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Reproduced with permission of the author.

The Future of European Contract Law: Some Questions and Some Answers

Guido Alpa

  1. Introduction
    (i)      Do We Need a European Contract Law?
    (ii)     A Critique of Uniform Contract Law from the Point of View of Business Relationships
    (iii)    A Critique of Legislative Intervention
    (iv)    A Critique of the Compression of the Situation's Spontaneous Evolution
  2. What Costs Might the Drawing up of European Contract Law Entail?
  3. Who is Legitimized to Draw up a 'European Contract Code'?
  4. Which Values Should a 'European Contract Code' Incorporate?
    (i)      A Critique of 'Ordoliberalism'
    (ii)     A Critique of 'Contractual Justice'
    (iii)    A Critique of Code-Based Fundamental Rights
  5. How Should a 'European Contract Code' Be Drawn Up?
  6. What Position Should the Legal Profession Adopt Towards European Contract Law?
    (i)      The Limits of Harmonization
    (ii)     The Level of Harmonization
    (iii)    The 'Toolbox'
    (iv)    B2B Contracts
    (v)    How Should European Contract Law be Used?

1. Introduction

I would like to put some of the answers to a questionnaire, submitted by the Italian Bar Council to Italian lawyers, in a wider context and to touch on some aspects of the problems that the questionnaire itself refers to and which would also be worth discussing in the perspective of the practice of law.

Although the questionnaire does not radically question whether or not to begin the process of constructing a European Contract Law, one senses many reservations in discussions with lawyers who are involved in this theme. The reservations are varied; many fear that the introduction of uniform regulations may undermine the application of domestic ones. It is also feared that new regulations in the contracts sector may involve radical choices, starting over 'from scratch' and therefore unplanned and inevitable costs, such as extra study; as skills and experience already acquired may not, in themselves, be enough to form the set of notions and tools needed by a genuinely 'European' lawyer. Others fear a loss of their indirect advantage, thanks to the pre-eminence of one legal system over another or of one language over another -- positions of advantage that would be reduced if all lawyers in a European context were subject to the arm's length principle.

These fears, doubts and scepticism are not only widespread in the field of legal practice: they reflect doubts and criticism that is also widespread in academic circles.

The basic questions on 'European Contract Law' were formulated with the usual perspicacious pragmatism of Roy Goode, at a conference:[1] 'Is there a problem with European Contract Law? Are the solutions proposed to resolve it appropriate?'

(i) Do We Need a European Contract Law?

The question regards European contract law in the sense of a harmonized or codified contract law. Many scholars have tried to provide an answer and, given the vast amount of literature on the subject, we cannot say who are more numerous: the supporters of European contract law, or the supporters of the current situation, which brings with it the approval of tradition, and favours diversity. In this case numbers certainly do not decree who is right and who is wrong. What does is the weight of arguments, their persuasiveness and rationality. We must first, however, clear up some perplexities.

The first arises from the connection between the construction of a European contract law and the choice of an applicable law for negotiation between parties. If everything could be resolved by applying the regulations of private international law to establish the law of the contract, the problem of European contract law would simply not arise. However, the problem does exist and it is different from a simple 'choice of law'.[2]

What is under discussion is not which law is applicable, because a 'model code' established at a European level could also become the law chosen by the parties and applied to their contract. On the contrary, the rules of private international law do not function so simply and the choice of the applicable law could be imposed by one party on another. Furthermore, what we want to avoid is the real aim of private international law: not choosing between laws, but establishing a single law for everyone. Or least building a solid, minimal base on which to set special rules that do not disappear into space, but have a 'safety network' around them, a way to interpret and apply them correctly and in a uniform manner to all countries that are members of the European Union (EU).

The second perplexity regards the 'beauty' or 'inalienability' of diversity: the assumption of 'the virtue of diversity' has become a cliché.[3]

Once again we are outside our area and this is not the problem to resolve. Comparison is like a mine, knowing how to compare is a great quality and using the results of comparison is a great wealth, but this science (or method) does not come into play in our case. We do not want to ignore, or even worse, emarginate national traditions and the origins of national legal culture. The great codes are the history of our legal systems and the grands arrets have marked their evolution. We are considering how to act in order that goods and services can circulate on the basis of uniform rules, not rules that are 'different' amongst themselves. Furthermore, if we accepted only the advantages of diversity (in rules) there would be no need for conventions, multilateral agreements or even the so called uniform law.

