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The Autonomous Contract

Reflecting the borderless electronic-commercial environment in contracting

1. Introduction

2. In search of autonomy

2.1 The diminishing role of States
2.2 Solutions available within national law
2.2.1 Uniform law and its limitations
2.2.2 Uniform rules and principles
2.2.3 Situation specific standard contracts
2.3 A transnational regulatory order for contracts
2.3.1 International commercial arbitration (ICA)
2.3.2 Lex Mercatoria - and its essential link to arbitration
2.3.3 Codified general contract principles as lex mercatoria
2.3.4 Protective principles as a necessary part of lex mercatoria
2.4 The autonomous contract - an a-national solution, a summary

3. The problem of predictability

3.1 Predictability at a municipal level
3.2 Uniformity at an international level
3.2.1 The UN Convention on the Law of Treaties
3.2.2 Interpretation clauses within uniform laws

4. Alternative solutions

4.1 Independent supra-national interpretation tribunals
4.2 Authoritative reviews as co-ordinating guides
4.3 Limiting of sources for interpretation
4.4 Information technology solutions - transnational harmonising information and knowledge-bases
4.5 E-contract solutions?
4.6 Education

5. Summary

6. Endnote

Endnotes

Endnotes

Metadata

SiSU Metadata, document information

Manifest

SiSU Manifest, alternative outputs etc.

The Autonomous Contract

Reflecting the borderless electronic-commercial environment in contracting

Ralph Amissah

copy @ Lex Mercatoria

The Autonomous Contract

Reflecting the borderless electronic-commercial environment in contracting

4. Alternative solutions

4.1 Independent supra-national interpretation tribunals
4.2 Authoritative reviews as co-ordinating guides
4.3 Limiting of sources for interpretation
4.4 Information technology solutions - transnational harmonising information and knowledge-bases
4.5 E-contract solutions?
4.6 Education

Whoever is able to provide the business community with the solutions it is seeking, in an acceptable way, has a reasonable chance of being subscribed to. Keep in mind: (i) the business community's interest in greater efficiency and predictability in the uniform and if possible transnational application of "law" and uniform texts; (ii) the business community's lack of focus on national law as a goal per se , increased autonomy from state law being acceptable and in fact desirable if successfully able to further the mentioned goals, and; (iii) the business community's ability through freedom of contract to take advantage of what is made available to them.

However a question does arise as to whether the ability to create alternative solutions and even an independent lex is or should be without limits. The present author is of the opinion that the duties of good faith and fair dealing and loyalty (or an acceptable equivalent) should be a necessary part of any attempt at the self-legislation or institutional legislation of any contract regime that is based on "rules and principles" (rather than a national legal order). If absent a requirement for them should be imposed by mandatory international law. As discussed in section 2.3.4 such protective provisions are to be found within the UNIDROIT and EU Contract Principles on good faith and fair dealing, and loyalty.

102

A radical approach has been proposed,  134  to have states accept an independent supra-national interpretation tribunal, to whom questions of an international commercial character concerning a uniform law would be referred for clarification, and whose rulings would be followed under a droit commune .

"[O]nly a fundamental methodological change would have a chance to reduce the gap between the slow pace of international legislation and the requirements of the modern world, especially in the field of international trade. He suggested that States should agree, by way of a general Convention, to accept rules established by the Commission, or under its auspices as a body of common law ( droit commune )."  135 

This suggestion was advanced on more than one occasion at early sessions of UNCITRAL where it drew respectful attention but little enthusiastic support.  136  A mitigation might be to give such a tribunal only persuasive authority.  137 

"As Professor Don King also indicated, a need may soon be felt for the establishment of a global court of commerce initially for those cases where resort has been made in arbitration to a national lex mercatoria or to general principles of contract law. At this Congress, we already heard a suggestion of Professor Sohn for the establishment of an international tribunal to interpret uniform texts."  138 

To date the political will backed by the financing for either such organ has not been forthcoming. In 1992 the UNCITRAL Secretariat's conclusion was that "probably the time still has not yet come".  139 

