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Commercial contracts and services

Guido Alpa

  1. Introductory remarks
  2. A comparison of experiences
  3. From general classifications and categories to the identification of regulatory techniques
  4. Legislative source: control of actions and behaviour
  5. The case of "services"
  6. Regulations and moral suasion
       (a)   Regulations
  7. Moral suasion. The case of corporate concentration
  8. New scenarios of contract law
  9. New scenarios of EC law: services and professional activities
  10. Services as a topic of the Draft Common Frame of Reference

1. Introductory remarks

"Commercial contracts" may be divided into two categories: "unilaterally commercial", where only one of the parties qualifies originally as a merchant and then as an entrepreneur, a business, a trader (or a professional, in European Community terminology) and "bilaterally commercial", in which both parties are professionals. Accompanying the definition is an important methodological warning: it is neither helpful nor correct to engage in an analysis of the former category without taking account of the latter; given the intimate links between them (from an economic, business and financial standpoint), the two categories deserve rather to be analysed in parallel, to see whether there are any rules, principles or praxis causing them progressively to converge, or to become so intertwined as to render them both normatively and conceptually inseparable. The definition and methodological warning go hand in hand. The syntagma has by now entered into accepted usage, alongside numerous others under which special contracts are grouped: according to the position of the subjects, according to causa, according to purpose, according to sector of reference, according to the method of conclusion and so forth.

We can ask ourselves whether, at the turning of the new millennium, given the globalisation of economic relations, the pervasiveness of technological innovation and the progressive Europeanization of relationships, this -- and other formulas -- still have a raison d'être.

The freedom of interpretation has its benefits. A jurist is obviously free to construct his/her categories, whose success will depend both on how they are received by the community of interpreters and how they are used in practice. He/she is also free to abandon them on discovering that they no longer meet the requirements of the times.

It should be observed, however, that taxonomic objectives, sometimes pursued for merely didactic reasons, are often transformed into normative techniques, presupposing inclusions or exclusions that carry as their consequence rules, imperatives, reconciliation of interests, solutions.

Now the syntagma in question has a doctrinal nature, and it has a factual significance, in that it indicates simply that the contracts we are talking about are concluded by "commercial" undertakings; however, it also has a normative significance, inasmuch as one, or both, or all of parties being "entrepreneurs" will have consequences on the destiny of the contract stipulated.

However, the classification does not necessarily imply the existence of common rules for all contracts in this category. An analysis of special legislation reveals that the common rules apply rather to the sub-sectors into which the category may be broken down, as in the case of the rules concerning bank contracts, financial brokerage contracts, insurance contracts, and so on.

Nor does the distinction between contracts stipulated by professionals (to use the terminology of EC derivation) and contracts stipulated by professionals with consumers necessarily imply two divergent sets of rules within the sphere of domestic law: we need only consider the regulations governing investment services, or the new administrative rules on banking "transparency" of bank contracts, to realise that in both cases the counterparty vis-à-vis the financial service provider or bank is referred to as the "customer". There are no special rules for consumers or professionals.

Also with respect to contractual behaviour, the distinction is not always useful: to return to our previous example, practically no banks, at least for the time being, have introduced differentiated contracts for consumers and professionals: they apply the conditions unilaterally defined by themselves to both categories without distinction.

The "commercial contract" formula thus has some degree of utility but also contains ambiguities.

An ambiguity that is dissolved neither by the systematics of the legal code, nor by design of the codifier, if we consider the Italian Civil Code.

This code, enacted in 1942, organised this subject matter in three basic ways:

(i)    by setting down "general" rules, interpreted by most as general rules on the contract per se, though the libro delle obbligazioni (book of obligations), title II, insists on speaking about contracts "in general" and in plural form;

(ii)  by setting down special rules applicable to "individual contracts";

(iii)  by including particular contracts in other books, such as the book on labour, where we find labour contracts, agricultural contracts, company contracts and consortium contracts tied to different types of enterprises.

But only broad indications are given, since when dealing with individual contracts the Italian Civil code refers to general contract categories, as occurs in section xvii, title III, which refers to banking contracts (necessarily tied to a banking enterprise) or insurance in general, which presupposes an insurance company. Furthermore, while the unification of the civil and commercial codes afforded in 1942 avoided a duplication of rules founded upon the status of the parties (so-called civil contracts as distinguished from commercial contracts, which were also such ex uno latere), it did not attain an appreciably systematic level, notwithstanding the intentions announced in the Report of the Royal Commission. On the contrary, the assumption of the Report, which, with regard to the reorganisation of subject matter, predicted attainment of "a more perfect system, one more in keeping with the postulates of a rational and scientific system" (Relazione della Commissione Reale p.5), seems inevitably disproved. The Report is even misleading when, in attempting to play down the innovations in the text, it goes so far as to affirm that "the single contracts governed by the code are () all ancient constructions, built up over the centuries on the highly solid foundations of Roman law, and which have lost none of their solidity" (Relazione della Commissione Reale p.45). Fortunately, the departures from Romanic tradition were innumerable, not only where rules were defined for new types, but also where newly coined principles and classifications were introduced in place of by now obsolete antecedents.

Moreover, the praxis soon gave rise to many non-standard contracts, which were later "socially standardised". This raised two hermeneutic questions: whether general rules had precedence over particular rules and whether it was possible to formulate general rules concerning commercial contracts. Part of the doctrine responded negatively to both questions: according to the opinion of the majority, an interpreter of the law should first construct the specific case bearing in mind the special rules intended for each contract and only afterwards, in the event of gaps, apply the rules on contracts in general. As regards the category of commercial contracts, in practice everyone preferred to follow the evolution of the rules governing each special contract: there was little concern about finding general rules applicable to all contracts to which a business undertaking was party.

The ambiguity of the formula cannot be dispelled even by examining the experiences of other countries. Which is to say that, as far as "commercial contracts" are concerned, the only agglutinating classification seems to be the one provided by EC law, which centres upon the figures of the "professional" and the "consumer", and sometimes obliges us to accept crude and philologically reprehensible simplifications, such as when the professional understood as an entrepreneur is likened to the professional who engages in an intellectual activity, or an industrial association is likened to an association of doctors or lawyers.

Other issues are also involved here: whether terminology, classifications and ordering criteria should be adapted to those originating from EC law, or whether they still have a raison d'être, almost as if they served to defend the "identity" of the normative model of which they are an expression; whether competition among legal systems should take place also at this level; or whether we should simply wait for the "natural convergence" of systems -- upon which Basil Markesinis has so much insisted -- which would itself lead, without any need for ab externo intervention (least of all an attempt at codification on a European level), to the circulation of models, solutions and remedies and hence a gradual harmonisation of rules.

