (Standard Terms of Business Act) 43, 86, 194 Bürgerliches Gesetzbuch (BGB)/German Civil Code 43, 46, 64, 71, 72, 76, 78, 81, 83–87, 161, 166, 194, 200 Book I 72, 161 Book II 72, 160, 161 s 138 85, 202 s 194ff 81

s 195 82

s 199 82

s 241 72

s 241 a 86

s 275ff 75, 77 s 280ff 74–77 s 305 86

s 305 a 86

s 305 b 86

s 305 c 86

s 306 86

s 306 (old) 75

s 306 a 86

s 307 86, 194 s 308 86

s 309 86

s 311 72

s 311 a 75, 76 s 313 72, 75 s 314 72

s 320ff 77

s 323 74, 75, 78 s 325 75

s 434 79

s 437 79

s 438 80, 82 s 439 78, 80 s 441 79

s 536 79

s 635 78

s 638 79

s 651a–k 84

s 823 82

s 937ff 82

Modernisation of the Law of Obligations Act 71, 72, 87 Italy Codice civile (1865) 158

Codice civile (1942) 40, 158, 159 Art 1325 202

Art 1341 193

Art 1346 202

Arts 1469 bis ff 159

Arts 1519 bis ff 159

Art 1938 203

Codice di Commercio (1882) 158

Consolidation Act No 58, 1998 Art 21 155

Constitution, Arts 117 and 118 160

Legislative Decree No 56 of 20 February 2004 155

Legislative Decree 6.9.2005 no 206 159

The Netherlands

Burgerlijk Wetboek (BW) 40, 43, 58, 59, 60, 61, 62, 69 Art 3:40 47, 68

Art 3:44 40

Art 3:54 40

Art 6:119a 40

Art 6:212 40

Art 6:258 40

Art 6:230 40

Art 6:231–237 45

Art 6:236 44

Art 6:237 44

Art 6:270 47

Art 7:2 (old) 41

Art 7:5 (old) 46

Art 7:6 (old) 41, 47 Art 7:17 46, 47 Art 7:21 47

Art 7:22 48

Civil code (1838) 39, 43 Grondwet, Art 107(1) 43

Scandinavia Scandinavian Sale of Goods Act 17

UK Competition Act 1998 172

Consumer Credit Act 1974 176, 201 Consumer Protection Act 1987 32

Enterprise Act 2002 181

European Communities Act 1972, s 2 64

Law Commissions Act 1965, s 3 35

Sale of Goods Act 1979 32

s 4 32

s 14 32, 33 Sale and Supply of Goods to Consumers Regulations 2002 (SI 2002/3045) 32, 33 Stop Now Orders (EC Directive) Regulations (SI 2001/1422) 181

Unfair Contract Terms Act 1977 31, 32, 201 s 3 32

s 6 32

Unfair Terms in Consumer Contracts (Amendment) Regulations 2001 (SI2001/1186) 31Unfair Terms in Consumer Contracts Regulations 1994 and 1999 (SI1994/3159 and SI 1999/2083) 31, 32, 33, 174, 175, 176, 177reg 6 32

USA

Restatements of Contract Law 15Uniform Commercial Code 15, 22

Table of EC Legislation

Treaties

European Community Treaty 26, 61, 89, 94, 106, 113, 240, 106, 113, 172, 173, 212, 215, 240

Art 2 212

Art 3 51

Art 3c 212

Art 3h 212

Art 5 50, 60, 90, 92, 94, 96, 98, 107, 113 Art 12 205

Art 14 51, 103, 207 Art 28 101, 102 Art 43 212

Art 47 93

Art 49 212

Art 55 93

Art 65 97

Art 81 62, 106, 172, 173, 186 Art 82 172, 173 Art 94 49, 90, 106 Art 95 3, 49, 90, 92, 93, 94, 97, 99–103, 106, 113, 136 Art 152 93

Art 153 92, 103 Art 226 44

Art 234 51

Art 249 48, 59, 61, 98 Art 308 97, 99, 113 Single European Act, 1987 93, 96 Treaty establishing a Constitution 99, 157 Treaty of Amsterdam 60, 90 Treaty of European Union 92

Conventions and Charters Brussels Convention on Jurisdiction and Judgments 249

Nice Charter 157

Rome Convention on the Law Applicable to Contractual Obligations 24, 111, 142, 221, 222, 238 Art 1 240

Art 3 9, 18, 23, 239, 240Art 5 241Art 7 241Art 20 239, 240, 241

Regulations

Council Regulation (EC) No 44/2001 of 22 December 2000 24, 186Arts 9–13 223Council Regulation (EC) 1/2003 of 16 December 2002/ModernisationRegulation 172, 173Regulation 261/2004/EC of the European Parliament and of the Council of

11 February 2004 62Regulation (EC) No 2006/2004 of the European Parliament and of theCouncil/European Consumer Protection Cooperation Regulation 36, 181,

