COMPARATIVE PRIVATE LAW

THE WORK ON A COMMON CONTRACT LAW

University of Oslo

Prof. Giuditta Cordero Moss

A Common Contract Law?

• Globalisation, Regionalisation• Common regulation of sectors• Contract law not harmonised• Mechansims that permit cross-border contracts• Vision: a common contract law• EU action plan• Does vision solve the percieved problems?

Contract law is not harmonised -I

• Tender for construction in Italy

• Norwegian contractor makes a bid

• Bid based on local sub-contractors’ prices

• Contractor is awarded the contract

• Tender for construction in England

• Norwegian contractor makes a bid

• Bid based on local sub-contractors’ prices

• Contractor is awarded the contract

The subcontractors’ offer

• ”This offer is binding on the offeror and cannot be revoked before 30 days have elapsed from the date hereof”

• Subcontractor revokes the offer before the term (but after the the contract was awarded)

Consequences

• Italian law:

– Firm offer cannot be revoked before the term

– Subcontractor is legally bound

• English law:

– Firm offer is not binding unless there is consideration

– Subcontractor is not bound

Contract law is not harmonised -II

• Norwegian producer purchases components from Italian supplier

• Force Majeure circumstance reduces supplier’s capacity

• Supplier has delivery obligations towards plurality of creditors

• At reduced capacity supplier can meet obligations towards only one creditor

• Norwegian producer purchases components from English supplier

• Force Majeure circumstance reduces supplier’s capacity

• Supplier has delivery obligations towards plurality of creditors

• At reduced capacity supplier can meet obligations towards only one creditor

Force majeure clause

• ”Non performance by a party hereto of its obligations hereunder is excused if such party was prevented from fulfilling its obligations by an event beyond such party’s control, that was not foreseeable and that could not be prevented or overcome by the prevented party using reasonable efforts.”

Consequences

• Italian law– Supplier’s obligations

are reduced pro rata with the capacity reduction

– Purchasers can demand delivery pro rata with the other creditors

• English law– ”Frustration kills the

contract”– Impossibility to deliver

is deemed to be a consequence of supplier’s own fact

– Purchasers can demand whole delivery

Mechanisms for cross-border contracts

• Conflict rules determine the law of what country governs

• Conflict rules are part of each country’s own law

• EU has harmonised conflict rules

• Norway has own conflict rules

Mechanisms for cross-border contracts, cont.

• Judge applies his own conflict rules

• First step: identify forum

• Then: apply conflict rule

• So: conflict rule determines what country’s substantive law governs the contract

Application of conflict rules

FIRM OFFER

• Forum: Lugano convention, art. 2 or 5.1

• Governing Law:– Italian subcontractor:

Italian law– English subcontractor:

English law

FORCE MAJEURE

• Forum: Lugano convention, art. 2 or 5.1

• Governing Law:– Italian supplier: Italian

law– English supplier:

English law

Vision: A common (European) contract law• Assumption:

– Plurality of systems is confusing– Conflict rules are complicated– Domestic legal system are meant for domestic

transactions

• Vision:– An international system deriving from the

parties’ own practice

From lex mercatoria to general contract principles

• ”Principles rooted in the good sense and common practice of the generality of civilised nations”

• Contractual practice

• Model laws, conventions

• Standard contracts

• Private codifications

• Restatements

Restatements

• To improve lex mercatoria’s weaknesses:– Difficult to determine– Not systematic– Too vague

• 1994, UNIDROIT Principles of International Commercial Contracts– Not a codification of existing principles– Systematic set of principles based on consensus

among international academics

Principles of European Contract Law

• ”Commission on European Contract Law”• 1995-2002: PECL I,II and III:http://www.cbs.dk/departments/law/staff/ol/

commission_on_ecl/• Aim of PECL

– Binding for all EU public contracts– Binding for private contracts, if referred to by

parties– Long term: binding for all contracts

Commission’s Communication

• Communication from the Commission to the Council and the European Parliament on European Contract Law – COM (2001) 398 final, 11.7.2001

• Requests comments on four alternatives:– Leave it to market forces– Through research establish general European

principles– Improve coherence of existing European law– Enact a European code

The answers to the Communication

• 181 answers• Each alternative has been supported and

criticised• Working groups established to develop each

alternative (especially 2 and 4)• In some academic circles focus on answer from:

– Commission on European Contract Law and Study Group on a European Civil Code (PECL)

The Commission’s Action Plan

• A more coherent European contract law – An action plan – COM (2003) 68 final, 12.2.2003:– Continue sector-based approach– Increase coherence of existing European law (CFR)– Support development of European standard contracts

(webpage)– Examine possibility of general measures, such as “an

optional instrument”

• “European contract law and the revision of the acquis: the way forward” – COM(2004) 651 final

Action plan’s effect

• Common Frame of Reference for Acquis Comunitaire– Does not cover general contract law

• EU Standard contracts– Must be referred to– Do not solve interpretation problems– Dropped (First Annual Progress Report on European Contract Law

and the Acquis Review, COM (2005) 456 final)

• Optional Instrument– Must be referred to– Does not help if vacuum– Does not totally exclude application of national law

Common Frame of Reference

• A legislator’s guide or tool-box http://ec.europa.eu/consumers/cons_int/safe_shop/fair_bus_pract/cont_law/index_en.htm – Commn fundamental principles– Definitions of key concepts– Model rules

• Joint network on European Private Law http://www.copecl.org/

Principles’ application - I

• Do the principles give a uniform regulation to the areas where governing laws give different regulations?

PECL and firm offer

• Italian Law:– Offer is binding until term

expires

• English law:– Offer is not binding until it

has been accepted (or there is a consideration)

• PECL, art. 2:202:– Offer is not binding until it

has been accepted, but cannot be revoked if it contains a term

• PECL, art. 1:103:– PECL can derogate from

mandatory rules, if governing law allows it

– PECL cannot derogate from internationally mandatory rules

– Consideration?

PECL and Force Majeure

• Italian law:– Purchasers are

entitled to delivery pro rata with each other

• English law:– Purchasers are

entitled to whole delivery

• PECL, art. 8:108:– No specific regulation

• PECL, art. 1:106 (2):– If regulation lacks,

underlying principles shall be applied. If this is not possible, governing law shall be applied

Application of the Principles - II

• Do the Principles ensure a uniform application where they contain a regulation?

Good faith

• Unidroit: Good faith is general principle (1.7). To be understood as good faith in international trade

• PECL: General duty to act in good faith (1:201). Autonomous interpretation

• Is termination upon immaterial breach against good faith?

Good faith in international trade

• General principle?• Generally acknowledged trade usage?• Contract practice• www.tldb.net:

– Good faith is general principle• Awards (no specific standard)• CISG (no good faith as duty between parties)• …• UNIDROIT Principles and PECL

Application of Principles

• As an integral part of the contract, if they have been incorporated by the parties– Not applicable if contrast with mandatory

governing law (art. 1.4)

• As an expression of trade uses, if they have not been incorporated– To corroborate governing law– Rarely as an independent source of law

Conclusion

• Comparative law as a tool towards unification?– Unification is not exhaustive– Even unified wording is interpreted in light of

interpreter’s own legal background

• Different legal systems will continue to survive long after unification (if any)