This raises yet another question, that is, whether it is advisable to follow this movement of convergence as it proceeds naturally, or preferable to accelerate the formation of common principles within the European juridical sphere, or even go so far as to define authentic "model codes". These are the questions that the European Commission and Parliament have put to governments, institutions, scholars and professionals in the various recommendations, resolutions and communications they have issued over the last twenty years (see COM (2003) 68 final; Res. 2003/C246/01; Plan of Action of 12.2.2003; and, more recently, see COM (2010)348 about on optional instrument concerning a European Contract Law for consumers and businee).

2. A comparison of experiences

The process of convergence left up to the "natural" evolution of legal systems in European countries is very slow and its results are only empirically perceptible. As for classifications, the situation seems replete with difficulties, given the differences among national cultures.

Now, comparative law teaches us many things, above all to assume that terminology and categories are marked by a high degree of relativity. Relativity of meaning and relativity of aspects relating to both time and function. In other words, if we just briefly consider, by way of example, the French experience and the English experience, which may be taken as sufficiently significant models, we will find categories similar or analogous or functionally comparable to our own. In those countries as well, jurists either proceed as if nothing had happened, and thus think about "adapting" existing categories to new needs, or else they, too, wonder about their destiny; or perhaps they do not even concern themselves with the systematic problem, but rather concentrate on adhering to the reality as it evolves, which leads them to put aside questions of a more dogmatic nature, allowing them to be absorbed by the flow of economic relations.

In delineating the characteristics of Droit privé européen during a conference organised some years ago by the Centre de recherche en droit des affaires of the Université de Reims-Champagne-Ardenne (under the direction of Pascal de Vareilles-Sommières, Paris, 1998), Christophe Jamin assumed "European" contract law to be a phenomenon regarding only general rules on the contract per se, though his study was aimed at ascertaining the existence of a European law relating to contracts. In any event, his conclusion was negative, in the sense that notwithstanding the transplantations, circulation of models and shared solutions for some problems, the national character of systems is so strong that just raising the issue of European contract law seems to reflect wishful thinking rather than confidence in a feasible project (Un droit européen des contrats?, op. cit., p. 47). What is more, he argued that "derived" EC law, i.e. the complex of rules imposed by the European Community through its directives, not only leaves ample margins and many gaps, but also ends up playing a much more limited, less ambitious role, which consists simply in circulating ideas and bringing national experiences closer together. Even the planning of a "restatement" of common principles of contract law appeared to him to be a merely cosmetic operation, which, given the flexibility of the terms and concepts used, would not be able to lend the certainty that specialists needed. In the same context, Richard Crone, for his own part, focused on international private law, the only body of rules that needed to be taken as a basis in order to achieve a more substantial, reliable harmonisation (Problèmes pratiques des contrats européens, op. cit. p. 54).

Those who describe the regulation of civil and commercial contracts (corresponding to the bipolarity of codes) venture into a more complex subject. Here it is noted that the different stages marking French history as regards the general and specific rules on contracts have caused interpreters to reject the initial classifications and adopt new ones. In this regard, François Collart Dutilleul and Philippe Delebecque observe that the common rules to be observed in all agreements, as established by the Napoleonic Code -- which also reflected the influence of canonical doctrine -- are no longer judged valid by contemporary jurists because in France a transition had been made from the general law of contract to the law of "très speciaux" contracts; in addition, two opposite trends have manifested themselves: common law has become more specialised, whereas special law has become more generalised. This is due to the existence of new sources, the creative power of jurisprudence and the intervention of independent administrative authorities, so that today "la catégorie des contrats commerciaux n'existe pas en tant que telle" (Contrats civils et commerciaux, Paris, 1996, p. 20).

French jurists who have directly addressed the problem of a European codification of contracts appear less hasty to rule out the possibility of a solution. But here as well a priority is placed on analysing problems relating to contracts in general rather than those involving special contracts. This choice is not, however, shared by everyone. Now not only is the classification of contracts coming under challenge, but also the very foundation of a general contract theory (Savaux, La théorie générale du contrat, mythe ou réalité?, Paris, 1997).

English jurists offer a more concrete analysis of the impact of EC law on commercial law (Droit communautaire des contrats, edited by C. Quigley, The Hague, London, Boston, 1998). Here, with reference to the regulation of "commercial" contracts, a description is given of all the problems related to payments, the rules of competition and the rules for individual economic transactions, with particular emphasis on distribution agreements. On the other hand, we all know that in English common law the distinction between contracts in general and special contracts, between civil law and commercial law, is based upon criteria very different from our own: it is empirical and concrete, shuns classifications, and above all every attempt at systematisation.

There are still those who hold the opinion, which in our eyes may appear old-fashioned, that it is possible to formulate a general description of contract rules (see, for example, McKendrick, Contract Law, London, 1990). This view has however come under criticism, since the status of the contracting parties is by no means irrelevant to the issue of uniform regulation (Brownsword, Contract Law. Themes for the Twenty-First Century, London, 2000).

But we also find something new on the opposite front, with respect to consumer contracts.

The social ambitions that had driven the first initiatives for directives designed to protect the economic interests of consumers have been abandoned, also within the European Community framework. Consumer law now seems oriented toward protecting citizens as such and many rules derived from fragments of law pertaining to individual contract types have ended up being extended to all contract relationships. This has led many jurists to envisage the development of a single European civil code governing all relationships, irrespective of the status of the parties (Micklitz, De la nécessité d'une nouvelle conception pour le développement du droit de la consommation dans la Communauté eorupéenne, in Mèlanges en l'honneur de Jean Calais-Auloy, Paris, 2004, p. 725 ff.). On the other hand, the push to harmonise national rules in the consumer sector has been taken by some as a negative sign of where EC law is headed, since harmonisation at the highest level stifles national identities, the adoption of general principles and clauses undermines the certainty of law and reliance on self-regulation ends up accentuating rather than reducing differences in status (Howells and Wilhelmsson, EC Consumer Law: Has it Come of Age?, in European L.Rev., 4, 2003, p. 370 ff.).

In short, again invoking the theory of relativity as regards legal categories and contract classification, it would seem that distinguishing between contracts between professionals, on the one hand, and contracts between professionals and consumers, on the other hand, does not provide a solution. The distinction may be justified only as long as the regulation of contracts belonging to the two categories pursues different purposes, but it is destined to disappear once the rules converge.

In the meantime, however, another distinction has been added, regarding the sources. That is, a distinction is made between contracts regulated by provisions that influence the freedom of negotiation and contracts that allow ample space for private autonomy. In the latter case the parties are free to decide the contents, methods, times, formation etc. of their agreements; in the former case they must follow the models devised by third parties, who may be legislators (national and European), administrative authorities (national and European) or trade associations with their codes of conduct, collective bargaining agreements or ethic codes.