And so is there a need for a European Contract Law?

(ii) A Critique of Uniform Contract Law from the Point of View of Business Relationships

As I previously stated, the question has been gracefully posed by a distinguished scholar of business law and lex mercatoria, Sir Roy Goode. It closely follows one of the basic questions posed by one of the founders of comparative law in the United Kingdom, Harold C. Gutteridge: 'Is there a problem?' Are the solutions suggested to resolve it appropriate?'

In order to answer the first question, Goode uses the same starting point as several institutions and study groups. He believes that the starting point for the construction of harmonized contract law (or even codified law) at a European level is incorrect. In other words, he believes that whoever supports the view that differences, currently in existence between national systems of contract and business law, damage trade, have not yet listed the reasons for these disadvantages and, furthermore, there is no evidence that business operators have ever complained about them. Multinational companies are used to using national regulations that are different and these differences only appear when national laws impose imperative regulations; otherwise, if rules can be deviated from, companies can prepare standardized contract forms for every legal system in which they carry out their activity.

Goode's criticism is also aimed at those who argue that transnational purchases of goods and services by consumers would be made easier by uniform contract law, for which there is no concrete evidence: it is merely hypothetical that success in business depends on the awareness (or otherwise) that consumers have of the law that can be applied to the contract.

In order to answer the second question, Goode maintains that a binding code for the parties involved would not be the best solution to the problem. A code presupposes that the Member States have a common social, cultural and economic background, but this connective framework does not yet exist. It cannot be said, either, that there are more similarities than differences between legal systems, or that the European Commission has the time or the technical skill to achieve this aim, or that study groups dedicated to this theme are legitimized to impose rules on operators. A democratic process requires all market actors to be involved, together with evaluations of a political nature that first need to mature elsewhere.

Goode adds the problem of language to all these difficulties. Translation implies choices of a conceptual nature and the end result is to invent an ad hoc language, in order to draw up texts that are acceptable to all. However, it is legal science that would suffer most, as all publications would have to be rewritten and a comparison of contract law would also be gravely damaged.

According to his conclusions, it does not mean that a 'model code' is not to be hoped for but, in Goode's opinion, the indispensable condition is that the parties involved choose its application, according to the rules of private international law.

In just a few sentences Goode summarizes a trend that is sceptical of (when not opposed to) the harmonization and codification of European contract law, in which many studies, carried out using different methods, converge. However, his position is not drastically negative, as he admits both the usefulness of a process of codification and its functionality, if the end result arises from free choice between the parties of the contract.

The disadvantages of harmonization have been studied in depth by Ewan McKendrick,[4] according to whom it is extremely difficult to achieve unanimous consensus on editing a uniform text on contractual law and the effects of its application might not bring the advantages that supporters of this initiative forecast. Furthermore, the range of choice that national systems offer to contract parties that want to carry out a business operation is such that a decision to harmonize contractual law would decrease this choice. The argument over competition between legal systems is one which is very important to many scholars of comparative law.

Further arguments against establishing a European contract law come from lawyers who work in situations where several legal systems exist side-by-side, due to multilingualism or the existence of different nationalities (for example, in Belgium, Scotland and England or the Autonomous Communities of Spain) and from lawyers who apply methods of economic analysis to law as a solution to this problem.

(iii) A Critique of Legislative Intervention

Among the many, interesting ideas that have arisen, there is also one, cloaked in deep scepticism, which sees in the 'European' code the illusion of reacting to the process of globalization (which is now irreversible in terms of timescales, methods and territorial borders) by preserving values and techniques of contractual law that are destined to be overwhelmed by supranational practices. Furthermore, this illusion is eroded not only at the highest level -- that of the regulations of world globalization -- but also at lower levels, given that, in many countries, contractual law also has regional origins and is no longer subject to the rigours of state law but is in competition with it. The codification of a European contract law would, therefore, be in conflict with globalized law and would inevitably be defeated by it and, with be in conflict with local laws, as it would represent authoritarian and anti-pluralist tendencies.[5]

This line of thought is shared by those who believe that only the lex mercatoria -- obviously the new lex mercatoria -- would be able to provide for the economic needs of the market.[6] These are joined by the critiques of those who conceive a contract not as the simple 'legal guise' of an economic operation but as the conventional means of realising private interests that the legislator can enrich with social content. So the discussion returns to the political not technical concepts of 'contract', 'freedom of contract', 'private autonomy' and of the role of the legislator and the judge in controlling the conduct of the parties to the contract, and of the aim, form and content of their transactions.