108

A less radical possibility is that there might be some body charged with (or that charges itself with) the task of reviewing important developments in relation to uniform texts over the course of time, and giving their authoritative, or persuasive opinion on the issue as to the right course to be taken in future. This might be an international body of scholars formed by the institution concerned, or in some other manner acceptable to legal counsel of the international business community, that reviews the decisions and writings made over the year and makes recommendations as to the future course that should be taken by others in the interpretation of the text. This could alternatively be pursued as an international interdisciplinary research effort (involving legal academics and practitioners, economists, business schools, and representatives of the business community) that is co-ordinated by a central institution.

If pursued through the original formulating agency, this could be done as a periodic update to a relevant commentary such as that of the UNIDROIT Principles , which could be updated in light of the experience that has been gained from the application of the text. Again this would be able to take advantage of the opportunities offered by information technology. Alternatively an independent authoritative guide on uniform application could be published annually (as a complete text). However organised, and whether by integral commentary update, or independent guide, provided the publication is reputable and acceptable to the business community it has a number of attractive features. The parties in their contract could specifically refer to the commentary or guide, together with the black letter text, as the primary source of regulation and means of interpretation of the uniform "law" in dispute resolution.

111

This suggests the possibility of another approach to the problem of unpredictability of uniform application. Given the mentioned problems, serious consideration should be given to the fact that improved predictability and efficiency may be better achieved by limiting of sources to be applied for the purpose of interpretation. What might such an alternative solution be? In attempting to achieve the uniform transnational application of a uniform text it is most efficient to look for answers as far as possible within the text itself, and if there is one, in the commentary or guide. An argument may be made for leaving the rest largely to the discretion of arbitrators. Part of the appeal of the UNIDROIT Principles is that they may be regarded (at the parties' election) as largely self-contained and that they allow for the arrival at efficient reasonable resolutions of disputes. The parties may wish to rely on the substantive text and accompanying commentary or guide to the greatest possible extent, and to restrict external sources for their interpretation in the interests of efficiency - achieving this "at the stroke of a pen". This to the common law lawyer is unfamiliar territory.  140  Predictability in most circumstances may be increased by reduced complexity in knowing where to look, the parties having a uniform, clear and concise idea of what there is to be aware of on the issue. Transaction cost should be reduced as a result, in knowing that there is a single set of transnational uniform rules and principles, and a limited amount of text to be ploughed through. This would represent the further rise of pragmatism over legal technicalities.

Robert Hillman writing on Article 7 of the CISG (contemporaneously with the writing and presentation of this paper) makes the following observations, that are of general relevance to harmonisation efforts, and with which the present author is in full agreement as suggesting the sensible approach and way forward:

"Professor Honnold suggests that decisions construing the Convention and secondary analysis will also clarify the significance of focusing on the "international character" of the Convention. In fact, most authorities have called for the publication of cases construing the Convention to increase the potential for its uniform application. The problem with this approach is that a high reliance on cases may create the impression that they are the primary source of international sales law and that the Convention's principles are inadequate. Such an environment may encourage tribunals not only to take their eyes off the principles but to engage in distinguishing, overruling, and even manipulating precedent. Lawyers from common-law states may feel comfortable with these activities, but they do not offer much promise if the goal is to achieve uniformity and certainty in the international sales law. Perhaps most worrisome, de-emphasizing principles may encourage tribunals facilely to turn to domestic cases, expressly or implicitly, when interpreting and gap-filling under Article 7. Analysts should therefore urge tribunals to try to find answers within the four corners of the Convention and to look to cases only in the unusual case where the Convention does not supply adequate guidance."  141 

In addition to original texts, international supra-national bodies or acceptable third parties might produce works on interpretation which, if not overly voluminous, and if they become generally known and recognised, could provide a particularly efficient way of reducing transaction costs and achieving sufficient predictability. Relying upon the reasonable resolution of the dispute by an arbitrator directed to use these specific sources as authority for reaching the decision.