3. From general classifications and categories to the identification of regulatory techniques

We now come to the central issue, which directly impacts the two poles expressed in the subtitle to our meeting: the relationship between negotiating autonomy and market regulation.

It is a subject that Hugh Collins dealt with in a brilliant and acute manner some years ago. The chosen perspective considers precisely the new techniques for regulating contracts. The conclusion of his investigation may be summed up in a few phrases. Collins reports that "private" law -- construed, according to its traditional meaning, as the reign of free will, not subject to outside intervention -- is progressively losing ground to "public" law; he also draws attention to the normative construction of markets and the increasingly broad role of the authorities involved in this process (Regulating Contracts, Oxford, 1999). His argumentation is based upon the premise that no market, even if it is free or may become so, can do without rules or ignore personal values. This subject is also highly familiar to Italian jurists who, as authors of recent essays on contracts, or defenders of civil rights, or as proponents of the values of equity and solidarity, or theorists of so-called contract justice, have addressed this problem and suggested solutions.

From this perspective as well, however, many things have changed. Just ten years ago, when presenting some publications on commercial contracts, bearing the more analytic title of I contratti del commercio, dell'industria e del mercato finanziario (Turin, 1995), Francesco Galgano ventured to observe that "the principal tool of juridical innovation today is the contract. Classic conceptions of law do not include the contract among normative sources; but if we were to continue conceiving the contract as a mere application of law, and not as a source of new law, we would deny ourselves the possibility of understanding how law changes in our own times" (op.cit.,p.xxvii). The emergence of non-typical contracts, international practices, the new lex mercatoria -- added Galgano -- have endowed the business community with the power to set itself up as the "sovereign ruler", of which national states "become the secular arm": in other words, the rules of contracts -- and of commercial contracts above all -- are transmitted and implemented through contractual models.

Today, however, we seem to be witnessing a reversal in the trend: not only has the protection of consumer and investor interests required ab externo intervention, but even some of the contracts typically left up to free negotiation between entrepreneurs have fallen subject to the imposition, ab externo, of models, contents and rules limiting negotiating autonomy, as they express a different conception of the contract relationship. Contract relationships, though innovative, no longer depend on the free determination of the parties, but are rather subordinated to rules from different legislative, administrative and ethical sources, in a context characterised by an increasingly extensive regulatory framework. The interests underlying a contract, regardless of the parties' status, are no longer only "private", but must rather conform to the needs of the community, even if it is made up exclusively of businessmen.

This state of affairs generates complexity and uncertainty and will continue to do so at least as long as the two trends, the one described by Galgano and the one I shall attempt to describe in these pages, develop at the same rate without cancelling each other out.

The complexity may be governed by drawing up one or more sets of general principles (Oppo, Impresa e mercato, in Riv.dir.civ., 2001, I, p. 430); and the uncertainty -- which depends on the changing relationship between mandatory rules and dispositive rules, or the judicial interpretation of contracts, or judicial remedies for their incompleteness (Gambaro, Contratto e regole dispositive, op. cit. 2004, I, p. 1 ff.) -- may be governed by the hermeneutic community, that is by consolidating interpretative models designed to reduce the arbitrary discretion of judges and arbiters.

But there is more. Beyond the processes of national codification or re-codification that are spreading throughout Europe (most recently see Patti, Diritto privato e codificazione europea, Milan, 2004), beyond the expansive force of EC law, beyond the different interpretations that may be given to the formula of "private European law" (recently discussed by Roppo, Sul diritto europeo dei contratti. Per un approccio costruttivamente critico, in Europa e diritto privato, 2004, p. 437 ff.) the need for coordination, clarification and simplification is felt everywhere and has had the effect of kindling new codification aspirations, of arousing interest in new standardisation techniques, new normative unification projects regarding individual sectors of legal systems, individual sectors of economic relations, individuals segments of the market.

Contract relationships, including those, like "commercial contracts", ascribed to the area enjoying the greatest freedom of negotiation up to a decade ago, are thus not immune to these phenomena, which though still fragmentary and localised are not isolated.

As it is impossible to draw a complete and organic outline of the situation it may be useful to cite a few examples of what, as I previously suggested, shows all the signs of being an authentic reversal in the trend.

It does not only transcend the dualism between statute law-case law, or the dualism between authoritative rules -- persuasive rules, hard law -- soft law, but also relies on other means whose significance is much more difficult to decipher. Among them, it seems to me that the most evident are:

(i)    intervention of regulatory subjects who represent a "third" player, as it were, alongside legislators and judges;

(ii)   intervention of rules governing activity and conduct, rather than the substantial relationship established between the parties;

(iii)  intervention of rules designed to resolve disputes between the parties.

These do not form a homogenous set of expedients or techniques, but by now we must give up pretending that the complex reality surrounding us can be deciphered on the basis of old categories.

4. Legislative source: control of actions and behaviour

We can start right from the "sources" to pick up the signs of change. Alongside the geometric, formal construction of Kelsenian inspiration, we must take account of other sources, both of an administrative and practical nature. These are the "unwritten sources" perspicuously illustrated by Rodolfo Sacco and other authors in vol. II of the Trattato di diritto civile (Treatise on Civil Law) edited by Sacco himself (Turin, 1999). To this listing of informal sources (usages, codes of conduct, interpretation and general clauses, principles, fiction, doctrine and so forth) we may add another technique for gaining insight into this normative universe: that is, a source must not be judged only by its "hardness" and "significance", but also by its empirical effect.

There are regulations, resolutions, circulars of independent authorities which today "weigh" more than the laws approved by Parliaments; there are contract models which count more than the rules set forth in codes: there are "persuasive" initiatives (i.e. relying on moral suasion) which carry greater weight than traditional authoritative acts.

But let us proceed with order, and succinctly, bearing in mind the time and space constraints imposed upon us in this context.

The scope of legislation has expanded in a constant and pervasive manner, both in our own system and in common law systems.

Limiting our discussion to "commercial contracts", we should first of all highlight the expansion of EC law, by now considered, thanks also to interpretations by the European Court of Justice, not an external sector of heteroregulation, and as such isolated within domestic law, but rather as a source of domestic law whose violation implies a responsibility on the part of the member state, even where EC law is incorrectly interpreted by a national judge (sentence of 30.9.2003, case C-224/01, in Foro it., 2004, IV, 4 ff.; with a comment by Scoditti).

I am referring not only to rules on competition but also to the regulation of e-commerce, electronic signatures, copyrights, patents and models, contract bidding procedures, corporations, insurance, financial services, as well as the acquis communautaire in the areas of consumer rights and environmental law. All topics warranting further discussion, wholly impossible at this time.