182, 184

Directives

Council Directive 64/225/EEC of 25 February 1964 212Council Directive 72/166/EEC of 24 April 1972 213Council Directive 72/430/EEC of 19 December 1972 213Council Directive 73/239 of 24 July 1973 213, 214Art 5 217First Council Directive 79/267/EEC of 5 March 1979 213, 219Second Council Directive 84/5/EEC of 30 December 1983 213Council Directive 84/450/EEC 36Council Directive 85/374/EEC of 25 July 1985 32, 42Art 7(e) 32Art 9 57Council Directive 85/577/EEC of 20 December 1985 9, 42, 90, 91, 95, 106,107

Council Directive 86/653/EEC of 18 December 1986 9, 42, 64, 91, 106, 186Art 17 186Council Directive 87/102/EEC of 22 December 1986 32, 90, 185Council Directive 87/343/EEC of 22 June 1987 213Council Directive 87/344/EEC of 22 June 1987 213Council Directive 88/357 EEC of 22 June 1988 213, 214Art 5 217Art 7 221Art 8 221, 222Council Directive 90/88/EEC of 22 February 1990 90Third Council Directive 90/232/EEC of 14 May 1990 213Council Directive 90/314/EEC of 13 June 1990 10, 42, 90, 106, 110, 185

Art 5 57Second Council Directive 90/619/EEC of 8 November 1990 213, 219Council Directive 91/308/EEC 155Third Council Directive 92/49/EEC of 18 June 1992 214Art 4 218Art 7 218Art 9 229Arts 32–35 218Third Council Directive 92/96/EEC of 10 November 1992 213, 219Art 6 218Art 9 229Art 14 218Art 32 218Council Directive 93/13/EEC of 5 April 1993 10, 31, 32, 33, 42, 44, 90, 101,

105, 106, 107, 108, 109, 158, 159, 174, 175, 176, 177, 183, 185, 188,

194, 195

Art 3 65Art 9 33Directive 94/47/EC of the European Parliament and of the Council

of 26 October 1994 10, 42, 45, 90, 178Directive 95/26/EC of the European Parliament and of the Council

of 29 June 1995 219Directive 97/7/EC of the European Parliament and of the Council

of 20 May 1997 36, 42, 91Directive 98/7/EC of the European Parliament and of the Council

of 16 February 1998 90Directive 98/27/EC of the European Parliament and of the Council

of 19 May 1998 36, 181, 182Directive 98/43 of the European Parliament and of the Council

of 6 July 1998 93Directive 99/44/EC of the European Parliament and of the Council

of 25 May 1999 10, 32, 33, 34, 35, 36, 42, 45, 46, 47, 64, 67, 71, 73, 78,

79, 80, 84, 91, 106, 107, 159, 166, 185

Art 2 64Art 3 78Art 4 186Recital 10 78Directive 2000/26/EC of the European Parliament and of the Council

of 16 May 2000 213Directive 2000/31/EC of the European Parliament and of the Council

of 8 June 2000 42Directive 2000/35/EC of the European Parliament and of the Council

of 29 June 2000 10, 43, 91, 106, 186, 242Council Directive 2000/43/EC of 29 June 2000 106

Council Directive 2000/78/EC of 27 November 2000 106Directive 2001/97/EC of the European Parliament and of the Council

of 4 December 2001 155Directive 2002/12/EC of the European Parliament and of the Council

of 5 March 2002 219Directive 2002/65/EC of the European Parliament and of the Council

of 23 September 36, 43, 91Recital 5 208Directive 2002/83/EC of the European Parliament and of the Council

of 5 November 2002 211, 219Art 32 221Directive 2002/92/EC of the European Parliament and of the Council

of 3 December 2002 230Directive 2003/6/EC of the European Parliament and of the Council 155Directive 2004/39/EC of the European Parliament and of the Council

of 21 April 2004 155Commission Directive 2004/72/EC of 29 April 2004 155Directive 2005/29/EC of the European Parliament and of the Council

of 11 May 2005 35, 36, 155, 171, 177, 178, 179, 184

Table of International Legislation and

Principles

European Convention on Human Rights 164, 203Art 8 203, 204Art 14 205Hague Conventions 6, 7

1964 Hague Convention, Art V 238ICC Rules on Arbitration 1998 192Principles of European Contract Law (PECL) 7, 8, 9, 13, 15, 18, 26, 27, 29,

31, 37, 38, 72, 74, 77, 81, 82, 83, 167, 168, 169, 210, 211, 232, 240, 247Art 1:101 9Art 6:111 8Art 9:401 79Art 9:508 8UNCITRAL Model Law on International Commercial Arbitration 1985 192UNIDROIT Principles of International Commercial Contracts 8, 15, 29, 72,

74, 81, 160, 191, 240

Art 1.9 192Uniform Law on the Formation of Contracts for the International

Sale of Goods 6Uniform Law on the International Sale of Goods 6, 238United Nations Convention on Contracts for the International Sale of Goods 6, 7, 8, 15, 17, 18, 24, 29, 37, 46, 62, 74, 80, 192, 225Art 9 192Art 49 17Art 78 8Art 79 8

almost mythical era of the ius commune Back then, from the twelfth to the

late eighteenth century, there was a basic unity of the general law of contract,taught and practised all over Europe It slowly vanished with the arrival of thegreat codes on the continent and has not been resurrected since