(iv) A Critique of the Compression of the Situation's Spontaneous Evolution

In this area of liberal thought, there are those in favour of the natural evolutions of systems, as a solution to the most critical situations that derive from the applications of directives and the preservation of domestic principles that are by now out of date. Competition between legal systems, updating national systems on the basis of uniform rules set down by some sectors, such as that of international sales, imitating or transplanting principles worked out ab externo in order to render law uniform, would also be factors that came closer to national rules and would not require incentives or impositions from the Community legislator.

An attempt has been made to answer all these arguments in various works in favour of a 'model code' of European contract law:[7] in other words, a harmonization of regulations in European transnational contractual relationships would, in my opinion, bring far greater advantages that the disadvantages outlined above.

2. What Costs Might the Drawing up of European Contract Law Entail?

Many arguments in favour, or against, harmonising European contract law or rendering it uniform, have their basis in an economic analysis of law. These arguments are, however, not founded on concrete economic data or on research carried out 'in the field'. These arguments are rational, in that there is the common conviction that it is currently not possible to establish if it is more advantageous to maintain the existing situation or if it is more advantageous to change the system, by passing from a polycentric normative model to a centralized one, on the basis of economic analysis.

The perspective of economic analysis of the process of creating European contract law is the basis upon which contributions from some scholars with different scientific and cultural backgrounds, as well as from different countries, converge.[8] Some believe that rules of private international law and conventional rules -- such as those included in the 1980 Rome Convention -- lead to uncertainty in the choice of applicable law and, as a result, to costs that should be avoided.[9] However, the answer to this does not appear to be rendering them uniform, but rather offering the parties greater freedom in their choice of applicable law. The 'virtues of diversity' are all oriented towards increasing contractual freedom, rather than imposing a binding choice on the parties. Only the harmonization of consumer contract law is to be wished for, even if a 'European contract law code' of an optional nature is, overall, also acceptable.[10]

As it is impossible to calculate the costs and benefits of harmonization [11] the way forward is to compare different solutions. Opting for change could, (in the opinion of H. Wagner [12]) result in costs of a political nature, lead down a different path to that originally planned and achieve results that are less satisfactory than forecast. In contrast, the existing situation allows us to choose a preferable situation, encourages efficient competition between legal systems and would reduce costs linked to bureaucracy to a minimum.

The same economists are also aware of the fact that 'legal diversity' creates costs: firstly, costs of acquiring information needed to choose the applicable law and therefore to adapt the drafting of the contract to be signed. There are costs from legal action arising from the application of one's own rules to different legal systems and costs that arise from contracts exposed to the uncertainty of continual changes in the contract law of different systems. There are also costs that arise from the legal administration systems that change from country to country.[13]

With the awareness that diversity creates costs, the solution of harmonization appears, at first sight, to be the remedy for all ills. However, it is rejected because it, in turn, generates costs linked to agreements and therefore a step by step approach is considered 'more desirable'.[14] This approach does not have the ambitious aim of drawing up a 'complete' code of European contract law, but aims to first resolve normative controversies arising from cross-border operations, through uniform rules and then to promote the convergence of civil procedure systems in order to improve the administration of justice in a European context.

From the 'behavioural' point of view, it is thought that operators do not see the need for change and that a spontaneous convergence of rules relating to contracts is, therefore, preferable.

Acquis is also not considered the best method for achieving this aim. Some believe that instead of harmonization, it generates diversity, and uncertainty rather than uniformity of interpretative choice.[15] This occurs for various reasons: (i) directives aim for minimal harmonization and the Community legislator leaves the Member States free to fill in the gaps, or to raise the standard of protection for interests to be safeguarded, or to make additions to the approved base texts, so that in national legal systems, EU-derived rules do not correspond perfectly; (ii) the interpretation of directives and norms to be implemented varies, because they contain general clauses, vague expressions and generic terms. They, therefore, legitimize the attribution of different meanings to the same rules in different legal systems (iii) acquis is fragmentary, it touches marginal sectors or aspects and directives are not coordinated.

