Towards a (Post)modern European Contract Law
| Author | Thomas Wilhelmsson |
| Pages | 23-29 |
Thomas Wilhelmsson
Towards a (Post)modern European Contract Law
A discussion of the development of a European private law and a European contract law is very appropriate here on Estonian soil. After regaining its independence, Estonia, together with the other newly independent states, has had the unique opportunity to completely recreate its private law system. Estonia has been forced to look at private law experiences in various parts of Europe and the world when making decisions concerning its own future. By necessity, Estonia as well as the other countries in the same position, have become showcases of the ongoing processes of the Europeanisation of private law.
Estonia has, for various reasons, including its pre-Soviet historical background, in principle decided to base the development of its private law on the German model1. From the point of view of Europeanisation, this seems, at the outset, like a step backwards ? why look (back) toward the law of a certain country, when legal ideas are moving across borders in Europe at an ever-increasing rate. However, Estonia did not choose German law in order to find a model to copy as such, but rather to find a suitable and needed point to anchor its legal culture2. When making concrete substantive decisions, a comparative method and a plethora of sources from various places have been used3.
The Europeanisation of contract law is taking place today on many levels. The rapid rate at which the EC is issuing directives in areas like consumer law is well known4. However, the creation of a general structure and general rules for a possible European contract law has so far been a task which has been mainly performed by the European academic community. Collections of rules have been created, or are in the process of being created, by various more or less privately organised groups of comparative contract lawyers. For Europe 5 , the most important result so far is the collection of the Principles of European Contract Law (PECL), elaborated by the Commission of European Contract Law, sometimes also called the Lando Commission after its convener Ole Lando6. These principles have gained much attention and will certainly influence the legal development of Europe7.
The PECL have already been used as source material by various countries outside the EU in the development of their own contract legislation8. Their influence is visible in the drafting of the Estonian Law of Obligations Act as well9. If the PECL become an important guideline in the Europeanisation of contract law, Estonian law has been placed in the vanguard of such a possible development.
Today I would like to make some general comments on the possible role of the PECL in the Europeanisation of law. As the future is notoriously difficult to predict, I will not try to make any prognosis concerning the role of the PECL in this inevitable process. Instead, my discussion is normative in character. First, I will make some comments on the quality of the PECL, comments that are relevant when discussing a modern law of contract from the perspective of commercial contracts. I will claim that in this perspective, the PECL are fairly modern and useful10.
However, this does not imply any enthusiasm concerning the idea of the European Civil Code, based on the PECL ? which is the vision of at least some of its creators11. I will, at the end of my paper, argue for a more "postmodern" vision of European contract law and private law that respects the pluralism of Europe while it also promotes the free movement of legal ideas across the European borders.
The drafters of the PECL have seen as one of the main aims of the Principles to provide a useful set of rules to be chosen by parties from different countries as the "law" governing the contract. According to the express provision in the PECL article 1:101, the Principles will apply both when the parties have expressly agreed to incorporate them into their contract and when they have agreed that the contract is to be governed by "general principles of law" or a lex mercatoria. They may even be applied by arbitrators when no explicit choice of law has been made, again as a kind of an elaborated lex mercatoria.
Although not all national legal systems would approve of a clause of this kind 12 , one may expect that in practice the PECL can become relevant in this way. As a comparison, one should note that the UNIDROIT Principles already have been applied in some arbitral awards as generally accepted principles, even if the parties have not expressly referred to them 13 , and that such an award has been upheld by an American court14. Through such practices, the PECL may also exert influence on the gradual development of national commercial law. And I think this is entirely appropriate. To my mind, the PECL do represent a modern European view on commercial contracting in many respects, and are therefore worthy of being influential in this area.
A good set of European contract rules cannot be created by searching for the "average" European contract law. The strength of the PECL lies in the fact that the Lando Commission did not strive to make only such a compilation, but to design a modern set of principles that responds to the needs of business today ? of course with due regard to national traditions. In a very interesting way, this can be seen, e.g. in the fact that the Commission members belonging to the common law tradition did not insist on doctrines like the doctrine of consideration, which is both rather strange for a Continental lawyer and impractical from the business point of view. Others, of course, made similar concessions. And what is perhaps most interesting: there are also principles in the PECL that do not reflect any present law, but are taken instead from modern commercial practice. The rules on change of circumstances, which I will return to below, are good examples of this.
As to their substantive starting point, the PECL are certainly very traditional. The main substantive principle is freedom of contract, which is expressly spelled out in article 1:102. However, a collection of principles of this kind, developed primarily to meet the needs of international trade and meant to be used as a kind of soft law based on express or implied choices of the parties, could hardly have had any other starting point. As long as we are talking about soft law for international commercial contracting, the traditional principle of freedom of contract is a natural basic principle.
The modern features of the PECL should be sought elsewhere. First, one should note that the principle of freedom of contract and its corollary, the binding effect of the contract, are not adhered to in absurdum, despite the fact that the Principles are offered to the parties to be used at their discretion. The general part of the PECL already includes a provision on good faith and fair dealing (article 1:201) that is mandatory. The parties may not exclude or limit their duty to act in accordance with good faith and fair dealing.
In the Comments on the PECL, this principle is presented as a basic principle that runs through the whole PECL15. The principle of good faith and fair dealing should be followed, both when the contract is made and when it is performed and enforced.
Of course, from the point of view of a Continental lawyer, it may seem strange that I mention this principle as an example of the "modern" character of the PECL. In fact, its model is taken from and it corresponds to the established Continental principles reflected, e.g. in the French concept of "bonne foi" and the German "Treu und Glauben". In Nordic law as well, a similar concept has traditionally been used to infuse a minimum level of honesty and decency in commercial relations16. However, from a common law point of view, this principle has introduced new patterns of thinking into contract law. It has been said that "the criterion of good faith is mysterious and exciting to an English lawyer"17. The principle of good faith has ? primarily because of the EC Directive on unfair terms in consumer contracts, but perhaps also because of the PECL ? caused much discussion in the common law world18.
A good example of the practical relevance of the good faith principle can be found in the rules on liability for negotiations (article 2:301). Although the starting point is, and must be, that a party is free to negotiate and is not liable for failure to reach an agreement, the PECL also state that a party who has negotiated or broken off negotiations contrary to good faith is liable for the losses caused to the other party. Entering into or continuation of negotiations with no real intention of reaching an agreement has been expressly mentioned as an example. Rules of this sort reflect ideas of decency and loyalty that should be...
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