The binding power of the contract

Author:Fryderyk Zoll
Position:Department of Civil Law/Foreign Law, Jagiellonian University, Krakow, Poland

Purpose – The purpose of this article is to investigate the role that the principle of pacta sunt servanda plays in consumer contracts under the Common European Sales Law (CESL). Design/methodology/approach – The new proposal for the CESL resembles quite closely other global and European instruments and collections of rules on contracts, such as the CISG, PECL, and DCFR. At ... (see full summary)

I The Contract Law of the CESL – between tradition and innovation

The picture of the contract law provided by the Common European Sales Law (CESL)1 at the beginning looks familiar to everybody who has followed the development of the European private law through the at least last to three decades ( Schulte-Nölke, 2012 ). CESL is rooted in the tradition of the CISG2, it reflects the concepts of the Principles of European Contract Law (PECL) ( Lando and Beale, 1999 ) and it is a text “in dialogue” with the Draft Common Frame of Reference (DCFR) ( Schulte-Nölke, 2012 ; von Bar and Clive, 2009 ; Zoll, 2012 ). Certainly, the Consumer Sales Directive has provided a frame and reference for the consumer law of the CESL. It easy to find in the CESL these foundational elements, characteristic for the contract law envisaged in all named sources ( Schulte-Nölke and Zoll, 2012 ). The provisions on the formation of contract3, pre-contractual information duties4, defects of consent5, unfair terms, performance and non-performance looks on first view as a certain simplification and reduction of the DCFR, while maintaining the main concept of the contract arising from this act. The DCFR was built on the core concept of strengthening the principle of pacta sunt servanda ( Schulte-Nölke and Zoll, 2012, p. 12 ). Even if according to various directives the DCFR provides also for the consumer a free right to withdraw from the contract within a given period, in certain qualified contractual situations6, it may be disputed whether this right limits the binding power of contracts. Instead, it can be seen as device for enhancing consent by creating the space for a well-considered decision and thereby strengthening the binding power of the contract ( Smits, 2011 ).

In analyzing CESL rules on contract making it becomes apparent by strengthening the requirements for consent it becomes more difficult to challenge the effectiveness of the formation of the contract. The importance of consent is visible in the rules on modified acceptance of the offer or on the “battle of forms”7. These provisions confine the possibility of a claim that the contract has not been concluded at all, because the parties have not reached the required agreement8. The efforts to maintain the contractual relationship are visible in the regulation of mistake. The counter-party of the party, who find it being in error, may prevent the avoidance of the contract by offering the performance according to the expectation of the latter9.

In the case of non-performance, the DCFR, and the other instruments, first aim at preserving the contract through the right to cure of the debtor, who failed to complete its obligation correctly10. Second, the requirement that the non-performance must be “fundamental” makes it more difficult to terminate and avoid a contract11. This last limitation has been relaxed in DCFR following to the sample of the Consumer Sales Directive12 in case of consumer sales contract. The threshold is lower in consumer transactions in that the lack of conformity only something beyond a minor defect in order to terminate the contract13. The right to cure also exists in the DCFR in the domain of consumer contracts, and the DCFR is less consumer-friendly than the Consumer Sales Directive because it gives the seller the right to choose between different methods of cure ( von Bar and Clive, 2009 ; Schulte-Nölke and Zoll, 2012, p. 12 ). It is one of the significant features of the DCFR that its general contract law rules are applicable to the contracts between businesses (B2B) and to contracts between businesses and consumers (B2C). The main difference between the B2B and B2C contracts, right to withdraw and a number of other exceptions, concern the non-mandatory or mandatory nature of certain rules that apply to B2C versus B2B.

The drafters of the CESL have used the template provided by the DCFR on a quite superficial level. The main structure seems to be very similar. The rules on the formation of the contract are similar ( Lurger, 2012 ). Only in the case of the modified acceptance does the CESL provide, following the pattern of the CISG14, more specific rules where the modification of the offer is presumed to be “material”15. This limitation drastically reduces the scope of the modified acceptance. This is the first sign that the CESL leads in another direction than the DCFR by relaxing the binding power of the contract. This relaxation is confirmed by the rules on the defects of consent. The option for the counter-party to maintain the contract by offering the performance as the other party expected is eliminated, which causes inconsistencies with the right to cure.

Despite of the consumer right of withdraw and the rules governing pre-contractual information duties, the different contracts regimes do not differ dramatically. However, the CESL diverges with the DCFR in the area of performance and non-performance of obligation. Performance and non-performance is not governed with references to in the “general contract rules”, which was the case in the areas discusses above. The level of the abstraction found in the general rules is lowered, and are allocated into the framework of the types of contracts governed by the CESL (sales, contract for supply of digital content, and related services) ( Zoll, 2011 ). The drafters do not hesitate to repeat similar or identical rules in relation to the different contract types. At the beginning of these chapters to the different types of contracts, any differences are marginal in size. The idea that B2B and B2C contracts are governed by quite different contract doctrines is not evident on the first view. The main difference between these two regimes concerns the fundamental question of the binding power of the contract. As I have mentioned before, this question has been already covered by the rules on the formation of contract, the genuineness of consent and the rules on the right to withdraw. However, in the area of non-performance, it is the belief here that the binding power of the contract is radically diminished in B2C contracts.

II Towards non-binding consumer contracts

The CESL protects the consumer...

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