General Contract Law in the EU

Background Major legal systems in the EU –The German Legal system The German civil code, BGB –The French legal system The French civil code, Cc –The English legal system –The Scandinavian legal systems

Contract law and barriers to trade - A case for negative harmonization? Can contract law rules form barriers to trade? Art. 34 and 36: quantitative restrictions on trade Dassonville: –”Directly of indirectly, potentially or actually” Keck: –Sales arrangements (art. 34 does not apply) –Product related requirements (art. 34 does apply) Liability rules? Conformity rules? Cassis de Dijon: –Legitimate restrictions Public health Fairness of commercial transactions Defence of the consumer

The proces of positive harmonization Starting point: The commission 1985: ”If trade barriers are legitimate, they should at least be uniform” The result is ”reregulation” (positive harmonization) in the field of private law

Different tools Directives –Mainly consumer law – examples: Unfair contract terms directive Consumer guarantees directive Package travel directive Doorstep selling directive Timeshare directive Distance marketing of financial services –Effect on general contract law? –The concept of spontaneous harmonization

PECL (Principles of European Contract Law) –What is PECL? –Structure: Chapter 1: General provisions Chapter 2: Formation of contracts Chapter 3: Agents Chapter 4: Validity Chapter 5: Interpretation Chapter 6: Contents and effects Chapter 7: Performance Chapter 8: Non-performance and remedies in general Chapter 9: Particular remedies for non-performance

Treaties (examples): –The CISG –The CMR-convention –The COTIF/CIM convention

Status and future prospects Status –Harmonization is a proces in progress –Some problems Harmonization at the supranational level creates disharmony at the national level Paraox: sometimes consumer protection directives may lead to a restriction of consumer protection at the national level Future prospects –A European Civil Code (?) The Draft Common Frame of Reference (DCFR) (Consultation period) –Directive on Consumer Rights, adopted June 23, 2011

Freedom of contract Basic principle Does it follow from the Treaty? –”The fundamental freedoms (eg. free movement of goods, art 28 ff.) are designed to extend party autonomy across boarders” but: –The Treaty now also recognizes other values such as consumer protection –Many directives reflect this fact ECJ case law? –Cassis de Dijon supports ”the information model” as opposed to ”substantive mandatory rules” –Many directives can be seen as reflecting this view

Formation of Contract The offer and acceptance model Conditions for the conclusion of a contract –The French approach Requirement of ”cause”/”causa” –The English approach Consideration requirement –PECL: art (1)”without any further agreement” Revocation of an offer: –German law: an offer is generally irrevocable until it lapses, for example at the time fixed for its acceptance –English law: an offer is generally revocable, but can be held open by consideration –PECL: (compromise) art. 2:202 (1):offer is revocable until acceptance has been dispatched Art.2:202 (3): fixed time for acceptance: offer is irrevocable –CISG art. 16 : similar rule

Content of the contract: Restrictions on freedom of contract The Unfair Contract Terms directive Article 2: Definitions –(a) unfair terms (article 3) –(b):consumer – ”natural person” acting ”outside his trade, business or profession” Article 3: –Para 1: ”A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirements of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer” –Para 2: The ”list” in the Annex (”indicative and non exhaustive”)

–Cases The Oceano ruling C-240/98 to C-244/98 (preliminary ruling – jurisdiction clause) Freiburger Kommunalbauten C-237/02 (preliminary ruling) Cape Snc. and Idealservice C-541/99 and C-542/99 (Preliminary ruling, concept of consumer) Commission v. Kingdom of the Netherlands C-144/99 (infringement procedure)

The principle of good faith and fair dealing: –PECL Art. 1:201: –(1) Each party must act in accordance with good faith and fair dealing –(2) The parties may not exclude or limit this duty Five examples: –Good faith in contract formation –Luring a party into a Time-Bar –Applying good faith to superseed the parties’ agreement –Good faith and reliance –Good faith and Post-Contract-Formation Comtingencies