Like every supernatural appearance, European contract law is somewhatelusive and for the most part not really tangible We realise this as soon as wetry to grasp it, as soon as we ask hard legal questions, such as ‘Does this agree-ment constitute a valid contract under European contract law?’ or ‘Whichremedies does European contract law provide for this situation?’ The answerwill invariably be a counter-question: ‘Which European contract law?’ Onlyoccasionally, where relevant EC law applies, might we be able to score a hit

In all the other cases we are not sure whether a ‘European contract law’ reallyexists, whether it is in force and whether it can be applied

However, there is undeniably a strong impression that there is somethingout there There are people who claim to have seen the European law ofcontract The author of the leading textbook, for instance, concedes that

‘there are as yet no actual rules of European law apart from European tion But’, he continues, ‘all that is needed to constitute European private law

legisla-is to recognlegisla-ise it.’2So people are constantly on the lookout, waiting for ritions

appa-As is usually the case with supernatural phenomena, this has generated an

1Cf the opening sentence of K Marx and F Engels, Manifesto of the Communist Party (1848).

2H Kötz, European Contract Law (Oxford University Press, 1997) v.

industry of its own There is a major textbook on ‘European Contract Law’from which I have just quoted A casebook has been co-edited by one of thecontributors to the present volume, Hugh Beale,3 and it will see a second

edition soon A journal, the European Review of Contract Law, was launched

in 2005 In the preceding year, the Oxford Law Faculty had introduced a newgraduate course entitled ‘European Private Law: Contract’ It was heavilyoversubscribed Finally, the title of this volume assumes that there is such athing as European contract law

Spectres generate different responses Some observers are terrified, othersare fascinated There are many, both in academia and in the professions, whowish to lay the ghost to rest once and forever They have various legitimatereasons for this Others would like to resurrect it, giving it substance andproviding for more than a shadowy outline These also include academicsand, to a lesser extent, practitioners And, more importantly, the EuropeanCommission has committed itself to this course of action Again, there aredifferent reasons, and they are considerable

Most arguments that are advanced in the current debate concern the bility and the methodology of further harmonisation in the area of contractlaw: in view of the diverging national contract laws, is it actually possible tocreate a common European contract law? And what is the way to achieve thisend: a restatement, the search for a ‘common core’, an EC regulation, anon-binding ‘optional instrument’, or the production of further scholarlyliterature? The one question that should logically precede all this is oftensomewhat neglected: is the creation of a European contract law necessary or

feasi-at least desirable? After all, uniformity or harmonisfeasi-ation as such is not an end

in itself There must be compelling reasons of a moral, political or economicnature if we are to abandon the status quo

This volume is an attempt to give at least a limited answer to this question.The starting point is, somewhat unsurprisingly, the status quo EwanMcKendrick gives an overview of the degree of harmonisation alreadyachieved in the area of contract law and of the various arguments for andagainst going ahead One of the major reasons advanced for change is thetension currently arising between the domestic contract laws and theemerging contract law of the EC Different legal systems in Europe haveadopted different strategies to cope with the problem Three of them arelooked at in this volume The strategy chosen in England is investigated byHugh Beale, Martijn Hesselink looks at that for the Netherlands, andReinhard Zimmermann considers Germany

The latter two countries were chosen in particular as they might hold instore some additional lessons for a further harmonisation of Europeancontract law Both Germany and the Netherlands underwent large-scale

3H Beale, A Hartkamp, H Kötz and D Tallon, Casebooks on the Common Law of Europe:

Contract (Oxford, Hart Publishing, 2002).

revisions of their contract laws relatively recently Obviously, these reformscannot be compared with a similar—and even more daunting—enterprise on

a supra-national scale However, they might give us some indication as to thetransition costs, ie the expenses incurred in switching from one contractualregime to another, which might be expected at a European level Supposing,for a minute, that the introduction of a new contract law has a number ofbeneficial effects: will they ever outweigh the expenses generated by theintroduction and implementation of the new regime, such as the preparationand drafting of new provisions, the necessity to amend the contracts generallyused by businessmen and the legal training needed to prepare lawyers fortheir new challenge?

Framing the question in this way does not even take account of the tial cultural and political ‘losses’ and ‘gains’ that are to be expected by theintroduction of a European contract law and that continue to dominate thecurrent debate as to the necessity and desirability of taking such a step Theseare highly important policy questions which merit further discussion.However, adopting a strictly legal viewpoint for the moment, the mostpressing issue on the agenda is a clarification of the constitutional compe-tence of the EC to enact a more comprehensive contract law of any sort This

poten-is dealt with by two contributions in thpoten-is book First, Steve Weatherill outlinesthe constitutional framework and argues that there are good reasons for theCommission’s reluctance to tackle the constitutionality question head-on.Then Stefan Vogenauer and Steve Weatherill present the results of a majorsurvey amongst European businesses engaging in cross-border transactions.Its purpose was to establish whether the diverging contract laws in Europereally form a barrier for international trade and impede on the proper func-tioning of the European economy Only if this question can be answered inthe positive are the requirements of Article 95 EC, the most promising candi-date to provide a legal base for further harmonisation, met