However, if drawing up a code that is 'imposed on the parties' appears fairly undesirable, the solution as a whole is a kind of 'model code' chosen by the parties as the contract law.[16]

At the end of the day, even those who argue in terms of an economic analysis of law come to the conclusion that a model code is preferable to the current situation.

3. Who is Legitimized to Draw up a 'European Contract Code'?

This question has been considered mainly by British and Italian scholars, but for somewhat different reasons.

Amongst British scholars, this problem has been studied by Stephen Weatherill.[17] He underlines that, in the three Communications of the Commission (2001, 2003 and 2004 respectively) that make up the development of this growing discipline, this question has remained in the background, almost obscured by other themes, even though this is a crucial problem of a 'constitutional' nature, because it directly affects the competence and, therefore, the legitimization of community bodies to deal with the issue. This competence is exercised under the principle of 'common rules for a common market' and began with the harmonization of some rules in certain sectors of consumer contract law. His opinion is that the same Article 153 of the EEC Treaty, by which the Community undertakes to protect the interests of consumers (including their economic interests), could not be the basis of legitimisation; and neither could Article 95 of the Treaty, which refers to Article 153. In other words, radical innovation of a legislative nature, such as drawing up common regulations for contracts in general, could only be the task of the legislating body and be confined only to sectors in which the Union has a precise competency (such as in the area of consumer rights).

Despite the doubts that have arisen, a conference was organized at Oxford by Stephen Weatherill and Stefan Vogenauer, dedicated to evaluating the answers to a questionnaire on this very theme, which had been sent to business people and to organizations representing them, and on the opportunity of constructing a European private law. What strongly emerged was the desirability of uniform regulations in contracts for transnational relations.[18] The fields of application of these general regulations should, according to the survey, be limited to contractual relations with consumers and aimed at improving acquis.

The question has arisen amongst Italian scholars of competence, not only under the profile of textual legitimacy (derived from the EEC Treaty), but of legitimacy of a political nature, regarding the introduction at a European level of a 'code of contract law'. The assumption of the critique is based on the fact that the expression 'code' and the idea of a 'code', at least in continental European culture, implies a constitutive process, a basis of consensus and a pre-eminent role in the sources of law and the pillars of the legal system, which cannot be entrusted to a Community body (that is technically incapable of drawing it up) nor delegated to external research centres or to simple checks conducted on exponents of stakeholders. A subject like this should be decided by Member States with the contribution of European citizens.[19]

The problem, therefore, moves away from the technical and into the political dimension.

4. Which Values Should a 'European Contract Code' Incorporate?

Italian scholars were the first to discuss this aspect of the problem. It was followed by a debate that went far beyond the confines of Italy and a group of scholars even felt the need to sign a 'manifesto' entitled 'Giustizia sociale nel diritto contrattuale europeo';[20] and the comments of Somma: 'Scienza giuridica, economia e politica nella costruzione del diritto privato comunitario'.[21] Within such a multifaceted scenario, we can only identify some of the guidelines that mark the territory and the extent of the debate.

(i) A Critique of 'Ordoliberalism'

According to a part of Italian legal literature (one which expresses the view of the great majority), the current proposals for a contract code, or even for simple preparatory documents for a contract code, restatements, or lists of principles, would have the serious defect of favouring only technical or formal aspects rather than codifying regulations aimed at protecting citizens' rights. This method is, therefore, opposed at the outset. Acquis is assumed as a given right and the values on which acquis is based are also taken for granted, without considering that the sector of consumer interests is only a small part of the area of contract law and that a European citizen cannot be reduced to the mere level of a consumer. The values shared by the European Constitution and by the Treaty of Nice are totally different. They show a European citizen whose personal values are protected, rather than those of the market (even if this emphasis is sometimes considered insufficient).

These dangerous characteristics of a 'market-centred' legal system are insisted upon by those who have shown that, through European contract law, they would like to codify directives aimed at liberalising the market at a general level. This would favour the interests of professional operators, rather than those of European citizens (who would be reduced to the simple role of consumers of goods and services). European contract law, in the form of acquis, already serves these interests. This operation would expand this line of thought to all contract law, sacrificing the values and interests of the European 'citizen'. In the experience of various countries, constitutional law and ordinary law, together with legislative action and doctrinal proposals, have enriched contract law as a stimulus for economic development, but also as a representation of individual values in negotiations between private parties. Criticism of the legislative method of standardization through single directives and criticisms regarding acquis, are multiplied in considering the possibility (which is here totally denied) of an 'amorphous', 'technically neutral' codification of contract law, which would have ideological connotations, as it would be aimed at protecting the interests of businessmen.