Looking at domestic law, in addition to the effects of EC-derived law, we should think about the progressive reduction in the margins of autonomy once enjoyed by contracting parties in the case of non-typical contracts: insurance brokerage, factoring of trade debts, late payment, subcontracting, shareholders' agreements, which have just recently been joined by rules on franchising (so-called commercial affiliation), are emblematic examples of relationships that have been removed, at least in part, from the sphere of negotiating autonomy in private contracts.

Contract models, once adopted by richer and more solid traditions, no longer suffice to regulate contractual relationships, since the basic rules are imposed by law. Little does it matter whether we are talking about a simple "connotation", partial provisions or a complete regulatory model: mandatory rules prevail over and are more numerous than dispositive ones.

In all of these cases legislators do not limit themselves to regulating the essential minimum content of contracts but rather, as I was saying, they go so far as to specify how a contract should be concluded and drawn up and even how the parties should behave.

It is this aspect which most strikes the interpreter: the legislator, who once relied on vague and generic definitions of general concepts such as good faith, fairness, public law and order, or standards such as diligence, now introduces new categories (abuse of a dominant position, abuse of economic dependence, prevention of unfair surprise, limitation of conflicts of interest) and detailed rules for controlling the parties' behaviour. Furthermore, non-compliance with normative requirements is punishable by both administrative and civil sanctions, which have repercussions on private acts resulting from the violation of the prescribed rules of behaviour. Conduct prior to the conclusion of a contract is more relevant than when the simple requirement of good faith was enforced. Legislators have imposed obligations related to the disclosure of information and delivery in advance of the contract document, obligations to ascertain that the contents of the contract rules are thoroughly understood and obligations to report conflicts of interest.

The most recent initiative regarding consumer protection refers precisely to conduct -- also with respect to contractual negotiation. It involves rules of fair practice, presently the subject of a proposal for a directive (of 18.6.2003, COM 2003,356 final) which dictates guidelines on how a company should behave in relation to techniques of communication with potential customers or, more specifically, "aggressive" or deceptive practices. On attaining final approval, the directive will need to be adapted, which will also entail the compilation of codes of conduct (regarding this point see, in particular, Marketing Practices Regulation and Consumer Protection in the EC Member States and US, edited by Micklitz and Kessler, Baden-Baden, 2002; The Forthcoming EC Directive on Unfair Commercial Practices. Contract, Consumer and Competition Law Implications, edited by Collins, The Hague, London, New York, 2004).

Conduct -- this time of third parties, vis-à-vis the contract parties -- is likewise a concern of the directives on the prevention and repression of money laundering (second directive Dir.2001/97/EC of 4.12.2001, implemented in Italy with legislative decree no.56 of 20.2.2004, no.56, and proposal for a third directive, dated June 2004).

On behalf of the public interest, the new anti-money laundering regulations make it obligatory for third parties participating in a contract's formation -- e.g. lawyers, notaries, accountants -- to report any suspicious transactions to the competent authorities, after having ascertained their client's identity, the identity of the economic beneficiary of the transaction and the source of the client's economic resources, and to refrain from performing any acts or even providing advice when the transaction shows evidence of criminal reprehensibility.

With respect to financial relationships the legislator's control over conduct is even more invasive. Intermediaries are obliged to behave according to principles of diligence, fairness and transparency, act in the interest of customers (irrespective of their status) and protect the integrity of markets, assuring fair treatment of customers, and engage in sound and prudent management practices (see art. 21 of consolidation act no.58 of 1998, as well as Directives 2004/39/EC of 21.4.2004 and 2004/72/EC of 29.4.2004).

This expanding legislative process is also manifested, as I mentioned earlier, through initiatives aimed at codifying entire sectors of economic relations. In these cases we are no longer talking about laws assembled into consolidated acts, but rather about a systematic arrangement of regulations incorporating the corrective adjustments necessary to bring domestic regulatory provisions into line with EC law. Such initiatives are based on delegated laws that are broad in content and allow greater freedom and more complex operations than in the past (l. 23.8.1988,no.400, l. 29.7.2003,no. 229).

Examples are: the "intellectual property code", the "code of consumer rights" and the "private insurance code" recently drafted by the Government and presently awaiting approval.

A lack of confidence in private autonomous decision making, or a need to protect "weak interests" or to streamline the normative complex regulating markets?

If we subscribe to the teaching of Roy Goode (Commercial Law in the Next Millennium, London, 1998), we will see this as a trend postulated by the market itself -- by the international market as well -- to lend greater certainty, greater efficiency and greater fairness to the relationships among entrepreneurs. And the trend is all the more significant given its acceptance (not without some reluctance and even a bit of regret) in a context such as English law, which had always upheld the "sanctity" of the contract and the free determination of economic operators in the conducting of their private business affairs.

However, what strikes us most about the English experience is the fact that the theory of the sanctity of contract was conceived to "armour" the will of the parties and keep their business safe from any meddlesome intervention by a judge. No thought had been given to applying it to prevent interventions by legislators: such occurrences were not frequent and in the majority of cases they were dictated by contingent exigencies.

Now, however, we are witnessing a sizeable expansion in contract-related statute law, as will be evident to anyone who leafs through the annual volumes of Acts, or visits the Houses of Parliament website. An expansion justified not only by factors tied to the implementation of EC directives, but also by the need to adapt the system to continental models, as has occurred in the case of third-party contracts with the adoption of a law that facilitates insurance company contracts.

In short, even in the English experience, where freedom of contract seemed to reign, the system is becoming increasingly rigid.

It is interesting to note that this legislation-based regulatory approach is in harmony with projects for European civil codes.

5. The case of "services"

A further example may lend credence to my assumption. I think the case of service contract regulation may effectively illustrate my point.

The service industry is undoubtedly one of the most complex and problematic sectors as far as both professional-to-professional and professional-consumer relationships are concerned. The European Commission has recently issued a number of communications calling for a more efficient liberalisation of the market, understood to embrace "legal services", hence the practice of law (COM (2000) 888 final -- 29.12.2000; COM (2004) 83 final).

EC law offers no definition of "service", which is thus derived indirectly from the definition of "good" or "commodity" or "capital": stated simply, a service is anything that cannot be defined as a good, commodity or capital. Italian legal literature has also made scant contributions on this subject: still today, the most important point of reference is an essay by Gerardo Santini, published in 1988 (Commercio e servizi. Due saggi di economia del diritto, Bologna, 1988, pp. 413-562). Santini organised his analysis by identifying the types of subjects who offer services, then looked at how they were integrated and, finally, examined different types of contracts embracing all of the possible variables in respect of subjects, purpose, consideration, quality, quantity, place and time and the combinations thereof. A highly complex, fragmented picture emerged, but one which reflects the current regulatory situation at the EC level as well. This latter topic is addressed in systematic treatises on European private law, which similarly rely on typological classification, (see Lipari (edited by), Trattato di diritto europeo, Padua, 2003; Tizzano (edited by), Il diritto privato dell'Unione europea, Turin, 2000).