More general issues about the codification of a European contract law arehighlighted in Guido Alpa’s contribution Then the focus changes to some ofthe areas of contract law which are of particular interest in the context of thecurrent debate: consumer contracts, standard terms, suretyships and insur-ance contracts John Vickers, Ulf Bernitz, Aurelia Ciacchi and DanielaWeber-Rey deal with these in turn, and it becomes apparent that there is nosingle answer to the question of whether further harmonisation is necessary

or desirable

The book concludes with observations by policymakers DirkStaudenmayer of the European Commission gives a view from Brussels.Baroness Ashton of Upholland presents the United Kingdom Department ofConstitutional Affairs’ perspective, which was not only crucial during thesecond half of the year 2005, when the United Kingdom held the Presidency

of the European Union, but remains of huge importance in the politicalprocess lying ahead

The contributions to this book are revised and updated versions of papersgiven at a conference that was held in Oxford on 18 and 19 March 2005.Both the speakers and the almost 120 conference delegates represented avariety of European legal systems and made for a rare mix of academics,students, practitioners, judges and policymakers: we welcomed barristersfrom London, solicitors based in various places from Budapest to Yorkshire,and a representative of the Council of the Bars and Law Societies of Europe.

We hosted judges from the Italian Supreme Court and the Royal Courts ofJustice We encountered members of the European Consumers’ Association,the Federal Association of the German Industry, the Spanish College of Landand Mercantile Registers, and the interest group representing the retail,wholesale and international trade sectors in Europe We met a Member of theEuropean Parliament, as well as representatives of the Department of Consti-tutional Affairs, the Law Commission of England and Wales, and the Office

of Fair Trading And academics and students came from such diverse places asParis, Northumbria and Lower Bavaria Small wonder that there werevigorous and highly informed discussions about all sorts of issues relating toEuropean contract law

The conference was chaired by Professor Sir David Edward, formerlyJudge of the European Court of Justice Sir Jonathan Mance, then a LordJustice of Appeal, was in the chair at one of the sessions We are grateful tothem both The conference was jointly organised by the Oxford Institute ofEuropean and Comparative Law and Clifford Chance, the London-basedglobal law firm The constant and generous support lent to the Institute byClifford Chance has already been mentioned in the Foreword to this volume.With respect to this conference and the ensuing publication, we are evenmore indebted to them than usual since Clifford Chance were not only instru-mental in devising the questionnaire for the above-mentioned businesssurvey, but also provided the considerable financial means to have itconducted by a professional agency Our thanks go to their Senior Partner,Stuart Popham, and to the other Partners involved in the preparation, particu-larly Julia Clarke and Simon James

It is not claimed that this volume gives a conclusive answer to the questions

of whether we should imbue the spectre of a European contract law with life,whether we ought to hope for it to vanish into thin air or whether we shouldactively force it to withdraw But far-reaching decisions will be made soon,and it is important that this is done on an informed basis If this book were toassist in this process it would have achieved its aim

Harmonisation of European Contract

Law: The State We Are In

of the current position in relation to the harmonisation of European contractlaw In this sense it is hoped that the chapter will set the scene for the discus-sion which follows in subsequent chapters

The chapter is divided into three parts The first part considers the cipal steps on the road to our current position, ie how we got here Thesecond part considers the arguments generally advanced in favour of furtherharmonisation of European contract law The third part considers some ofthe objections routinely put forward (at least by the English1) against furtherharmonisation or integration of European contract law

prin-I H O W D prin-I D W E G E T H E R E ?The road towards a greater degree of harmonisation of European contract

1 In this essay I do not purport to speak for Scotland, which is a separate jurisdiction from England and Wales Some of the objections discussed in the third part of the chapter may also be voiced by Scots lawyers, but I do not purport to represent their views (whether academic lawyers

or lawyers in practice).

law has been a long one In many ways it is difficult to identify the precisestarting point of the journey Some might be tempted to go back to the medi-

eval lex mercatoria But the link between the medieval lex mercatoria and the

modern debate on the further harmonisation of European contract law is atbest tenuous The world has changed so radically in the last few hundredyears that it is impossible, in my view, to draw any meaningful comparisonbetween the regulation of the medieval world and the regulation of the worldtoday

A more realistic starting point for the modern debate may be the work ofthe great Austrian jurist Professor Ernst Rabel He began work on thecreation of an international uniform sales law in the late 1920s and, largely athis suggestion, UNIDROIT adopted the project and commenced the task ofpreparing a draft international sales law This work began in earnest in the1930s but was suspended on the outbreak of the Second World War Workwas resumed on the project after the end of the war and ultimately bore fruit

in the form of two Hague Conventions, namely the Uniform Law on theInternational Sale of Goods and the Uniform Law on the Formation ofContracts for the International Sale of Goods The texts for both instrumentswere agreed in 1964, but neither instrument came into force until 1972,when they obtained the necessary ratifications However, neither Conven-tion can be termed a resounding success Only nine States ratified them.2However, it would be a mistake to conclude that they were therefore devoid

of practical significance Professor Schlechtriem, one of the leading ties on sales law, has offered the following conclusion on the HagueConventions:

authori-the Hague Sales Law in authori-the end proved to be very successful In 1987, when

my Institute [in Freiburg] published a collection of cases decided under thisUniform Sales Laws and asked all district courts and courts of appeal to send uscases decided by them in which these Uniform Sales Laws were applied, wereceived almost 300 decisions, although only 5% of the courts responded to ourrequest.3