The 'Manifesto', which includes some criticisms by Italian authors, points out the lack of democracy in the process of constructing contract law. It demands greater social justice than that provided by acquis or any other current proposal, according to which just protecting some consumer rights (even at a less strong level) could in itself satisfy the need for a 'fair contract law'. Furthermore, the 'Manifesto' underlines the danger that a reductio ad unum of contractual regulations, which are today a great resource of the rich diversity of national cultures, would end up flattened by bureaucratic language in a dull, 'watered down' version of the depth and meaningfulness of centuries-old traditions and of dynamic systems.

We can go further: it has been pointed out how changeable (that is inspired by different degrees of intervention and different spheres of action) is the welfarism of acquis and of EU rules related to contracts. We can distinguish: (a) a model aimed at rationalising the functioning of the market and promoting the autonomy of the parties, mainly by imposing duties to give information; (b) a model aimed at correcting market dynamics in order to make professional behaviour acceptable, by using rules of fair dealing; (c) a model aimed at creating forms of distributive justice, which protect weaker parties and interfere with the content of the contract; (d) an egalitarian-type model of distributive contract law aimed at protecting certain categories of 'weak parties'; (e) a model for action aimed at protecting parties that find themselves in particular difficulty, as in the case of 'force majeure'; (f) a model aimed at protecting public interests such as the environment or fundamental rights. The answer to these varied techniques of intervention presupposes that the legislator has a freedom of action that would be seriously limited by a European Civil Code.[22][23]

(ii) A Critique of 'Contractual Justice'

On the other hand, many legal experts believe that a model code should enhance freedom of contract, not contain mandatory rules, not impose contractual terms or types, but resolve only the simplest questions of interpretation of the words used in directives and leave the parties with maximum room for inventiveness, ability, competence and economic power. According to this idea, no regulations should be included for business-to-business (B2B) relations, while some regulations of merely elementary protection should be included in business-to-consumer (B2C) relationships.[23]

In every legal system there is a trend not only towards increased contractual justice in consumer contracts (to eliminate unfair terms and asymmetry of information) but also greater contractual justice in B2B contracts (to eliminate the abuse of economic dependence or the abuse of dominant positions).

(iii) A Critique of Code-Based Fundamental Rights

Those who care about the social dimension of the rules of European contract law put their trust in fundamental rights, to give an ethical base to regulations that would otherwise only be the result of an academic exercise. Most lawyers think in this way, not only because of the current relevance (acquired from the western model) of fundamental rights, but also because their application to relationships between private parties is the common experience of all national legal systems. There are, however, some people who challenge the feasibility of an organic system of fundamental rights and therefore do not believe that they can form the connective framework of a contract law code.[24]

It is therefore unthinkable that the values contained in the Treaty of Nice should not be applied to contractual relations and that a 'model code' should not be coordinated with a constitutional European dimension.

5. How Should a 'European Contract Code' Be Drawn Up?

There are those who believe that the sun has set on the idea of a nineteenth century code and that it cannot and should not be proposed again in a society such as ours, where law is necessarily fragmentary. There is no longer a coherent system of ethical values on which a uniform and systematic list of regulations can be founded. Each legal system is divided into blocks of regulations that mediate between conflicting interests. A legal system must necessarily be 'flexible' and would find it difficult to stand the straightjacket of codification, even if applied only to the contracts sector.[25]

The controversy over the modern relevance of codes has no basis in the initiatives of EU bodies. Not only because the Commission has changed direction in its works and has greatly circumscribed the objectives to achieve (even if the European Parliament continues to call the set of uniform regulations that it wants to introduce a 'code') but also because, even if we are dealing with a 'code', the end result of the work would obviously not have the characteristics, functions or image or a real civil code. It would not have these characteristics, because the idea of a code is associated with the tradition of countries. The different paths that national legislators have chosen with regard to codes currently in force demonstrates that each code has its own history and represents an experience that cannot be transferred or shared. A 'European code' would be the outcome of the experience and cultures of different countries and of economic and social needs felt at a European level, with its own innovative choices, language and legislative techniques.

