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Leaving the Shadow for the Test of Practice - On the Future of the Principles of European Contract Law*

Friedrich Blase#

1. Introduction

2. History and State of Affairs of the PECL

3. The Success Story of the UPICC

4. Specific Value of the PECL

5. Necessary Steps for the Future

6. Endnotes




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Leaving the Shadow for the Test of Practice

On the Future of the Principles of European Contract Law

Friedrich Blase

copy @ Lex Mercatoria

Leaving the Shadow for the Test of Practice - On the Future of the Principles of European Contract Law*

Friedrich Blase#

4. Specific Value of the PECL

What then is the value of the PECL? Their future will be essentially decided on the question whether it has its own 'market'. Are the PECL and the UPICC two similar sets of rules for the same purpose?  46 

The PECL focus on Europe. The Europeanisation of trade has long taken place. Hence, the PECL cannot ride on the back of the enthusiasm which this trend might have provided at earlier times. Instead, the focus of EU debate is on its institutional reform and the eastern enlargement. Legal harmonisation is not 'chic' in Brussels today. But a solemn focus on the input which the PECL might deliver for a European Contract Code or a European Civil Code is too short-sighted. The volume of cross-border trade in the EU is immense. For example, more than half of Germany's exports are devoted to the other member states of the EU.  47  Another ten per cent of exports is devoted to Eastern Europe, whose countries are preparing for an admission into the EU.  48  Already today, the PECL can be used in these transactions and the dispute settlements thereof. While preparing a contract the parties may refer to the PECL as a check list or use it as a reference for the definition of terms.  49  They may decide that the contract shall be governed by the PECL either as the sole set of rules or as a supplementary set siding the application of the CISG or a national law. The choice of the PECL as governing law should be upheld by arbitral tribunals, if their lex fori has incorporated the UNCITRAL Model Law on International Commercial Arbitration.  50  It is thus argued that the PECL will establish themselves in European trade while the UPICC will be the dominant set of rules used in global trade surpassing the European borders.

However, three advantages of the PECL over the UPICC are evident which could prove to be the catalyst for success of the PECL.

First, the PECL in their complete version will deal with more issues than the UPICC. The drafters of the PECL add to the first version chapters on formation, interpretation, and validity of contracts as well as the authority of agents. Whereas the question of authority of agents is expressly excluded from the scope of matters governed by the UPICC 51  the complete version of the PECL deal with this issue extensively.  52  Not only does it address the issue of direct representation, but also deals with the questions arising from indirect representation.

The future work of the Commission on European Contract Law focuses on the one hand on the invalidity of contracts arising from illegality and immorality. Once rules for these issues have been laid down, only invalidity arising from lack of capacity will not be addressed by the rules on validity in the PECL 53  On the other hand the Commission is undertaking research on the questions of conditions, interest on interest, set-off, assignment of claims, assumption of debts, plurality of debtors and creditors, prescription, and discharge. These issues are not addressed in the UPICC. Since their combined launch in 1994/95 the Lando-Commission has been more vigorous in tackling these new legal questions.  54 

Second, the PECL set forth general rules for contract law  55  whereas the UPICC restrict their application to commercial contracts.  56  The term 'commercial' is intended to exclude consumer contracts.  57  The PECL, on the contrary, expressly include consumer contracts in their scope. Such a wide application may seem rather illusionary considering the conflict of laws rules concerning consumer contracts commonly in operation in the EU. On the one hand the rules protecting the consumer in their country of domicile demand adherence irrespective of the choice of law.  58  On the other hand inclusion of arbitration agreements in consumer contracts is restricted.  59  The practical imposition of the application to consumer contracts set aside, it is already the mere orientation on consumer contracts which add value to the PECL. By considering the rather weak position of consumers in contract negotiation, academics and practitioners might find that the drafters of the PECL have balanced the interests of the parties more evenly and regulated certain legal questions in more detail than the UPICC.

Finally, the overwhelming advantage of the PECL is their future prospect of inclusion in a codification. No global treaty with respect to contract law is foreseeable.  60  Although the CISG is one of the most successful international legal harmonisation initiatives,  61  its scope is limited,  62  the options for reservations numerous  63  and a number of its articles bitterly disputed.  64  In Europe the chances for an overarching codification of the contract law are much higher. Even though legal harmonisation is not at the core of the Brussels bureaucracy today, the force of economic integration increased by the introduction of the EURO will demand a legal framework identical in all member states of the EU. Legal harmonisation follows economic harmonisation. This has been the experience of German unification at the end of the 19th century and the beginnings of the European Communities in the 1950's and 60's.

