European and Estonian Law of Obligations - Transposition of Law or Mutual Influence?

Author:Irene Kull
Position:Doctor iuris, Docent of Civil Law, University of Tartu

1. Estonian Law of Obligations Act in the context of unification of European law - 2. General principles of law - 3. Principle of freedom of contract - 4. Principle of good faith - 5. Binding force of contractual promises - 6. Binding force of contractual declarations of intention - 7. Third parties in a contractual relationship - 8. Liability for non-performance of obligations


Irene Kull

Doctor iuris, Docent of Civil Law, University of Tartu

European and Estonian Law of Obligations - Transposition of Law or Mutual Influence?

1. Estonian Law of Obligations Act in the context of unification of European law

Changes in the legal system do not always result from the countries' free choice but from international competition and political coercion countereffects1.Besides the export of culture and goods, globalisation has brought about also the transformation of law. The success of transformation of society largely depends on how effectively the existing legal system can be reformed, the role that transplants from other legal orders and systems acquire in the existing legal framework, and how they are understood in the context of generally recognised legal traditions and the developed legal culture2. Mapping of the existing traditions has sometimes been regarded as a crucial prerequisite for harmonisation of law3, but in a situation where globalisation has transformed the legal culture into a very rapidly changing and dynamic phenomenon, this task seems unfeasible and difficult to follow. Today, it is not only the methods and scope of transposition of rules that are of interest but also the substance of the rules or the meaning that a particular provision has acquired in a specific cultural environment. The following discussion covers some of the most important legal transplants in the Law of Obligations Act (LOA), their sources, and the issues that have arisen and may arise in the future in giving substance to these provisions. Estonia has an intriguing chance of influencing the formation of common European civil law by introducing its experience in the transformation of unified civil law principles and rules into the national legal system.

The Estonian Civil Code comprises, according to the pandect system, five basic acts, which, though not codified, make up a systematised set of rules consisting of single legislative acts4. The choice for the Continental legal system had already been made in 1988, when preparations started for Estonia's own civil law system and when it was found that historical consistency should be restored also in legal drafting5. Historical consistency primarily meant the decision to prepare the new Civil Code on the basis of the draft Civil Code of 1940, which was never passed as time ran short at the end of Estonia's first period of independence. But in contrast to the portions of the draft Civil Code of 1940 dealing with property law and law of succession, the regulation concerning the law of obligations had become hopelessly outdated and its provisions were unsuitable for a modern act on the law of obligations, due to their inefficient regulatory methods and issues of substance.

The Baltic Private Law, on the example of which the Civil Code of 1940 was drafted, was prepared so as to provide regulation as detailed as the law and legal dogmatics of the time allowed. A peculiarity of the Estonian legal drafting culture, associated with the Baltic Private Law and persisting to this day, lies in the idea that if we write down in law everything that is covered in the developed countries by the laws and the legal dogmatics outside written law, we will avoid disputes over the application and substance of law6. The Law of Obligations Act that entered into force on 1 July 2002 is thus also characterised by very detailed regulation and a great number of sections7. The number of sections in the Law of Obligations Act may be chiefly justified by Estonia's unique opportunity to draft a single law covering consumer contracts, obligations arising in economic or professional activities, and obligations arising between 'ordinary subjects'. Unfortunately, there is still no answer to the question about the efficiency of civil law reform in a situation where laws are casuistic and superfluous and leave little room for legal theory and the general principles of law8.

A great advantage in the creation of the civil law system of Estonia as a groundbreaking form contrasted against systems in states with an established legal system and historical traditions was the possibility to create a system of rules free of the forced solutions and outdated, inflexible dogmatics that do not satisfy the needs of today. In a transformation society where prior legislation and legal dogmatics are almost non-existent or carry the ideology of a different political and social system, it is possible to write the entirety of civil law from scratch, to create one's own system and avoid the mistakes that other countries have made in the development or reformation of their law. Throughout history, the transplantation of laws and legal institutes from one legal system to another has been the most efficient and simplest approach, because legal transplants usually do not concern the interests of individuals9.

The activities of proponents and implementers of model laws10 and the convergence of rules for the harmonisation of law and the idea of a European Civil Code11 have had a very direct and strong influence on the reformulation of the member states' national law. Besides the work of study centres addressing the uniformity of European civil law, the newer legislation of European countries has had its impact on the development of the legal systems of transformation societies. The German reform to the law of obligations, largely resulting from the need for harmonisation with the relevant European Union legislation12, and the new Civil Code of the Netherlands13 should be given primary mention. The US Restatements system and the US Commercial Code, particularly the part dealing with sales contracts, have served as good examples for Europe. The model laws prepared for the harmonisation of contract law, such as the UNIDROIT Principles of International Commercial Contracts (PICC) and the Principles of European Contract Law (PECL) prepared by the Lando Commission, reflect the current discussions about contract law to a very large extent. By transposing and systematising, to some extent in a unique way, the results of the work done in the harmonisation of civil law, Estonia has the opportunity to participate in these discussions and also offer new solutions itself.

Since the time of Cicero, differences between legal systems have been considered an inconvenience that should be overcome. The differences between the systems of common law and civil law are clearly distinguishable not only as regards historical heritage and developments but also as regards the issues of the structure of the legal profession, legal education, classification of the areas of law, the judicial system, and fundamental positions on law and legal philosophy. But we can also see a number of similarities between these two legal systems in areas such as sales contracts, contracts in general, non-contractual liability, and business organisation. The understanding that these two legal systems, different in their historical development and nature, are coming closer to each other stirs up less and less emotion these days. Such a tendency toward convergence has been observed in attitudes to both written laws and court decisions as precedents, which themselves may serve as a source of law. While the number of areas regulated by law has increased in common law, the role of judicial practice as a source of law in the legal system has substantially changed in countries applying civil law14. Besides that, European countries have started to rely more on case law, which is especially noticeable in the activities of the German Constitutional Court and the French administrative courts. Gaps in law have forced courts to extend law and assume the role of lawmakers. But whether these are signs of convergence is not always so clear15.

After regaining independence, Estonia has mainly relied on Western European models for its development. Estonia's wish to accede to the European Union and hence develop as a democratic state based on the rule of law and social market economy has greatly influenced the development of law. The unification of legal systems through special programmes and projects (e.g., the activities of the Lando Commission and UNIDROIT) as a result of transposition or natural convergence of law is effective only when the structures, institutes, and procedures of the national legal systems are able to ensure unity in both the application and interpretation of the rules16. The first task is to word the provisions in a uniform manner; then, the rules can be interpreted and applied in a uniform manner.

According to Alan Watson, legal transplants have been known in the form of legal loans since Roman times17. As in Ancient Rome, so in the newly independent Estonia, which aimed at reforming its legal system. The most prominent lawyers were sent to foreign countries to study what was good and transplantable from the other legal orders, what their relevant judicial practice was, and what the law of a specific state presented in the widest sense. Legal transplants have a long history. The reception of Roman law in Europe even extended to the USA via the English colonies. History also knows the extensive impact of the French Civil Code on the legal codes of the European countries. Much of US law has spread to Europe, particularly Switzerland. There are still mixed jurisdictions, which vividly exemplify the effect of transplants on common law, civil law, and local common law18.

The following discussion describes certain areas where the provisions of the...

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