This conclusion is, however, rather more favourable to the Hague tions than the generally accepted view, which is that they failed to have theimpact for which those responsible for their creation had hoped

Conven-The primary significance of the Hague Conventions is probably to befound in the fact that they provided a significant starting point for thedrafting of what was to become the Vienna Convention on Contracts for the

2 United Kingdom, Belgium, West Germany, Italy, Luxembourg, Netherlands, San Marino, Israel and Gambia.

3 P Schlechtriem ‘Uniform Sales Law—The Experience with Uniform Sales Law in the Federal

Republic of Germany’ (1991–92) 3 Juridisk Tidskrift 1, 2 It would, however, appear to be the

case that the Hague Conventions exerted their greatest influence in Germany, Italy and the Benelux countries.

International Sale of Goods (CISG) While it is true that the CISG did departfrom the Hague Conventions at a number of points, it did so only aftercareful consideration of the competing issues The CISG is now, of course, ahugely influential Convention It has been ratified by most European States4and its significance has extended into the domestic law of some Nation States,notably Germany.5The CISG came into force on 1 January 1988 and therenow exists a huge academic literature on the Convention6and a considerablevolume of case law, much of which is relatively easily accessible courtesy ofsome excellent websites.7The extent to which the CISG has succeeded in theaim of harmonising sales law across the world is a matter of some debate.8There is evidence to suggest that courts and arbitrators remain prone to inter-preting the Convention through the lens of domestic law.9Even making anallowance for a certain ‘homeward bound’ tendency in the interpretation ofthe Convention, it can nevertheless be considered a resounding success One

of its principal successes has been the development of an agreed frameworkfor the analysis of some of the complex legal issues that can arise in the law ofsales and, more generally, in the law of contract One may disagree with some(or, perhaps, many) of the solutions prescribed in the CISG, but one cannotdoubt that these solutions are now of great practical and academicsignificance

The next major stage in the development of a harmonised Europeancontract law can be said to be the work done on the Principles of EuropeanContract Law (PECL) The PECL were prepared by scholars drawn fromthe Member States of the European Community under the chairmanship

of Professor Ole Lando (hence the frequent description of the groupworking on the Principles as ‘the Lando Commission’).10The PECL werepublished in three phases: Part I was published in 1995, Parts I and II in

4 The principal exceptions being the United Kingdom, Ireland and Portugal.

5 On which see further R Zimmermann, ‘Remedies for Non-performance: The Revised German Law of Obligations, Viewed against the Background of the Principles of European

Contract Law’ (2002) 6 Edinburgh Law Review 271 and W Lorenz, ‘Reform of the German Law

of Breach of Contract’ (1997) 3 Edinburgh Law Review 317.

6See generally P Schlechtriem and I Schwenzer (eds), Commentary on the UN Convention on

the International Sale of Goods (CISG) (2nd (English) edn, Oxford University Press, 2005).

7 Such as those operated by PACE (http://www.cisg.law.pace.edu) and the University of Freiburg (http://www.cisg-online.ch).

8 See, eg H Flechtner, ‘The Several Texts of the CISG in a Decentralised System: Observations

on Translations, Reservations and other Challenges to the Uniformity Principle in Article 7(1)’

(1999) 17 Journal of Law and Commerce 187 and RA Hillman, ‘Applying the United

Nations Convention on Contracts for the International Sale of Goods: The Elusive Goal of

Uniformity’ [1995] Cornell Review of the Convention on Contracts for the International Sale of

Goods 21.

9See, eg Flechtner, ibid.

10 See also the preliminary draft of a European Contract Code produced by the Academy of European Private Lawyers (the Pavia Group) under the direction of Professor Giuseppe Gandolfi The text of a preliminary draft of that code is to be found in O Radley-Gardner et al,

Fundamental Texts on European Private Law (Oxford, Hart Publishing, 2003) 439.

2000,11and Part III in 2003 The work of those responsible for drafting thePECL was very much influenced by the work of those who had gone beforethem Thus the significance of the CISG can be seen at numerous points in thePrinciples, even though the Principles frequently go beyond the solutionsprescribed in the CISG12—and, in this way, the members of the LandoCommission made the best use of the opportunity to learn from the problemsand gaps that had become apparent in the final text of the CISG Further, thefact that the members of the Lando Commission were not aiming to produce

a legally binding text gave them greater latitude in developing novel or ‘best’solutions to some old and some new problems in the law of contract.13Thework on PECL was also influenced, at least in part, by the UNIDROIT Princi-ples of International Commercial Contracts These were first published in