Among the projects undertaken by several universities and institutes to promote the harmonisation of law in the internal market and the formulation of "model codes" of European private law, we owe the most interesting initiatives to Juergen Basedow, from the Max-Planck Institut in Hamburg, as regards the insurance sector (The Case for a European Insurance Contract Code, in J.Bus.Law, 2001, p. 569 ff.), and the group led by Maurits Barendrecht at the University of Tilburg; both initiatives fall within the scope of the general programme for the drafting of a "European Civil Code" coordinated by Christian v.Bar.

Whereas the former of the two initiatives makes reference to the acquis communautaire and various directives already approved at the EC level to deal with the insurance sector, the latter purports to draft rules applicable to all service contracts -- or rather, the most common types of service contracts -- and to be included in the "European civil code".

A fairly complex picture emerges from the literature published thus far with the aim of designing a framework of standard rules for service contracts. The rules proposed embrace both relationships between professionals and relationships with consumers. They include general rules concerning the pre-contractual stage and duties to inform customers, rules of cooperation, rules about the standard of professional diligence, rules relating to customer demands and the professional's duties to warn and rules relating to non-performance and withdrawal. Subsequent chapters contain specific rules for the individual contracts considered: construction, manufacturing process, consignment, design, information and consultancy, "handling".

Besides the doubts one may have as to the feasibility of formulating general rules for these basic contracts, it should be pointed out that the scholars who have ventured onto the regulatory scene tend to favour a substantial limitation of private autonomy within the realm of services. This would entail not only the standardisation of contracts but also the imposition of imperative rules on the parties.

In other words, they would rather construct a "cage" of rules within which to confine contracts than rely on general principles, clauses or standards.

6. Regulations and moral suasion

Again with respect to sources, it is possible to identify two approaches followed by independent administrative authorities in Italy: preparation and implementation of regulations provided for under the respective institutive laws in the form of delegated normative power and the "negotiation" of initiatives, acts and behaviours with the subjects affected by the regulations, namely businesses.

When describing the sources of contract rules one usually tends to consider the first approach and disregard the second, which, in my opinion, is equally important.

(a) Regulations

The vast array of regulations is highly significant: detailed, extensive, complex in their phrasing, they impose not only administrative sanctions but also, at times, penal ones. It should also be considered that these institutions have multiplied: taking the example of Italy, we can enlist: Consob (securities market) , Isvap (insurance sector), Covip (pension funds), Antitrust Authority, Energy Authority, Telecommunications Authority, Public Works Authority, Data Protection Authority, just to name the ones most frequently involved in the enforcement of regulations that restrict private autonomy.

A particular focus is due to the Bank of Italy.

Though there is some debate as to whether the Bank of Italy should be ascribed to the category of independent administrative authorities, for the purposes of our discussion it is impossible to ignore the provisions of the consolidated banking act (leg. decree no. 385 of 1.9.1993 and subs. amendments), though they do not cover the entire scope of the numerous regulations pervading this sector.

Art. 38, which deals with land credit, assigns Banca d'Italia, in conformity with the resolutions of the CICR (Interministerial Committee for Credit and Savings), the task of determining the "maximum amount of loans, identified in relation to the value of the mortgaged property or to the cost of work to be executed on the latter, as well as the possibility where the presence of previous mortgage entries does not preclude the granting of loans".

With respect to early loan repayment (full or partial), art. 40 provides that the CICR shall determine the fee to be paid to banks, as the aim is to guarantee the transparency of conditions. For its own part art. 58 empowers the Bank of Italy to issue instructions for the transfer, to banks, of companies, business units, property and legal relationships identifiable en bloc.

As regards systems of guarantees for depositors, the Bank of Italy -- "being concerned about protecting investors and the stability of the banking system" (art. 96 ter) -- among other things issues rules for refunding deposits, also with reference to cases in dispute.

Moreover, numerous provisions regulate the transparency of contract conditions. Just in May 2003 the supervisory authority issued instructions on the transparency of contracts (see Alpa, La trasparenza dei contratti bancari, Bari, 2004).

The Bank of Italy also controls the banking "standards" issued by the A.B.I. (Italian Banking Association); as an association that embraces the entire Italian banking community, the A.B.I. exercises a normative power that derives from the private regulatory capacity assigned by statute to associations. A famous resolution of the Bank of Italy, adopted following an inquiry conducted by the Antitrust Authority, struck down many of these "standards" in that they were likely to undermine interbank competition (03.12.1994 no. 12).

The aims pursued, whether explicitly stated in law or inferable from the tone of the provisions, regard the stability of banks, transparency of contracts, equal treatment for customers, and thus the fairness of banks in stipulating contracts with customers.

It is significant that the nullity provisions included in the consolidated banking act to assure the transparency of contract conditions are relative in nature, as nullity may be enforced only by the customer.

7. Moral suasion. The case of corporate concentration

The remedies designed to restore competition within the market are configured according to two opposite policies, which may be coordinated precisely through antitrust initiatives: a dirigiste policy, which envisions a role for the regulatory authority based on a system of authorisations and prohibitions, and a free-enterprise policy, which relies instead on moral suasion and seeks solutions based on agreements between operators and the authority.

Precisely in this sector we can see the utility of proceeding on a level of cooperation, rather than on one of contention between private interests and public authorities. Recourse is made to acts and behaviours which fall within the sphere of agreements -- construed as the manifestation of a common will -- and thus relate in a broader sense to contract rules and conventional limitations of private autonomy, with the introduction of restrictions in the freedom of contract suggested (or, if necessary, imposed) by the authority and accepted by private individuals and entities. This reflects a need to govern certain market sectors adopting an approach founded on private participation in the authority's action, rather than on a contraposition between the positions of private parties and the powers of the authority. What is involved, therefore, is neither a negotiation of administrative acts, which would be inconceivable, nor indirect control (achieved through subsidies, incentives, rebates) according to a reward logic. Rather, we are talking about a common quest for solutions based on transparency, and which follow a sequence of steps where: private undertakings state their intentions, presenting documents and information to illustrate the operation they pursue: this enables businesses to prepare their assessments of the operation beforehand; the private undertakings can amend the originally formulated operation by introducing all the corrective adjustments that the authorities may judge necessary to ensure its compatibility with competition rules.