116

There can be no doubt that the information potential of information technology will play a vital role in this process. As a tool what is most valuable is its potential to make instantly available large volumes of information if required (from anywhere on the globe). At the most basic level tremendous potential is provided for comparative study of developments around the world with regard to uniform law texts - academic writings, court decisions. However, its most exciting potential is realised when designed for transnational harmonisation. There is every possibility to adopt the approaches discussed in section 4.1-4.3 combined with an educational aspect (section 4.6). One possibility is the development of specialist sites dedicated to particular uniform law texts, that attempt to catalogue and manage information regarding international developments, and in so doing implicitly or explicitly recommend and provide a guiding hand as to how it should be interpreted and applied. Such "databases" dedicated to the task of international harmonisation would serve more than "data". Such use of information technology appears over time to offer the best chance of altering the orientation and focus of the world's legal communities in the way necessary to achieve the internationally uniform application of uniform texts and more generally to achieve greater harmonisation of international trade law.

118

The electronic environment provides possibilities for designing standard contracts that are virtually self contained and self-governing. The contract together with an entire Lex can easily be stored on electronic media - illustrated by the possibility of storing relevant portions of such databases as Lexis , Westlaw , or Lovdata on "disk". The parties may confine themselves to their electronic contract, which contains or incorporates all sources of regulation and their interpretation in a convenient one-stop location, including inter alia : all relevant conventions, principles, rules and standard terms on which it is based, together with relevant commentaries and contractually authorised sources of authority (copyright problems apart). Having relevant material easily available from a single source is of some interest, however, the idea in itself is only of marginally greater interest than what is made possible by the use of one of the large commercial law databases.  142  The real value of such a concept arises where the electronic contract (as a one-stop solution) is designed to meet the "objective" of the business community for a relatively straightforward transnational and uniform Lex , (see Section 2.4) that is of a limited textual dimension, (see Section 4 and 4.1 - 4.4). It was suggested that limiting the sources for the interpretation of uniform texts might be a better way to achieve uniformity than seeking to know and distinguish all that has been decided on point internationally.

In the electronic contract further steps could be taken in the design of the contract so as to limit the necessity to look elsewhere. Several issues that might not usually be agreed in advance could be covered, including procedural ones, such as the manner and amount of discovery in the event of a dispute. In creating an environment for the parties, it could also be used as a means of broaching some differences between civil law and common law approaches. There are numerous other possibilities, the contract could for example become part of a standard software utility program (being incorporated into a standard model regulatory order, based for example on the structure outlined within this text). Such a contract, even if agreed at a specific point in time, is likely to be more dynamic. It could guide the parties during contractual negotiations as to some of the more important factors to consider. On having entered a contract it could assist the parties in determining the nature and timing of their relative obligations. For longer term and more complex agreements, part of the contract directed towards the parties goals could be designed to have interactive logistical functions. It could make use of live data from specified sources - that is continually updated. "appendices" to the electronic contract could record submitted logs of performances of the parties. The parties may be guided to use electronic communication for third party conciliation and mediation, before the more serious step of adversarial dispute resolution through ICA.

Beyond this the imagination is the only limitation as to what might technically be done. Drawing back to the more mundane, but essential in today's world, the standard electronic contract could have country specific profiles that might include such details as the status of electronic documents and signatures, and relevant country specific details and peculiarities.

A standard electronic "autonomous contract" could provide greater control, and further simplify the parties' contractual environment. Given that this would be the result of the parties' contractual freedom there is no need to suggest that this would be the only or best solution, only that it should be workable, and should have potential if pursued.