1994, and were thus available to members of the Lando Commission whenthey were preparing the early drafts of their text However, the LandoCommission quickly began to catch up on the work of UNIDROIT and,indeed, Part III of PECL was produced before the second edition of theUNIDROIT Principles made its appearance in 2004 It would perhaps befair to say that, latterly, the two Principles operated in tandem (or even incompetition with one another), and that the learning experience was notnecessarily a one-way process (with PECL always drawing on the experience

of UNIDROIT)

As has been noted, the PECL is a very different type of instrument from theCISG in that the Principles were not drafted as, nor were they intended to be,

a legally binding set of rules Professors Lando and Beale, in their editorial

introduction to Principles of European Contract Law: Parts I and II,14set out

a number of purposes for which the Principles are designed First, they state

11 The production of Part II resulted in various changes being made to the version of Part I which was published in 1995 and, consequently, an amended version of Part I was also published

it was only possible to secure agreement in Art 78 to the principle that interest should be paid (on which see generally C Thiele, ‘Interest on Damages and Rate of Interest Under Art 78 of the UN

Convention on Contracts for the International Sale of Goods’ (1998) 2 Vindobonda Journal of

International Commercial Law and Arbitration 3) The Article is silent on matters such as the

rate at which interest is to be paid Article 9:508 of PECL, which deals with the payment of interest, is, by contrast, more elaborate The fact that there was no need to achieve unanimity on the text of the Article doubtless made it easier to reach agreement on the content and the scope of Art 9:508.

14O Lando and H Beale (eds), Principles of European Contract Law Parts I and II (The Hague,

Kluwer, 2000).

that the Principles may form a foundation for European legislation, including

a possible first step in the work of preparing a future European Code ofContracts Secondly, the Principles are stated to be suitable for express adop-tion by contracting parties, who can declare that their contract is to begoverned by the PECL However, the ability of contracting parties to incor-porate the PECL into their contract in this way is limited by Article 3 of theRome Convention on the Law Applicable to Contractual Obligations Whilecontracting parties are free to incorporate the Principles as a set of contractterms, they cannot incorporate them into the contract as the applicable law, atleast in the context of litigation in national courts Article 3 requires theparties to choose the law of a country as the applicable law,15so that anychoice of the Principles can only take effect subject to the national law that isfound to be applicable to the contract, applying the usual conflict of law rules.Thirdly, Lando and Beale state that the Principles are a ‘modern formulation

of a lex mercatoria’ (in other words, they can be applied by arbitrators in the

case where a contract is stated to be governed by ‘general principles of law’ or

‘the lex mercatoria’16) Fourthly, they are a model for judicial and legislativedevelopment of the law of contract Finally, they may form the basis for theharmonisation of contract law among the Member States of the EuropeanUnion Lando and Beale conclude:

[T]he Principles have both immediate and longer-term objectives They areavailable for immediate use by parties making contracts, by courts and arbi-trators in deciding contract disputes and by legislators in drafting contract ruleswhether at the European or the national level Their longer-term objective is tohelp bring about the harmonisation of general contract law within the EuropeanUnion.17

Thus far, no mention has been made of the impact of European communitylaw on the development of a European contract law This omission must now

be rectified Community law has had an impact on national contract law,although it is probably fair to say that its intervention has been rather episodic

or selective to date However, its role is steadily increasing The principalexamples of the contribution of community law to the development of aharmonised contract law take the form of the various Directives which havebeen introduced over the last twenty years These Directives cover subjectssuch as doorstep selling,18 self-employed commercial agents,19 package

15See A Briggs, The Conflict of Laws (Oxford University Press, 2002) 159.

16 See Art 1:101(3)(a) of the PECL It is, however, open to question whether the drafters of the

Principles are able, by their own assertion, to constitute the Principles as part of the lex

mercatoria.

17 See above n 14, xxiv.

18 Council Directive 85/577/EEC of 20 December 1985 to protect the consumer in respect of contracts negotiated away from business premises [1985] OJ L372/31.

19 Council Directive 86/653/EEC of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents [1986] OJ L382/17.

travel,20unfair terms in consumer contracts,21timeshares,22sale of consumergoods and associated guarantees,23and late payment in commercial transac-tions.24

A more expansive role for the EU has been signalled in recent years On 13July 2001 the European Commission issued a Communication on EuropeanContract Law to the European Parliament and the Council The purpose ofthe Communication was to broaden the debate on the creation of a Europeancontract law by encouraging contributions from consumers, businesses,professional organisations, public administrations and institutions, theacademic world and all interested parties The Commission was concernedabout possible obstacles to cross-border trade within the internal marketcaused by the differences between the various national contract laws inEurope and sought to ascertain the extent to which differences betweennational laws created difficulties for commercial parties The Communica-tion discussed options for the future of contract law in the EC and set out anon-exhaustive list of four options to stimulate discussion:

— Option I: no EC action, leaving interest groups and others to advise on

cross-border trade and solve problems encountered in it;

— Option II: promote the development of common contract law principles leading to more convergence of national laws, encouraging the develop-

ment of non-binding restatements of principles;

— Option III: improve the quality of legislation already in place,

concen-trating attention on reviewing existing Directives, modernising,extending and simplifying them so as to produce a more rational andcoherent set of laws; and

— Option IV: adopt new comprehensive legislation at EC level This could

take the form of a Directive, a Regulation or a Recommendation, andcould range from an optional set of rules to be incorporated by the par-ties to rules that apply unless excluded or even to a mandatory code Thelevel of harmonisation that would be effected would depend very much

on the form and extent of the model chosen

Following the publication of the Communication, the Commission receivedcontributions from some 180 stakeholders, the largest number coming from

20 Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours [1990] OJ L158/59.

