Not Enough Thought Has Been Given in any European Code to the Way Contracts Should Be Classified - Essay Example

?“Not enough thought has been given in any European to the way contracts might or should be ified.” Do you agree? In recent years there hasbeen an overwhelming move to develop a unified system of laws and legal framework. This move has not been limited to one region as such but is more of a global concept. For example, legal instruments such as common legal principles are being developed by UNIDROIT1 in the form of CISG2. On the global scale these common legal instruments are more or less concerned with commercial transactions. In a similar manner, the move on mainland Europe to create a common legal framework is designed to facilitate commercial transactions in order to enhance commerce. Main land Europe is looking to create a common civil legal framework which will be developed in a number of steps. This common legal framework is currently being heralded as the European Civil Code and would require coordinated efforts over a number of decades for effective implementation3. The first step has been termed as the PECL4 and is aimed at unifying the contract law prevalent throughout Europe. Success of the PECL and its precedents will determine if it is possible at this stage to develop a common legal framework for the European continent. This could have even wider implications for the global harmonisation attempt given that the obstacles encountered in PECL would be encountered similarly elsewhere too. Importance of the PECL is enhanced by the fact that the European community is looking to create the Common Frame of Reference based on the learning from the PECL5. At this point in time the PECL is not an instrument that has been recognised by governments around Europe. Instead the PECL is more or less a document drafted by academics to serve as a standard reference when hard-core moves to harmonisation are attempted. The PECL is a broad attempt to create a set of “general rules” which are flexible enough to accommodate future developments and to provide a framework for contract law6. Here due consideration must be provided to the fact that contract law is the first thing that is being attempted in terms of a common legal framework for a number of reasons. Contract law is highly important when it comes to cross border trade. The significant differences between national contract laws make trade beyond borders costly, time consuming and often legally complex. Furthermore, a number of companies are dissuaded from trading in neighbouring nations because of complex trading instruments and their legal ramifications. This in turn promotes domestic trade at the expense of transnational trade which is not beneficial for the commercial interests of the European Union. Europe is currently looking to develop something close to the Lex Mercatoria so that trading and commercial transactions of all kinds are simple all across Europe7. In order to facilitate trading all over Europe with the same legal principles it was necessary to create a common legal framework. The PECL is the resulting legal framework which has emerged from these efforts. In addition there is another reason behind the PECL’s importance. As mentioned before, the PECL will serve as the basis for the future of the Common Frame of Reference so this enhances the important of the PECL even more. Here it must also be mentioned that the success of the PECL and the Common Frame of Reference are critical to the future of harmonisation attempts in Europe. Hence, careful consideration is mandatory in order to provide a framework that is successful and tends to provide solutions that are holistic. Any such framework would need to be carefully thought out. As mentioned before, there is no question of implementation as yet because these harmonised frameworks are merely guidance based as yet and are not strictly enforceable as yet. Drafting a standard set of principles for guidance over the domain of contracts may not be as simple or straightforward as it may seem. Perhaps the greatest obstacle to creating a common contractual framework is coming to a common core. The common core must be derived from the parts of national sets of laws but these are different from nation to nation. Largely the differences between contractual laws throughout European nations are based on historical tradition. Typically these differences arrive from the spirit of law’s derivation from either a common law system or a civil law system8. Traditionally nations across Europe tended to derive their laws from differing principles and historical realities. As a straight consequence of this fact, harmonisation in commercial, private or other branches of law poses a significant challenge today. This is compounded by the fact that certain quarters feel that harmonising the law in certain sectors will lead to imbalances in the overall legal structures prevalent around Europe. This view holds serious weight as the differentiated legal structures across Europe have enough differences to bog down the creation of commonly agreed upon legal frameworks. This problem was ever present in the creation of the PECL itself which indicates that these problems will persist into the creation of a common European civil code as well. Similar problems were experienced when the basis for the Common Frame of Reference was being created. However, the problems posed by harmonisation attempts should be looked into such as the issues of contract classification before a strong opinion can be coined. Since the domain of contract law has been attempted first and foremost by the European legal academia so it is only reasonable to dissect its classification scheme for a better understanding of the results. The creation of a common European legal code had been on the agenda for a long period of time but actions towards a common legal code were complicated by differentiated attempts at it. The ultimate aim is to create a European civil code that could theoretically attempt to deal with areas in private law comparable to a national code. As mentioned before, this paper is only concerned with contract law in regards to attempts at creating a common legal framework. The domain of contract law under national code is covered differently for different European nations. For example, the principle of freedom of contract is a fundamental recognition in Swiss law without it being a written provision. This freedom is seen as one of the four fundamental freedoms on which civil law is based9. This position is also supported by Swiss case law in the instance of the case of the Swiss Federal Tribunal, 1st Civil Court, 7th May 200210. In a similar