It would not have these functions, because the idea of a civil code, once a 'law for private parties', today functions as a connective framework between the 'general' law and 'special' law, between ordinary law and sector codes, between the Constitution and the protection of private interests. A 'European Code' would coordinate the regulations of private law issued at the EU level and would reduce them to a systematic order. It would also employ general principles, clauses and terms that were sufficiently vague to be flexible, easily modifiable, interpretable and applicable.

It would not have the image or be (as with the European Constitution) the object of plebiscitary voting or referendums. Even if a code is full of values and policies, it requires ability and technical preparations that neither the European Parliament nor the Commission seem to have.

However, so that it does not remain an academic exercise, a code needs both of the above. It needs the Commission to arrange contacts, meetings and discussions between experts and stakeholders, and to enrich texts presented from time to time for examination by competent bodies, with the experience and comments of the interests involved. It needs Parliament, because vital choices: protection of fundamental rights and comparison between conflicting interests, require political evaluations that only the (European) Parliament can provide.

Another question regards the way in which the 'code' will be used. Here, obviously, one can choose between a policy of small steps, a policy of free choice for parties, or a policy of ex ante or ex post derogation.

All of these choices can be made at a later stage, because they do not affect the methods, content or time frame of editing the work.

6. What Position Should the Legal Profession Adopt Towards European Contract Law?

Since research groups [26][27] began preliminary comparative legal studies and editing texts on the project, the Italian Consiglio Nazionale Forense (CNF) began to take an interest in this initiative, organising seminars and meetings, with these research groups as guests, in order to give their contribution.[27] When EC bodies promoted initiatives linked to this, the CNF showed itself to be very open to the possibility of a 'model code' aimed at regulating contracts in the European sector.

As regards the Commission's action plans on initiatives for harmonization and eventual unification of European contract law, the Council of Bars and Law Societies of Europe (CCBE) posed some basic questions, mainly concerning the possibility of being directly and effectively involved in this initiative. For the moment, as the largest project aims to improve the acquis communautaire, the CCBE has preferred to wait and see the final result of this work, rather than intervene medio tempore, therefore risking untimely and ultimately useless action. At the same time, it has expressed the 'political' desire to be involved in the initiative, since it appears to be the duty of those who could be called upon to apply new regulations or to follow new models, to become aware of them beforehand and offer a critical evaluation.

In this perspective, harmonization of European contract law is seen as a means to reduce barriers that still exist in internal markets. Contract law is portrayed, first and foremost, as a body of regulations in which two areas have already been harmonized by the Directive on unfair terms [28] and the Directive on certain aspects of the sale of consumer goods and associated guarantees,[29] where harmonization has been carried out by following minimum standards.

(i) The Limits of Harmonization

The first question one asks is if this harmonization should be extended to other areas.

If we take into account that, as well as these two directives of general importance, the EU has taken action regarding both the particular ways of concluding the contract (sales negotiated away from business premises, distance sales of consumer goods and services and the sale of financial services) as well as special contracts (consumer credit, package travel, package holidays and package tours and timeshares) and if we consider that consumers are led or encouraged to conclude other types of contract (due to their mobility and to an intensification of competition) we could reply (bearing in mind the need to remove barriers) that it would be right to:

(a)    Continue with the harmonization of regulations that are only partially subject to this process, for example the harmonization of the whole area of contracts of sale and other types of sales;

(b)  Continue with the harmonization of regulations for contracts through which consumers carry out fundamental business operations, such as leasing houses, and transport, order, mediation and contracts for essential services. Incidentally, it must be said that the general directive on services is currently being approved and this would also fill a gap in European contract law;

(c)  Continue with the harmonization of regulations regarding all contracts with banks, financial investments and insurance, which are already partially subject to EU directives or to simple recommendations (such as mortgages for the purchase of a home) and to related contracts, such as surety bonds, personal guarantees and first demand guarantees, and so on.

(ii) The Level of Harmonization

We have already anticipated the answer to the second question, which concerns the level of harmonization of regulations related to contracts. Faced with the dilemma of choosing the minimum or maximum level -- with respect to which national options are greatly reduced and, above all, the putting into effect of directives is fairly rigid -- I believe that we should begin maximum, strict harmonization. Only in this way can we render the provisions in the text, their interpretation, the uniformity of conduct and practices and the resolution, arbitration or conciliation of legal cases as homogenous as possible.