The balance between the interests at stake is safeguarded: the private interests pursued through the merger operation, the public interest in maintaining a competitive market and consumer interests, which avoid being damaged by concentrations susceptible to distort competition.

This approach was designed within a European Community framework and formulated on the basis of the research and options delineated in the White Paper on the modernisation of the rules implementing Articles 85 and 86 of the EC Treaty, released on 28.4.1999 (Commission programme no. 99/027; COM /99/0101 final) and on the basis of the initiatives undertaken with the Green Paper on the review of Council Regulation (EEC) no. 4064/89 (COM (2001) 745 final), which deals with the subject of mergers.

And it has been confirmed in the recent reform of merger regulations.

In current speech we hear talk about "remedies", negotiated or imposed by the Authority, and "commitments" undertaken by businesses. The terminology used is vague, souple, and must be adapted to the general and specific characteristics of each system.

Each nation's legislators have adjusted these remedies to the internal situation.

The Italian experience is exemplary in this respect (see Donativi, in Diritto antitrust, edited by Frignani, Pardolesi, Patroni Griffi, Ubertazzi, II, Bologna, 1993, p. 1077 ff.; with regard to the present situation see Alpa, Concentrazioni e misure ripristinatorie della concorrenza. Aspetti di diritto contrattuale, in I contratti, 5, 2003).

Art. 16 of law no. 287 of 10.10 1990 provides that if the Competition Authority considers that a concentration may be subject to prohibition under art. 6 of said law, whether the Authority was duly notified of the concentration or has come to learn of it by any other means, it shall start an investigation. On completing the investigation the Authority may authorise the concentration:

(i)    if the undertakings concerned provide sufficient proof that any aspects of the concentration deemed likely to distort competition as originally planned have since been removed (art. 18/ 2 cit. law);

(ii)  or, should the concentration have already taken place, subject to compliance with the instructions issued by the Authority itself, which shall lay down the measures necessary to prevent the consequences deemed likely to distort competition (as per art. 6/ 1 cit. law), requiring that such measures be implemented by the undertakings concerned (art. 18/ 3 cit. law)

Therefore, the basic provision does not specifically consider the possibility of negotiations taking place prior to the investigation; there is no mention thereof in the rules governing the investigative procedure.

Doctrine and praxis have served to clarify and complete the meaning of the provisions.

Regarding the nature of the orders issued by the Competition Authority, in the first years of application of law no. 287 of 1990 the doctrine came to define them as administrative acts.

As regards the measures referred to in art. 18 (2), recourse has been made to the "agreement-based approach": since companies may, on their own initiative, request the Authority to issue authorisation once they have demonstrated that any aspects judged likely to distort competition have been removed, we are in the presence of an informal, consensual type of activity. Private undertakings implement measures to restore competitive conditions, confident that the Authority will in turn grant authorisation.

This may be viewed as a sort of moral suasion, an attempt by the Authority to persuade and convince the operators concerned. In other words, market operations are facilitated, as the Authority is expected to take a "soft" attitude rather than relying on authoritative measures.

There has been some question as to whether this sequence of acts gives rise to a negotiating procedure, virtually assuming the characteristics of an agreement.

In view of the juridical, and hence binding nature of an "agreement", some problems arise here, since the Authority cannot be obligated to take a measure which is by its very nature a discretional act, as in this case.

Therefore, reconstructing the procedure on the basis of current provisions, operators that intend to proceed with the operation in question must:

(i)    first remove any obstacles to the free play of competition, i.e. implement the measures they deem useful to persuade the Authority to decide in favour of granting authorisation;

(ii)  then request the Authority to issue a favourable decision on their behalf. The measures to restore competition must be directly adopted by the operators; a simple commitment to do so is not enough.

Whereas under EC rules a simple "commitment" by the parties may be sufficient (art. 8 EC reg. 89/4064), Italian law appears to be more restrictive. However, the doctrine holds that the application of the EC principles set forth in art. 1 of law no. 287 of 1990 permits the literal meaning of the text to be extended to include this possibility as well. Indeed there have already been cases where the Competition Authority has allowed, de facto, a simple commitment, by issuing an authorisation conditional upon the commitments being duly fulfilled. The Authority does not have the authoritative means to make commitments binding or bring about their effects.

If a simple request is submitted by the parties, and thus no actual agreement is involved, the Authority may issue an authorisation subject to the parties keeping the measures in place (for example, they must not revoke them as soon as they have obtained a favourable decision).

Since the competition law states that the operators -- in this case -- must adopt measures to restore competition, and not simply commit themselves to doing so, another question arises: should these measures have an immediate and permanent effect? Or may their implementation be made conditional on the obtainment of a favourable decision? The disposal of shareholdings or business units and any other steps that may taken to reach competition, in the assumption that the concentration will be authorised, represent a cost for the operators concerned. If the authorisation were not to be granted, such steps would be pointless. The operator is faced with a difficult choice: if it divests assets and then fails to obtain the hoped-for advantage, it will have lost assets it would not have divested if it had been able to foresee the Authority's rejection; but if it does not divest assets, it cannot obtain the advantage.

Taken literally, the text of the law does not seem to leave margin for conditional divestitures. However, as the Authority always reserves itself the option of revoking the authorisation if the measures adopted fail to have the effect of restoring competition, it seems fairer (in light of the principles governing private autonomy and cooperation with the administrative Authority) to accept that adoption of the measures be made conditional on the Authority's granting the authorisation sought. Always provided that the measures themselves are binding and produce the planned effects immediately and automatically as soon as a favourable decision is issued.

One possible outcome is illustrated by the Alitalia-Malev case, in which an operation relating to flights from Milan and Rome to Budapest was modified during the antitrust investigation (no. 1064, Official Bulletin 7/93).

In another case, the operators gave up their merger plans (no. 1462, Official Bulletin 27-28, /93).

An explicit "agreement" is thus not always on the table. However, there may also be an actual agreement.

This leads us to consider two other possibilities: acknowledging the measures adopted, the Authority may express a favourable decision with regard to the operation; or else the Authority and the parties concerned may actually conclude an agreement which incorporates the terms of the authorisation. However, in this case we are talking about a preliminary agreement, not one that can replace the final official decision.

Different considerations apply in the situation envisaged by art. 18 (3), where the operation has already taken place and the Authority is supposed to prescribe which measures need to be taken to restore competition.

Implied in such a case is an obligation to contract, determined by law and fulfilled through the order that the Authority issues to the private party, though no private legal relationship is directly established.

8. New scenarios of contract law

At this point we might wish to expatiate on usages and codes of conducts, that is to say "soft law", one of the characteristic concerns of "professionals". But apart from a few aspects already alluded to in this paper, usages and codes of conduct do not represent the most relevant new development in this sector in the new millennium.