sense Dutch law also supports such a position as per the freedom of contract without any written provision for it11. In contrast to this, the freedom of contract is restricted in English, Irish and Scottish law as per contract provisions that are determined as immoral or unenforceable12. Much similar to the British example, the contractual framework in Germany poses certain kinds of restrictions on freedom of contract13. All of this serves to highlight the basic problem in integrating contractual undertakings – the lack of common values that contractual relationship are built upon in various nations across Europe. This lack of commonality can be attributed to a number of factors most of which depend on historical tradition where laws were derived from. The evolution of the current frameworks for common contractual relationships needs to be looked into as well in order to decipher its impacts. When the European common code of contract law was being drafted, two major points of views and their corresponding groups could be discerned. On the one hand, one group looked to the acquis communautaire14 or simply put the body of European Union law to create a common legal contracting framework for the European domain. On the other hand, the other group looked to comparative law as well as the analysis of domestic law codes in order to draft up a common legal framework for Europe. Throughout the drafting of common contracting legal principles, both groups struggled to bring forth their opinion as the dominant ideology. In the early stages of this intellectual struggle, the comparative law and domestic law option was preferred. However, as the drafting progressed, the acquis position gained greater prominence. Eventually both options were provided to the Commission of European Communities 2001 Communication on European Contract Law. The majority viewed that emerged from this conglomeration supported the acquis view in order to develop a common legal framework for Europe as comparative law and domestic law approaches were seen as impracticable for integration. This issue can be understood better if analysed in the context of particular contractual classifications that are often used to deal with contracts. A number of different contractual classifications are possible. Various authors and academics have chosen to use different kinds of contractual classifications. For the purposes of this paper, the classification of contracts used by Geoffrey Samuel15 will be looked into in order to see if common European contractual frameworks deal with them effectively enough. The major classifications used by Geoffrey Samuel include classification by remedy, classification by form, classification by substance and classification by speciality. In most cases contracts are created between parties to ensure that each contracting party keeps to its part of the agreement. In case that any party fails to live up to expectations, the most common solution comes as remedies. When classifying contracts in the form of remedies it must be kept in mind that remedial classifications can be numerous in themselves. There is still a large difference between law and equity so that claims for monetary damages and claims for non-monetary damages are carried out distinctly through different rules16. It must also be stated that the distinction between rules to interpret a contract and the rules to interpret an equitable remedy are pertinent and so enforceable17. When the issue of remedies is explored further, it becomes clear that remedies come in more than one form. Remedies could be either monetary, non-monetary, equitable, self-help, judicial etc. The basic contention in making this point is that any legal framework needs to keep abreast of these forms of remedies so that the contracts coming out of the legal framework are able to account for these kinds of remedies and others. Therefore, any common European contractual code needs to keep itself in line with these classifications. When European codes are looked into in terms of remedies for contracts, it becomes clear that they do their best to provide for remedies at par with other international harmonised codes of law. It has been argued that remedies available in the European codes are broad in their scope of application because they are derived in themselves from a variety of sources. Moreover, these remedies have been labelled as neutral so that they apply equally to business to consumer contracts (B2C) as well as business to business contracts (B2B). For example, termination of contract as a remedy for non-performance has been recognised in European codification attempts as well as international conventions such as the CISG. These remedies are available both in the PECL as well as the Draft Common Frame of Reference (DCFR). Moreover, such remedies have also been made available in proposals such as the Proposal of the European Code of Conducts that was worked out by the Gandolfi Group. Another issue that must be related here is the fact that this derivation has come through using the acquis principle which can be seen as broadening the sectoral approach of private law directives in the European codes domain18. In addition, the right to terminate a contract can be seen as general remedy in most legal systems that are not limited in any form to any specific nature of contracts. All forms of academic work on European code as well as other legislative options provide for termination of contract under the principles of contract law no matter what form of classification is being used19 20 21 22. A few things need to be noticed here – classification of contracts as per remedies is possible in the European codes although there is fluidity in the application of certain aspects of contract law. However, the fluidities being talked of such as termination of contract for non-performance or other measures are also available in other codifications of law on the international scale. These fluidities or the broad scopes of application can thus be termed as a natural consequence because they are available in national codes as well as harmonised international codes of private law. Given these projections on the European contractual codes, it is apparent that as far as classification of contracts as per remedies is concerned, there are distinct classifications possible. Raising a contract in the nascent European codes as per remedial classifications is possible although there are natural fluidities as per the termination of such contracts. In this respect at least it could be said that classification has been well figured out in European codes for private law. The next form of contract classification is as per form of the