Applicable Law in the Light of Modern Law of Obligations and Bases for the Preparation of the Law of Obligations Act

• Author: Villu Kõve
• Pages: 30-37

Villu Kõve

Applicable Law in the Light of Modern Law of Obligations and Bases for the Preparation of the Law of Obligations Act

1. Development of Estonian private law

The Estonian private law has always been a part of Baltic-German law. The first major written body of law, the Baltic Private Law Code (BPLC) dates back to 1863. It was an extensive and extremely voluminous private law code that regulated in great detail the civil relations of the time. Its volume and contents were very similar to the old Common Prussian Land Law. The BPLC was in force in Estonia as a result of the so-called Baltic Special Rights granted to the Baltic countries by Russia (Estonia was a part of Russia from the beginning of the 18^th century), which allowed to maintain the predominant Baltic-German law that was in force here before the Russian Empire.

In 1918, Estonia became independent and the young state gradually also started to enforce its own laws. In the area of private law, the preparation of the Estonian Civil Code commenced in 1920, which was meant to replace the tsarist legal acts (including the BPLC) that had been in force until that time. The draft was prepared mainly on the basis of the BPLC and the German Civil Code, but it was also largely influenced by the Swiss Civil Code. The draft was structured as a classical code: general provisions, law of property, law of obligations, family law and law of succession. While in several areas, particularly concerning the law of property, the code was clearly orientated to the establishment of a new thorough and systematic regulation, the same could not be said about the law of obligations and, above all, the family law in which the already outdated concepts of the BPLC still prevailed. The legislative proceeding of the draft in the Riigikogu (Estonian parliament) continued until 1940, but it never became an act because the USSR armed forces occupied Estonia just before the draft was passed. Hence, the old BPLC in fact continued to apply to private law relations until 1940, although it was obvious that several concessions and adjustments had to be made to be able to implement the code.

Under the Soviet occupation, the Civil Code of the Russian Federation was at first enforced in Estonia to regulate private law relations. Although it was an ideological document rich in propagandist provisions, its basic regulations were similar to those of the classical European civil code, the main distinctive feature being the lack of legal transactions with land due to the non-existence of real property law. With regard to the law of obligations, the basic regulations did not differ from what had been in force in Estonia until that time. In 1964, the occupying power formally replaced the Russian code with the Civil Code of the Estonian SSR, which applied in full until 1993. As to its contents, there were no significant differences between that Code and the earlier code, apart from the fact that it had become even more ideological and the hitherto categories used in Estonian for the law of property and law of obligations (in Estonian: võlaõigus) were formally replaced with the new categories "title" and "law of the obligations" (in Estonian: kohustisõigus). However, it did not involve any fundamental changes as to their content.

When Estonia restored its independence at the beginning of the 1990s, the young state also lacked the authority and facilities for the enforcement of a new legal act to regulate private law. Instead, it was decided to reform the private law step by step, gradually proceeding to a legal system based on the Western-European standards. In 1993, the Law of Property Act entered into force as the first new source of civil law, followed by the General Part of the Civil Code Act and the Family Law Act in 1994. The Commercial Code governing primarily company law was passed in 1995, to be followed by the Law of Succession Act in 1996. Only one part of the old Civil Code ? the one concerning obligations ? has survived to date, which will be replaced by the Law of Obligations Act.

2. System of applicable private law

2.1. General regulation of private law

As mentioned above, the present system of Estonian private law consists of various legal acts that date from different periods. Despite the fact that the areas of private law have not been regulated by a single legal act (code), it can be said that, with regard to the system of law, Estonia is still a European country with classical codified civil law.

Namely, applicable private law clearly divides as follows:

(a)general principles concerning persons, objects and transactions (the General Part of the Civil Code Act);

(b)law of property (the Law of Property Act);

(c)family law (the Family Law Act);

(d)law of succession (the Law of Succession Act);

(e)law of obligations (the Civil Code of the ESSR, the Commercial Lease Act, the Employment Contracts Act, the Dwelling Act, the Consumer Protection Act, etc., henceforth to be regulated by the Law of Obligations Act);

(f)private international law (the General Part of the Civil Code Act, henceforth to be regulated by a separate act);

(g)company law (the Commercial Code);

(h)intellectual property law (the Copyright Act, the Patents Act, the Utility Models Act, the Trade Marks Act, etc.);

(i)contracts related to shipping (the Merchant Shipping Code).

2.2. Main regulation of law of obligations

As said above, the law of obligations is the only area of private law where a new system of provisions conforming to modern requirements has not yet been established and the Civil Code of the Estonian SSR ¹ continues to remain in force. A question may arise of how it is possible to still live with the deeply Soviet rules dating from 1964 when almost ten years have passed since the restoration of independence and the revolutionary transformation of economic relations. Nevertheless, a large part of the disputes arising from contractual and extra-contractual obligations are solved on the basis of the Civil Code even nowadays. Presumably, it has been possible for the following reasons:

(a)as to their underlying structure, the provisions of the Civil Code regulating the law of obligations conform to the classical idea of contracts and extra-contractual obligations;

(b)the main regulations of the Civil Code are sufficiently general to avoid major problems in different social formations when the regulations are applied;

(c)several special areas have already been regulated by other legal acts;

(e)after the entry into force of the Constitution, courts no longer apply ideological provisions or provisions restraining the disposal of ownership and providing for the inequality of persons.

What was said above does not naturally mean that the regulation of the Civil Code is sufficient for the present situation. Since the preparation of the new act has been delayed for a number of reasons, the legal system has simply tried to adapt itself to the changed circumstances.

To date, approximately 250 sections of the Civil Code are officially in force, of which about 200 actually function and can be applied. Compared to the Western-European principles, an important difference in the understanding of the provisions of law of obligations is the imperative interpretation of law, i.e. the established provisions serve as imperative unless otherwise provided by the provision itself. This relatively unreasonable regulation is mitigated by the fact that in the unregulated part (which is the major one) the parties may adjust their relationships as they need.

The main functioning part comprises the general provisions of the Civil Code that govern obligations including, inter alia, rules concerning the entry into contracts, the performance of obligations and the liability arising from the violation of obligations. The provisions regulating solidary liabilities, penalties, surety, guarantee, cession of claims and transfer of debts as well as the provisions concerning the termination of obligations are also important. As for the factual principles, the provisions in force have no peculiarities. The common and general feature is superficiality and non-regulation of many important issues, which has, in its own way, probably been the factor allowing the application of the Code in contemporary society. In the light of European codes, the provisions concerning the entry into contracts and other general provisions of contracts are commonplace and do not contain any significant distinctive features. The performance of obligations has also been regulated without any major peculiarities; the Code regulates, inter alia, performance for the benefit of a third person, creditor default and interest in the case of delay in the performance of a financial obligation (although only 3% per year). As a special feature, the so-called favourable term of seven days could be...