In other words, the idea that the market of the third millennium should or inevitably would be relegated entirely to the sphere of private autonomy, while the only task left to the authorities -- or institutions -- would be "soft" regulation and ex post monitoring of economic transactions, seems to me to be contradicted by phenomena of an opposite sign.

Rather than being merely a relic of old law, of the old way of conceiving the contract and commercial contracts, these phenomena tend to support the opinion that neither model, considered on its own, appears to be satisfactory in a context such as the European Community or Europe in a broader sense, where personal values of the individual, ethical values and representation in a democratic society that is not merely mercantilist represent the fundamental features of the new European society, as reflected in the Nice Charter, the European Constitution and the thus rules that must be applied in Europe, whatever their source.

Some conceptual revisions are thus necessary in order to adapt national cultures to this new trend.

As regards the general rules of contracts, the trend as reflected by EC directives regarding certain types of services and the relationships between professionals in general appears to place an emphasis on principles of fairness in pre-contractual information, principles of fairness in the formulation of contract texts and deterrents to the abuse of power. At the same time it is also possible to perceive a slow, gradual, but constant extension of the rules already established for consumer contracts to relationships between professionals.

The margin left to private autonomy is thus narrower. Of course a distinction should be made between types, as it is not possible to generalise. Nonetheless the freedom of the parties appears to be limited:

(i)   in the choice of the contracting party

(ii)   in the choice of contents (extra-minimal)

(iii)   in the choice of remedies

(iv)  in the choice of the formulation of clauses

(v)   in the choice of the types of individual clauses adopted

(vi)   in the choice choice of applicable law and applicable procedure

Regulation is thus based upon normative models of a legislative type, sometimes detailed, sometimes expressed through broad formulas. In this case we may speak of a sort of rebirth, or "revival" of general principles, by now widely disseminated also at the EC level (Toriello, I principi generali del diritto comunitario.Il ruolo della comparazione, Milan, 2000).

Regulations of a "legislative" and administrative type are joined by codes of conduct, which tend to replace usages. In this case as well, however, it must be pointed out that although codes of conduct are an expression of the professional categories concerned, their adoption is imposed by numerous directives.

But as I suggested at the beginning, private autonomy is also being challenged in the sphere of conflict resolution. By now, numerous directives require the Member States to set up special bodies for settling disputes out of court. This obviously does not mean that judges are denied access: however, preference is shown for an approach to conflict resolution based on principles of independence, impartiality, competence, procedural simplicity and efficiency, which can guarantee users of the "service" an opportunity to verify the legitimacy of the rights claimed through proceedings that are simpler and faster than those employed by ordinary courts (on this latter point see La risoluzione stragiudiziale delle controversie e il ruolo dell'avvocatura, edited by Alpa and Danovi, Milan, 2004).

At this point an investigation should be conducted into the costs and benefits, also from an economic perspective, of a "system" in which contracts are increasingly removed from the sphere of private autonomy. And we should try to answer the basic question, whether it is better to "maintain the status quo", so to speak, or support the trend I have attempted to described.

To my knowledge, the issue has not been raised at the EC level, since in most cases commissioners and offices are concerned with assuring not only a maximum degree of competition but also maximum simplification of relations to facilitate market integration. However, it is significant that, based on a broad analysis of the effects of directive no.13 of 1993 on unfair terms, the Commission has let it be understood that it is preferable to work with uniform contract models purged of unfair terms rather than relying on the free choice of professionals as regards their inclusion in the contracts drawn up by them and submitted to judicial control (The "Unfair Terms" Directive. Five Years On, Bruxelles, 2000).

In short, competition applies for all purposes other than making agreements: it is better to have uniform conditions more acceptable for consumers than mutually competing contract models.

Based on what has been said thus far, the same line of reasoning seems to apply for contracts between professionals.

This will also hurt competition among legal systems as we move toward increasing harmonisation of normative rules and contract conditions. But uniformity helps increase the certainty of the parties' legal positions, the intelligibility of their acts and the fairness of their conduct. In other words, the sacrifice of private autonomy is counterbalanced by the positive effects produced by regulation, to the advantage of the parties, the operators concerned and markets.

9. New scenarios of EC law: services and professional activities

The E.U. lawmaker's intervention in the service sector by means of a Directive having general scope is significant not only at E.U. regulatory level, but also at internal law level since it takes up the meaning of a sectoral regulation which applies to all services. Therefore the intervention has a dual significance: the regulations being defined regard cross-border services, but also affect internal services.

First and foremost, we are faced with a "framework" Directive which, as explicitly assumed by the lawmaker, does not intend to set detailed rules nor fully harmonize all member States' rules applicable to service activities. Indeed, the Directive rather intends to tackle the fundamental issues on the solution of which the regular operation of the service internal market depends. It explicitly recognizes "the specificities of every profession or sector of activity" (page 9). In particular, with reference to regulated professions, it resorts to self-regulation.

In relation to regulated professions, the Directive envisages the drafting of codes of conduct freely adopted by professional organizations (articles 29 and 39). The modernization process in which it is placed works on the assumption that it is advisable to streamline the administrative procedures regarding these activities, envisage the lifting of internal barriers, ensure the free movement of services and promote a gradual harmonization of the rules regulating the sector.

This Directive also completes the draft Directive on the recognition of professional qualifications (of March 7, 2002, COM (2002) 119 final). By way of summary, we can add that it tackles the safety and security of services, unfair trade practices (for which a specific Directive is being defined) and raises some fundamental issues to which member States' governments and Parliaments, as well as institutions representing service providers' and recipients' interests are invited to respond, with the specific aim of listing the rights of service providers and recipients.

In particular, the Directive provides a definition of service.

It means "any self-employed economic activity, normally provided for remuneration, as referred to in Article 50 of the Treaty".

The Directive also simplifies the procedures to provide services (article 5), facilitates access to information for providers and recipients (article 7) and lays down general rules on the authorization procedures and schemes for service provision (article 9 and subsequent ones). Finally it promotes the free movement of services by applying the principle of the country of origin (article 16 and subsequent ones) and defines requirements for the quality of services.

In this regard, the Directive lays down that, in the case of regulated professions, the information on providers and their services, including the professional title and the member State in which that title has been granted, shall be given by professional bodies or similar institutions with which the provider is registered. Furthermore, the Directive provides for a list of mandatory information regarding the address at which the provider is established, the general conditions and clauses, if any, used by the provider and the contractual clauses concerning the law applicable to the contract and/or the competent courts.

In the case of provision of professional activities, the Directive lays down the obligation for providers whose services present a "direct and particular risk to the health or safety of a recipient or to the financial security of a recipient" to subscribe to professional liability insurance. This insurance may also be replaced by providing equivalent guarantees or arrangements.