(iii) The 'Toolbox'

The third question concerns the 'toolbox' that is being constructed as part of the initiative of a 'common frame of reference'. In sectors where European contract law is already a reality, because there are many directives but still 'gaps' from the point of view of the completeness of transactions most frequently carried out by consumers, two other operations should come first (at least logically, if not temporally):

(a)    The unification of terminology and concepts, so that terms, notions and institutions employed each time in directives do not create problems of interpretation, both at a level of linguistic translation and at a level of realization when they are adapted by national legal systems;

(b)  The construction of a general normative base, so that harmonization is not diluted in rivulets of transposition with too many connotations of tradition, culture or structure of national legal systems. Therefore, general principles, regarding the formation, the validity, the performance, the non-performance, the cancellation of the contract and compensation for damages and so on, can not only consolidate and complete the acquis, but also help the construction of the directives. Obvious examples are obligations to provide information and their violation, the completeness of a contract and techniques for cancelling a contract, such as withdrawal and sanctions for non-performance.

It is also clear that the area of contractual relations regarding property, property guarantees, methods of property acquisition, and the transfer of property by death and unilateral acts should also be taken into consideration. And why not also take into consideration, for the sake of completeness, the law of obligations, the law of restitution and also law of tort?

The Directive on product liability [30] omits the general area of tort and compensation for non-contractual damages and this is a gap that should also be filled. It seems difficult to appreciate EC action that only regards the circulation of defective goods and is not concerned with defining other cases of liability in which consumers may also be involved.

It is important to underline that, notwithstanding the increase of accidents, there is still no uniform regulation of compensation for non-contractual damage, either for persons or goods, at a European level. There are, however, situations where the law of contract and the law of tort are extremely closely linked. In reality, when we talk about the harmonization of European contract law, we should really be talking about harmonization of the whole law of obligations.

(iv) B2B Contracts

On the same theme of the area of intervention, one asks if it is appropriate to extend harmonization to contracts between businesses (B2B), from the point of view of consumer protection. I believe that an answer should also be set out on this subject.

As I have mentioned before, there are directives in the banking, financial and insurance sectors and in the sectors of transport and public tenders that have partially harmonized current regulations in national legal systems. These are regulations regarding conduct and procedures, but also substantive law. Even the area of competition has uniform regulations regarding contracts. Here the EU has not used the flexible source of the directive, but the more rigid one of regulation. Even directives on payments and e-commerce contain regulations that influence the law of contract.

Why not then proceed with the harmonization in the most frequently used B2B contracts? This process could be begun for those contracts that most affect consumers, but at the end of the day it is not easy to make this kind of distinction. It would create problems of interpretation for contracts that have effectively been concluded, as well as creating problems in the field of application of harmonized regulations law.

As regards methods of harmonization for contract law, the hypothesis of rendering contract models uniform has recurred in legal science as well as in EC documents. This method would have a notable advantage from the point of view of making texts intelligible, making it easier to compare contractual offers and to identify unfair terms. It is clear that these should be models for standard form contracts, as it is more difficult to lay down guidelines for negotiated contracts. The creativity of those in the legal profession who draw up contracts would be reduced, but it would confirm a practice that is already in place, in which many standard operations are based on forms that circulate informally. After all, there are no exclusive rights to contractual texts, patents or copyright, but only an obligation of secrecy regarding the identity of the parties and not of the contractual terms to which they have agreed.

(v) How Should European Contract Law be Used?

One last question concerns the way in which European contract law should be used. Here there is a multitude of alternatives.

If we follow the trend of some directives that have been put into action, interpreted and applied by national legal systems, the answer should be that it seems appropriate to introduce rules that are binding, rather than those that can be derogated.

Creating a 'uniform law' (or 'model code') that parties could choose as an applicable law for a contract is, in my opinion, a rather unfortunate choice. It would reopen all those problems with which operators, lawyers and judges are tormented in applying private international law. A 'model code' of this type would have to be studied, evaluated and applied before receiving universal consideration. In any case, this option could be the minimal solution to a process of completing the harmonization of contract law, which is currently only sector related and approximate.

The last question focuses on the opt-out/opt-in alternative. Given what has been said above, it seems that the answer should be the latter.


