Common European Sales Law. A critique of its rationales, functions, and unanswered questions

• Pages: 222-240
• Published date: 07 September 2012
• Date: 07 September 2012
• DOI: https://doi.org/10.1108/14770021211267342
• Author: Larry A. DiMatteo
• Subject Matter: Economics

Common European Sales Law

A critique of its rationales, functions,

and unanswered questions

Larry A. DiMatteo

Department of Management and Legal Studies, University of Florida,

Gainesville, Florida, USA

Abstract

Purpose – Thisarticle seeks to take a criticallook at the proposedCommon European SalesLaw (CESL).

Design/methodology/approach – The article looks at the rationales given to support the enactment

of the CESL. The approach is critical in nature seeking to vet the plausibility of the rationales given for

a new regulation The article also takes a critical look at the CESL’s structure and trilogy of coverage

– sale of goods, supply of digital content, and supply of services.

Findings – The article exposes some of the shortcomings of the CESL and the dangers to substantive

private law of crafting a regulation based on political feasibility.

Research limitations/implications – The CESL as proposed offers some innovative ideas in areas

of the bifurcation of businesses into large and small to medium-sized enterprises (SMEs), as well as rules

covering digital content and the supply of trade-related services. In the end, the analysis suggests a more

thorough review is needed to better understand the CESL’s interrelationship with the Convention

on Contracts for the International Sales Law (CISG) and EU consumer protection law.

Practical implications – Further analysis is needed and unanswered questions need to be answered

prior to the enactment of the CESL into law. A practical f‌irst step would to begin with a more targeted

law focused on internet trading and licensing contracts.

Originality/value – This article questions the rationales given for the enactment of an ambitious new

regulation covering disparate areas of sale of goods, supplying (licensing) of digital content,

trade-related services, and consumer protection. It further questions the rationality and practicality of

the creation of the designation of SMEs as types of businesses in need of extra protections not currently

provided by contract law’s general policing doctrines.

Keywords Common EuropeanSales Law (CESL),

Conventionon Contracts for the InternationalSale of Goods (CISG), European Unioncross-borders sales,

Internettrading, Consumerprotection,Opt-in instruments, EU Acquis,Small to medium-sizedenterprises,

Regulation

Paper type Research paper

1. Introduction

The Proposed Common European Sales Law (CESL) is the latest entry into the area of

supranationalcontract andsales law[1]. This providesan opportunity to assessthe state of

both hard and soft supranational private law.Does the current mix of hard – Convention

on Contracts for the International Sale of Goods (CISG) and soft laws – UNIDROIT

Principlesof InternationalCommercial Contracts(“Principles”)and Principles of European

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1477-0024.htm

The author would like to thank Prof. Dr Reiner Schulze for his helpful comments on an earlier draft

of this Article. He would also like to thank Prof. Dr Ulrich Magnus and the participants at the CISG

Conference: CISG vs Regional Sales Law Unif‌ication, Max-Planck Institut fu

¨r Ausla

¨ndisches

und Internationales Privatrecht, Hamburg, Germany (12 May 2012) for sharing their insights on

the CESL.

JITLP

11,3

222

Journal of International Trade Law

and Policy

Vol. 11 No. 3, 2012

pp. 222-240

qEmerald Group Publishing Limited

1477-0024

DOI 10.1108/14770021211267342

Contract Law (PECL) provide suff‌icient avenues to structure international business

transactions?Does the CESL f‌ill a void in theseestablished choices of law or doesit add an

unneeded level of complexity to an already crowded f‌ield? What is the likelihood of

confusion over what may be interpreted as overlappinglegal regimes? This Article will

examine the legal nature, objectives, and functions the CESL is expected to serve. This

examination will allow for a tentative assessment of a number of important issues

including the inf‌luence of the CISG on the drafting of the CESL and any resulting

redundancies;and whether autonomous interpretationsof the CESL should diverge with

the CISG? Will judgesand arbitrators be tempted to use the CESL inapplying the CISG,

especially in areas where the CISG lacks suff‌icient clarity and certainty, such as the

conf‌lictinggeneral terms and conditions,the remedy of specif‌ic performance,the scope of

damages and interest, and the role of good faith in the interpretation, performance, and

enforcement of contracts?

Article 1 of CESL restates the fundamental principle of contract law – the parties are

“free to conclude a contract and to determine its contents”. The principle of freedom of

contract or private autonomy is the core rationale for all contract laws. In reviewing a new

contract law instrument, the key analysis is how that core principle is limited. Once again,

Article 1 continues by saying that the freedom enunciated above is “subject to any

applicable mandatory rules”. Therefore, the most fruitful analysis looks to determine the

rationales for restrictions on complete freedom of contract which include – freedom to

contract where the agreed terms are freely enforceable (no prohibitive terms) and freedom

from contract (no mandatory terms) are to be automatically implied. In this secondary sense,

the second order and over-riding rationale for the CESL is that its numerous mandatory

rules are meant to protect weaker parties in the sale or supply of goods, digital content,

and related services. Traditionally, such protections were meant to protect consumers in

business-to-consumer transactions (B2C). The various EU Directives that intervene into

the freedom of contract principle attest to the perceived need to protect consumers from

overreaching by businesses. The overreaching is made possible by the superior bargaining

power of the business due to the uniqueness of its products, superior information, and,

at times, the lack of sophistication of the consumer. This lack of “sophistication” is often

due to bounded rationality (limited information or time constraints).

The protectionrationale is extendedto certain business-to-business(B2B) transactions

as well. This is the true novelty found in CESL rules. The CESL carves out a sub-set of

businesses and designates them as small-to-medium sized enterprises (SMEs). In most

legal systems, there are only the traditional classif‌ications of B2C transactions and

commercial or merchant-to-merchant (B2B) transactions. However, some legal systems,

such as the German BGB, intervene to police unfair terms in both consumer and

commercialtransactions. Other legalregimes, such as the AmericanUniform Commercial

Code’s (UCC) Article 2 (sale of goods) provide policing doctrines that control all sales of

goods transactions. It codif‌ies the principle of unconscionability that allows courts to

rescind or reform overly one-sided terms[2]. This doctrine is not limited to consumer

transactions and, therefore, applies to merchant-to-merchant transactions as well.

However, in reality, courts have only applied the principle to consumer transactions.

Neither the German BGB nor the American UCC recognizes the classif‌ication of SMEs.

The issue of the designation of SMEs as unique types of businesses in need of protection

will be further discussed later in this article.

Common

European

Sales Law

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