The removal of the total prohibition of commercial communications for regulated professions is envisaged (article 24), as well as a check on said communications to ensure that they comply with professional rules which relate to the independence, dignity and integrity of the profession; professional secrecy, however, is safeguarded in a manner consistent with the specific nature of each profession.

The Directive also envisages freedom to exercise multidisciplinary activities, but, by way of exception to this general principle, it admits that limits may be imposed on regulated professions "in so far as it is justified in order to guarantee compliance with the rules governing professional ethics and conduct, which vary according to the specific nature of each profession" (article 25).

It also envisages the certification of the quality of services by independent bodies (article 26). The professional bodies are encouraged to cooperate at E.U. level to promote the quality of service provision, especially by making it easier to assess the competence of a provider. It also considers the advisability of facilitating the procedures to lodge complaints and settle disputes. Finally the Directive envisages the drafting of codes of conduct at E.U. level which, in the case of professions, shall ensure independence, impartiality and professional secrecy, by considering the specific nature of each individual profession.

With specific reference to the professional market, the Directive is certainly less intrusive/invasive that the one drafted by the D.G. Competition (of February 9, 2004, COM (2004), 83 final)

Some concern is raised in relation to the "points of single contact" (article 6) in which providers may complete all the procedures, formalities and applications needed for providers to perform their activities, since only the professional bodies or associations must necessarily provide these administrative services.

Similar perplexities are raised with respect to professional liability insurance, which shall be valid in all the countries in which the provider's activity is performed. Other problems regard the legal form under which the professional activity is performed -- which changes from country to country -- and the implementation of the non-discrimination principle with specific reference to mandatory tariffs (article 15) and reserved activities.

The provisions on the quality of services are equally problematic, especially with reference to advancing the cost of services -- which cannot be foreseen in the case of lawyers -- as well as recourse to commercial advertising, which is not allowed in some countries. The same applies to the performance of multidisciplinary activities (at least within the limits of the principle set by the European Court of Justice in the Wouters case), the control over the quality of services provided by lawyers (which is conditional upon the acquisition of the related qualifications and licensure to practice the profession, as well as to lifelong learning and continued training), and the information on professional's honourability, which in many cases is confidential.

10. Services as a topic of the Draft Common Frame of Reference

In 2009 the black letter version of the Draft Common Frame of Reference, namely the text that a Committee comprised of authoritative university professors drafted with a view to proposing a "model code" of European Private Law, was published. It is structured as a European-style "code", though formulated with general rules and principles. In the framework of Book IV, it lays down a series of rules for services (Section C). These rules are grouped into eight chapters (I. General Provisions; 2. Rules applying to service contracts in general; 3. Construction; 4. Processing; 5. Storage; 6. Design; 7. Information and Advice; 8. Treatment). The black letter version was followed by a widely commented version edited by Maurits Barendrecht, Chris Jansen, Marco Loos, Andrea Pinna, Rui Cascao and Stéphanie van Gulijk (Principles of European Law. Study Group on a European Civil Code. Service Contracts (PEL SC), Sellier, Munich, 2007).

In this contribution, only general rules will be considered, without making reference to the special contracts outlined by those who drew up the Draft while taking into account the most frequent economic transactions in the sector. Indeed, also in other chapters, the Draft tackled contracts which may be defined as service contracts, such as agency, franchise, distributorship, mandate. General rules, however, only apply to the contracts considered in chapter 1; hence we can say that they are "general" only to a certain extent. Specific provisions (IV.C.-1:102) rule out their application also to transport, insurance and financial products.

First and foremost it is envisaged that the service contracts considered in Part C are contracts with valuable consideration: hence, they envisage a price (2:101).

As required by the Directive (article 22), the service provider shall communicate some information and warnings to the client. These are pre-contractual duties, the infringement of which gives rise to remedies which are not indicated in this part of the Draft. However, in Book II -- Chapter 3, devoted to "Marketing and Pre-contractual Duties" two types of remedies are envisaged: in the case of consumers, the right to withdraw; in the case of everybody, termination and compensation of damage.

The above stated information and warnings regard the fact that the contract may run the risk of not reaching the result declared or expected by the client, damage other client's interests or be more expensive than expected by the client.

In their turn, clients shall inform the provider of the unforeseeable circumstances which may affect the performance of the contract. The duty to cooperate is also envisaged (2:103). Indeed, a general duty of good faith is already envisaged in the Premise of the whole Draft (1:103) and hence we could argue that the duty to cooperate is a mere specification of it. The drafters, however, have preferred to highlight this provision by underlining that the client shall request to the provider the specific or supplementary information required to provide the service according to the contractual terms and conditions, and shall also give to the provider the essential reasonable instructions and guidelines to perform the contract.

The client shall also obtain the necessary permits, while the provider shall give to the client a reasonable opportunity to check whether the performance of the contract is accurate. Should the client not provide the information or indicate requests, the provider may withdraw from the contract. If the request increase the price of the service, or prolong the time for performing the contract, the provider is entitled to be compensated for the damage suffered and be granted an extension of the term originally envisaged to perform the contract.

What is relevant -- in relation to the specific rules including the clients right to change the contract and the provider's right to be paid a price for each change -- are the general principles here applied.

On the one side, the drafters insist in the obligation of skill and care that the reasonable service provider shall use "under the circumstances"; should a higher degree of skill and care be promised by the service provider, his/her behaviour shall be adequate to said level.

Skill and care are measured by considering the clients' reasonable expectations by considering, in particular, the nature, magnitude, frequency and foreseeability of the risks involved in the performance of the service for the client, whether the provider is a business, whether a price is payable and if the client had no reason to believe that there was a substantial risk that the result would not be achieved by the service (2:105).

These are very different criteria compared to the ones envisaged by current codes. Indeed, one is obvious because if the service provider is a professional, his/her skill and care is bound to be professionalism, hence having a higher degree than ordinary men's (diligens pater familias); the other criteria regard the foreseeable nature of the non-performance risk which, however, has nothing to do with the skill and care with which the service must be provided.

Besides the obligation of skill and care, also the obligation to "achieve result" is envisaged which, in traditional terms, can be defined as obligation de résultat. This distinction drawn between the obligations de résultat and the obligations des moyens, which characterizes the French system, has been preserved in some legal systems as typical of special service contracts, in particular the works and building contracts (this is the reason why this Section regulates the construction contract), while in the case of storage contracts, which are also regulated in this Section, reference is usually made to maximum skill and care.

Hence we cannot understand the rationale of envisaging rules on skill and care, when a sort of objective responsibility to achieve the agreed result falls upon the provider.


©Pace Law School Institute of International Commercial Law - Last updated September 13, 2011
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