1. First published in Ius Commune Lectures on European Private Law 8 Maastricht, METRO, (2003) and then collected in a volume edited by F.W. Grosheide and E. Hondius, International Contract Law. Articles on Various Aspects of Transnational Contract Law, 2003 (Intersentia, 2004), at p. 309.

2. See G. Alpa and M. Andenas, Fondamenti del diritto privato europeo, (Milan, 2005), II, Ch. 1.

3. See G. Wagner, 'The Virtues of Diversity in European Private Law’, in J. Smits (ed.), The Need for a European Contract Law. Empirical and Legal Perspectives, (Groningen/Amsterdam, 2005), p. 3; E. McKendrick, 'Harmonisation of European Contract Law: The State We Are In’, in S. Vogenuaer and S. Weatherill (ed.), The Harmonisation of European Contract Law. Implications for European Private Laws, Business and Legal Practice, (Oxford and Portland, Oregon, 2006), p. 28.

4.[4] McKendrick, 'Harmonisation of European Contract Law: The State We Are In’.

5.[5] N. Irti, Nichilismo giuridico, (Rome-Bari, 2004).

6. F. Galgano, La globalizzazione nello specchio del diritto, (Bologna, 2005).

7. See G. Alpa and M. Andenas, 'Harmonisation and Codification in European Contract Law’, p. 149; E. Hondius, 'Towards a European Civil Code, International Contract Law’, in International Contract Law. Articles on Various Aspects of Transnational Contract Law, 2003, at p. 147; A. Hartkamp, Principles of Contract Law, in A. Hartkamp et al. (eds.), Towards a European Civil Code, 2. nd. edition, Nijmegen 1998, p. 171; W.H. Hesselink, 'The Ideal of Codification and the Dynamics of Europeanisation: The Dutch Experience’, in Vogenauer and Weatherill (ed.), The Harmonisation of European Contract Law. Implications for European Private Laws, Business and Legal Practice, at p. 39.

8. Smits (ed.), The Need for a European Contract Law. Empirical and Legal Perspectives.

9. For example, see Wagner, 'The Virtues of Diversity in European Private Law’, at p. 14.

10. Ibid., p. 16.

11. Ibid., p. 19.

12. Ibid., p. 39.

13. Ibid., p. 44.

14. Ibid., pp. 44–5.

15. J. Smits, The Need for a European Contract Law. Empirical and Legal Perspectives, at p. 164.

16. Ibid., p. 179.

17. 'Constitutional Issues – How Much is Best Left Unsaid?’ in Vogenauer and Weatherill, (ed.), The Harmonisation of European Contract Law. Implications for European Private Laws, Business and Legal Practice, p. 89; and S. Vogenauer and S. Weatherill, The European Community’s Competence to Pursue the Harmonisation of Contract Law – an Empirical Contribution to the Debate, Groningen/Amsterdam 2005, p. 105.

18. Vogenauer and Weatherill, ult.cit. p. 117.

19. See S. Rodotà, in Codici, (Milan, 2003).

20. 'Social Justice in European Contract Law: A Manifesto’, European L.J., 10/6, (2004): 653.

21. In Riv.crit.dir.priv., (2006), n. 2; ID., Diritto comunitario v. Diritto comune europeo, Turin, 2003

22. T. Wilhelmsson, 'The Ethical Pluralism of Late Modern Europe and Codification of European Contract Law’, in Smits (ed.), The Need for a European Contract Law. Empirical and Legal Perspectives, p. 138.

23. [24] See U. Perfetti, in AA.VV. Diritto privato europeo, Quaderni del Consiglio nazionale forense, 2005, edited by G. Alpa.

24. Wilhelmsson, 'The Ethical Pluralism of Late Modern Europe and Codification of European Contract Law’, p. 141.

25. Ibid., p. 130.

26. In particular the group set up by Ole Lando, then coordinated with Hugh Beale, the group set up by Christian v. Bar and the group set up by Giuseppe Gandolfi.

27. See Giuffré, (ed.). Quaderni della Collana del CNF, (Milan).

28. 93/13/EEC, OJ No. L95, 21 April 1993, p. 29.

29. 99/44/EC, OJ No. L171, 7 July 1999, p. 12.

30. 85/374/EEC, OJ No. L210, 7 August 1985, p. 29.

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