Europe shares a common legal tradition often referred to as the ius commune 65  Although in parts greatly different, the various national laws have Roman law as their common core. British common law with its apparently distinct difference is undergoing Europeanisation by developing more statutory law. The differences between the United Kingdom and the civil law continent are constantly decreasing  66  thus enabling the integration of the British system into the European development of a common civil or contract code.

The work of the Lando-Commission was backed by the European Parliament in a resolution in 1993.  67  With the parliament gaining in strength and influence in the EU, this fostering relationship will be of some importance towards the inclusion of the PECL in the process of harmonisation.

 46. Since 1994/95 the use of the UPICC was encouraged in all cases of the Moot. The competition of 1998/99 even included a contract which was solely governed by the UPICC.

 47. Cf. Bonell, The UNIDROIT Principles of International Commercial Contracts and the Principles of European Contract Law: Similar Rules for the Same Purposes?, ULR 1996, at 229 et seq.; cf. also Bonell, International Restatement of Contract Law, 1997, at 99 et seq.

 48. Cf. Deutsche Bundesbank (ed.), Monatsbericht März 1999, at 64.

 49. Cf. Deutsche Bundesbank (ed.), Monatsbericht März 1999, at 64.

 50. For this mode of application with respect to the UPICC cf. Bonell, International Restatement, 2nd ed., at 238 et seq.

 51. Cf. Article 17 of the UNCITRAL Model Law. The UNCITRAL Model Law has been incorporated into the German Code of Civil Procedure as of January 1, 1998. For a detailed study cf. Berger (ed.), Das neue deutsche Schiedsverfahrensrecht / The New German Arbitration Law, 1998.

 52. Cf. Art. 3.1 UPICC.

 53. Cf. Art. 3.101 - Art. 3.304 PECL.

 54. Cf. Art. 4.101 PECL, which reads: 'This Chapter [concerning validity] does not deal with invalidity from illegality, immorality or lack of capacity.'

 55. The UNIDROIT Working Group has only relatively recently resumed a review of the current principles and work on issues such as agency, limitations of actions, assignment of contractual rights and duties, contracts for the benefit of a third party, set-off, and waiver. Interestingly enough, the Working Group has assigned a special report on the adaptations of the UPICC in the light of electronic commerce; cf. Report on the First Session of the Working Group for the preparation of a second enlarged edition of the Unidroit Principles of International Commercial Contracts, reprinted at ‹http://www.unidroit.org/english/princples/wg-1998.htm›.

 56. Art. 1.101 PECL.

 57. As already their name suggests, cf. also Preamble of the UPICC.

 58. Bonell, An International Restatement of Contract Law, 1997, at 51.

 59. Reithmann/Martiny, Internationales Vertragsrecht, at 633.

 60. Cf. § 1031 para. 5 ZPO (German Code of Civil Procedure): If a consumer is involved, arbitration agreements must be signed as a separate document.

 61. In fact the lack of this prospect brought UNIDROIT in the first place to the conclusion that it should not opt for a draft convention but rather non-binding set of rules; cf. Bonell, A Restatement of Principles of International Commercial Contracts: An Academic Exercise or A Practical Need?, RDAI 1988, at 873 (886).

 62. For an updated list of the countries that have signed and adopted the Convention, turn to ‹http://www.un.or.at/uncitral/status/status.pdf›.

 63. See Art. 1 - 5 CISG. The CISG is narrowed to apply only to sales contracts. Consumer purchases - though not consumer sales - as well as combined contracts with a dominating service element are excluded. Even if applicable, the CISG itself does not address questions concerning the validity of the contract nor the effect on the ownership of the sold goods. It leaves these questions to be regulated by the national law applicable by virtue of the conflicts of laws rules.

 64. See Art. 92 et seq. CISG. Especially the reservation of the writing requirement for the conclusion, amendment or termination of the contract (Art. 96, 12 CISG) might pose problems with respect to the trade on the internet.

 65. See only the relationship between Art. 48 and 49 CISG.

 66. cf. in general Knütel, Rechtseinheit in Europa und römisches Recht, in ZeuP 1994, at 244 et seq.

 67. Gordley, Common law und civil law: eine überholte Unterscheidung, in ZeuP 1993, at 498 et seq.

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