21 Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts [1993]

OJ L95/29.

22 Directive 94/47/EC of the European Parliament and of the Council of 26 October 1994 on the protection of purchasers in respect of certain aspects of contracts relating to the purchase of the right to use immovable properties on a timeshare basis [1994] OJ L280/83.

23 Directive 99/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees [1999] OJ L171/12.

24 Directive 2000/35/EC of the European Parliament and of the Council of 29 June 2000 on combating late payment in commercial transactions [2000] OJ L200/35.

the academic and business communities, with a considerable number fromgovernments and legal practitioners In addition, the European Council, theEuropean Parliament and the Economic and Social Committee eachproduced responses to the Communication This interest of the CommunityInstitutions and stakeholders shows the importance of the debate launched bythe Communication Of the four options put forward, the majority of contri-butors rejected Option I on the grounds that it was unrealistic andinadequate, and that it failed to give sufficient protection to weaker parties.

By contrast, Option II attracted more favourable comment, although anumber of respondents saw this as merely a step on the way to a new legalinstrument at the community level (Option IV) Option III seemed to be themost favoured solution, receiving support from governments, business,consumer organisations, legal practitioners and academic lawyers Opinionsvaried on Option IV Some respondents saw a uniform and comprehensiveEuropean civil code as the best solution to the problems identified, whereasothers were strongly opposed to the creation of a civil code

In 2003 the Commission produced a further communication in the form

of an Action Plan.25 In this document the Commission identified variousareas in which problems may undermine the proper functioning of theinternal market and the uniform application of community law It notedsupport for Option II and that the ‘overwhelming majority’ of respondentssupported Option III, and therefore proposed to continue a broad strategy ofsector-specific legislation as well as non-regulatory measures Steps topromote standard EU-wide cross-border contract terms were launchedimmediately

However, the central plank of the Action Plan was more ambitious andconsisted of a plan to produce a Common Frame of Reference (CFR) TheCFR was to consist of a delineation of fundamental principles of Europeancontract law (such as the principle of freedom of contract), definitions oflegal terms (the examples given were ‘contract’ and ‘damage’) and possiblymodel rules The CFR was intended for use when existing legislation wasbeing reviewed and new legislation drawn up so as to improve consistency incommunity legislation; it was also hoped that the CFR would be taken intoaccount in the drafting of national legislation and so further encourage theconvergence of contract legal rules throughout Europe Finally, it was hopedthat the CFR would provide the foundation for the development of anoptional instrument, should that option be pursued Over 120 responses tothe Action Plan were received and published on the website, again from awide range of stakeholders There was some scepticism about the efficacy anddesirability of measures intended to increase the use of EU-wide standard

25 Communication from the Commission to the European Parliament and the Council, ‘A More Coherent European Contract Law: An Action Plan’, COM(2003) 68 final, available at http://europa.eu.int/comm/consumers/cons_int/safe_shop/fair_bus_pract/cont_law/com_2003_ 68_en.pdf.

contract terms With regard to the CFR, there was broad support, althoughperhaps some confusion as to what exactly it entailed.

On 11 October 2004 the Commission issued a further Communication on

a European contract law and the revision of theacquis: The Way Forward.26

In this document the Commission stated that it would ‘pursue the elaboration

of the CFR.’ It is clear that the CFR will play a crucial role in the development

of a European contract law At present, the Commission considers that ‘theCFR would be a non-binding instrument,’ although it acknowledges that this

is an issue on which divergent views have been expressed and which it may benecessary to re-visit The main role of the CFR will lie, at least initially, in the

improvement of the existing acquis To this end, there will be a review of eight

consumer Directives in order to determine whether the Directives meet theCommission’s consumer protection and internal market goals.27But the CFR

will not be confined to the present and future acquis: a more extensive role

for the CFR is envisaged Thus it is suggested that the CFR could: (i) be takeninto account by national legislators ‘when transposing EU directives in thearea of contract law into national legislation’; (ii) be used in arbitration to

‘find unbiased and balanced solutions to resolve conflicts arising betweencontractual parties’; (iii) be developed ‘into a body of standard contract terms

to be made available to legal practitioners’; and (iv) ‘inspire the European

Court of Justice when interpreting the acquis on contract law.’ The

prepara-tion of the CFR will be undertaken, at least initially, by a group of researcherswho will be expected to deliver a final report to the Commission in 2007.This research

will aim to identify best solutions, taking into account national contract laws (bothcase law and established practice), the ECacquis and relevant international instru-

ments, particularly the UN Convention on Contracts for the International Sale ofGoods

The proposed structure of the CFR bears a remarkable resemblance to thestructure of the Principles of European Contract Law (although the Commu-nication does not expressly acknowledge this) with the addition of chapters

on sales contracts and insurance contracts A number of workshops have beenheld in Brussels at which drafts prepared by the researchers have been consid-ered by stakeholder experts.28Once the report prepared by the researchershas been received by the Commission, it will consider the report and subject it

26 COM(2004) 651 final The Communication has been considered by the House of Lords European Union Committee and is the subject of a report: ‘European Contract Law—The Way Forward’ (12th Report of Session 2004–5, HL Paper 95, 5 April 2005).