contract. Contracts may assume a number of different forms based on their purpose or their involved stipulations. Contracts could possess a unilateral or bilateral character. Similarly, contracts may be formal or informal in their character or how they were provided to either party. Since these characters of contracts have been derived from historical example, it is only reasonable to assume that any common European legal code would accommodate for such contract characters. There is a rather rich and somewhat similar tradition in terms of classifying contracts according to their form throughout Europe. The Belgian, French and Luxembourg civilian codes clearly provide under Article 1108 that contracts can only be valid when the consent of parties who have the capacity to contract is involved. The Spanish civil code possesses similar rules as per its Articles 1261 and 1262. The English tradition is based more upon creating contracts as per learning from relevant case law. Moreover, English common law places clear distinction between unilateral and bilateral contracts. In contrast, any contract is seen as a juristic act in the German and Austrian legal codes. This means that any contracts would involve legal consequences so therefore they need to be respected. This also tends to indicate that contracts have more of a formal character that must be respected as well. The case of Dutch and Portuguese law is similar where contracts are seen as juristic acts that require formal respect to be paid given the associated legal consequences. If all of these rich traditions are placed together in context of European contract law, it becomes clear that European contract law tends to provide as much of a coverage to each tradition as possible within a common framework. The conditions provided for the conclusion of contracts as per the PECL23 provide necessary coverage to most legal traditions across Europe such as the English, French, Belgian and Luxembourg tradition. The issue of coverage to other national laws is somewhat differentiated because certain nations held informal contractual character while others did not24. In this case, the PECL has taken a clear stance that the character of contracts could only be formal. There is no place for informal characters of contracts as per the PECL which can be seen as a mature position on the issue25. Again due consideration must be given to the fact that the European code has provided adequate contract classification in this regards although it has failed to accommodate all possible aspects. This is so because certain aspects of contract character are mutually exclusive and hence cannot be configured together. In this respect, European codes have taken the more mature position on these issues. Therefore, it can be safely concluded that European contractual codification is adequate in regards to classification by form. The last two methods to classify contracts include classification by substance and classification by speciality. When contracts are classified by substance, the contract is used to address specifics for which the contract is set out such as the purchase of certain kinds of goods. Typically substance based classifications rely on movable and immovable goods for a broader dichotomy. Similarly another major difference relies on contracts involving people and contracts involving objects. Also, goods and services are also classified separately. Several other distinctions may also be made in order to classify contracts by substance. While the domestic legal codes around Europe allow for various classifications as per substance involved in the contract but the common European codes do not rely on such an approach. As mentioned before, these new common codes tend to provide a broad framework that may be utilised to garner the contract in any required manner. Therefore, it is unwise to expect these broad frameworks to supply specific substance based classifications. It may be possible that when these codes are practically implemented, it may be required of them to be more substance classified. However, in their current form they lack such a classification. It is natural to expect classification by substance as most domestic legal codes around Europe support this classification. Therefore, the current classification of contracts as per substance is weak in European codes but it may improve given the academic nature of these contractual codes as yet. In contrast to this, the area of classification of contracts by speciality has been gaining wider attention. Certain specialised classification such as sales of goods has already come into existence leading to the belief that more such specialised contract classifications will also emerge. Based on this it can be surmised that classification by substance is non-existent as yet and may develop in the future as practical implementation becomes a reality. Also, classification by speciality is already underway indicating its practical implementation. It could be expected that through greater practical application classification by substance will become a greater reality. Summing up, it could be said that contractual classification in nascent European codes are emerging as time passes indicating their appreciation for practicalities. It is expected that as European codes come into the implementation stage further, there will be greater developments. Currently European codes provide for contractual classification as per remedy, form and speciality although the area of classification by substance is limited. When compared to other international harmonised codes the European framework is highly competent. It could therefore be said that adequate attention and thought has been paid to contract classification in European codes. References Arthur S Hartkamp and Carla Joustra, Towards a European Civil Code (3rd edn, Kluwer International 2004) Chartbook Ltd v Persimmon Homes Ltd [2009] Cambridge Law Journal 253 D Busch, E H Hondius, H J Van Kooten, H N Schelhaas and W M Schrama (editors), The Principles of European Contract Law and Dutch Law, A commentary (Ars Aequi Libri and Kluwer International, New York / Hague 2002) European Commission, ‘Contract Law’ (European Commission for Justice, 12 March 2012) accessed 7 April 2012 EuroVoc, ‘Community Acquis’ accessed 7 April 2012 Geoffrey Samuel, ‘Classification of contracts: A view from a common lawyer’ in Saskia Kummerle (editor), Vertragstypen in Europa (Sellier 2010) James Gordley, The Enforceability of Promises in European Contract Law (1st edn, Cambridge University Press 2001) Lando, Ole, Some Features of the Law of Contract in the Third Millenium, ch. 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