27 The Commission is still in the ‘diagnostic phase’ of this work but some ‘preliminary findings’ are set out in the ‘First Annual Progress Report on European Contract Law and the Acquis Review’ COM(2005) 456 final (23 September 2005), section 3.

28 A brief report of these workshops and the initial difficulties in running them effectively can

be found in COM(2005) 456 final, above n 27, paras 2.6.2–2.6.3.

to a ‘practicability test on the basis of concrete examples of the anticipateduses of the CFR,’ and will consult with a wide range of interested parties It ishoped that the adoption of the CFR will take place in 2009, when it will bepublished in the Official Journal of the European Union and reviewed asnecessary.

The Communication of 11 October 2004 also deals with the promotion ofthe use of EU-wide standard terms and conditions, but there is little here that

is new The Commission stated that it would ‘host a website’ on which marketparticipants could exchange information about EU-wide standard terms andconditions which they were currently using or planning to develop However,the Commission has since changed its mind and decided that it is not appro-priate to host such a website, largely because of the costs involved in setting

up and maintaining such a site and its likely limited utility.29In particular, theCommission pointed out that standard terms and conditions tend to bedrafted for a specific sector, have a limited life-span and, if they were to beheld out as enforceable terms in all European jurisdictions, would have tosatisfy the ‘most restrictive national law’ (and a standard term which wasdrafted in order to comply with the most restrictive national law would be oflimited utility to traders who enter into transactions in Europe but not in thejurisdiction which happens to have the most restrictive national law)

Finally, the Communication of 11 October 2004 raises the more difficultissue of ‘an optional instrument in European contract law.’ Here the Commis-sion states that it intends ‘to continue this process in parallel with the work ondeveloping the CFR.’ But the message which emerges from this section of thedocument is ambiguous On the one hand, the document states that ‘it ispremature to speculate about the possible outcome of this reflection,’ but onthe other hand it states that

it is neither the Commission’s intention to propose a ‘European Civil Code’ whichwould harmonise contract laws of Member States, nor should the reflections beseen as in any way calling into question the current approaches to promoting freecirculation on the basis of flexible and efficient solutions

Nevertheless, the linkage of the optional instrument to the progress of theCFR suggests that it would be premature to dismiss the possibility of a Euro-pean civil code at some time in the medium to long term Quite what willemerge from this process is hard to predict, but the CFR may (togetherwith the Principles of European Contract Law) turn out to be one of thefirst significant steps on a road that will end with a European code of contractlaw

29Ibid, para 4.1.

I I W H Y S E E K T O C R E AT E A E U R O P E A N CO N T RACT L AW ?

It is now time to turn to the second issue, namely the arguments that arecommonly advanced in favour of further harmonisation of Europeancontract law A number of different arguments have been advanced in support

of this view

1 Increase in Cross-border Transactions

Businesses increasingly do not confine themselves or their activities withinnational borders To use the jargon of the day, we now live in a globaleconomy, and in that economy national boundaries are said to assume far lesssignificance The emergence of the global economy is of primary significancefor businesses but it cannot be said to be confined to the world of commerce

It also has significance for consumers; not only do they travel more sively than they once did, but widespread access to the internet has enabledpotential purchasers to discover the existence of products and sellers in otherjurisdictions and has enabled sellers to advertise their products on a globalscale It has been argued that, in light of this increase in cross-border transac-tions, the harmonisation of contract law would be beneficial, both forbusinesses and for consumers.30

exten-2 Differences in Contract Law as a Barrier to Trade

The argument that the differences between the various national contract lawscan act as a barrier to trade is a simple one; it rests on the assumption that onecontracting party is less likely to be willing to enter into a transaction whenthat transaction is governed by the law of another state Take, for example,the case of negotiations between a German seller and an English buyer.Neither party may be willing to conclude a contract which is governed by thelaw of the other party In such a case, an impasse may be reached An inter-nationally accepted set of rules has the potential to break that impasse, in that

it can be adopted and applied by parties from different jurisdictions Aharmonised law of contract has the appearance of neutrality that the law of aNation State lacks The existence of such a harmonised law would thereforereduce, if not eliminate, the battle over the law that is to govern the contractand thus remove one potential stumbling block to the formation of that

30This is not necessarily an argument in favour of the creation of a European law of contract It

can be argued that a global economy requires the creation of a global or an international law of contract and not an instrument which aims at regional (European) harmonisation of contract law This point also applies to some of the other arguments which are advanced in favour of the creation of a European contract law.