Note on the validity of electronic documents and signatures

"Contract law is one of Rome's most important contributions to legal history. Yet, Watson (The Evolution of Law) writes, it is prima facie astonishing that the Romans never developed a written contract that would take its place by the side of stipulatio as a second contract form. Stipulation required the presence of both parties and was oral. A written contract could have been negotiated at a distance and would have been easier to prove. The Romans knew that written contracts had been standard and useful in classical Athens. But the idea of stipulatio as the contract form had become so ingrained in the Roman legal mind that the option of using an alternative form simply was not adopted."  143 

For most purposes but not all and in most jurisdictions though not all, contracts may be entered into without regard as to form: orally, in writing, or by conduct. It being possible, where necessary, to adduce evidence as to the existence and contents of an agreement. In some cases however, an agreement must be in writing, as for example in the case of an arbitration agreement for its recognition and enforcement under the New York Convention  144  Needless to say, for such purposes, acceptance of the validity of electronic documents is essential for truly electronic contracting and commerce. For electronic contracting to be borderless and effective globally such acceptance of validity should be world-wide. Some states including some "modern" European ones do not recognise the validity of electronic documents or electronic signatures, however well authenticated and free from the possibility of tampering they may be.  145  The UNCITRAL Model Law on Electronic Commerce 1996 addresses these and other issues related to electronic commerce. In the interest of a global rather than regional solutions, it makes sense that states give electronic commerce the support it needs by adopting the Model Law or by enacting laws that are in conformity with it. The guiding principle, here to be applied to writing on paper or electronically, that is found in the UN Model Law on Electronic Commerce , is suggested by the US Framework for Global Electronic Commerce (1997):

"rules should be technology-neutral (i.e., the rules should neither require nor assume a particular technology) and forward looking (i.e., the rules should not hinder the use or development of technologies in the future)"  146 

This in a sense is a rejoinder to the Roman favouring of oral over written contracts, which today sounds backward, but in fact is no less so than the blanket non-acceptance of electronic writing and signatures regardless of suitable authentication and verification possibilities. Beyond these observations on the need for electronic documents to be held valid for electronic commerce, the discussion in this paper is generic to international commerce. Under the current diverse national orders, however, it is necessary to know the requirements of individual state laws to ensure the validity of electronic contracts where a contract is required to be in writing, and if in doubt to resort to paper.

It may be observed that the business counterparts are least cognisant of location in transactions that can be carried out entirely within the electronic world, such as trade in intangibles, money transfers, services, many areas on intellectual property; whereas trade in tangibles, including goods and most types of investment include a physical (off-line) component.

129

"... one should create awareness about the fact that an international contract or transaction is not naturally rooted in one particular domestic law, and that its international specifics are best catered for in a uniform law."  147 

Within the framework described in this section, education and sensitivity to the needs of the business community by the legal profession and academia would appear to be a necessary part of any solution. However, while the business community seeks and requires greater uniformity in their business relations, there has paradoxically, at a national level, been a trend towards a nationalisation of contract law, and a regionalisation of business practice.   148  As Pierre Lalive points out quoting Roy Goode: "The undeniable fact is that, in most countries today, the part played in a student's curriculum by what I would call 'non-national' subjects (ie public and private international law, comparative law, international trade law and the like) has steadily diminished over the years, paradoxically, at the very time when everyone can observe and should know that the world is becoming more and more international."   149  The disparity grows worse today. Legal education has become more local as a result of the considerable domestic and regional legislation passed. Textbooks and studies, to cope with the increased material, have had to concentrate on taking a domestic and regional approach with little space to spare for an international perspective, or for comparative study.  150  This is regarded by many as unfortunate, especially given the long experience with fruitful international communication in the area of international trade law.  151  Finding means to transcend national boundaries is also to continue in the tradition of seeking the means to break down barriers to legal communication and understanding. In 1966, a time when there were greater differences in the legal systems of states comprising the world economy Clive Schmitthoff was able to comment that:

"22. The similarity of the law of international trade transcends the division of the world between countries of free enterprise and countries of centrally planned economy, and between the legal families of the civil law of Roman inspiration and the common law of English tradition. As a Polish scholar observed, "the law of external trade of the countries of planned economy does not differ in its fundamental principles from the law of external trade of other countries, such as e.g., Austria or Switzerland. Consequently, international trade law specialists of all countries have found without difficulty that they speak a 'common language'

23. The reason for this universal similarity of the law of international trade is that this branch of law is based on three fundamental propositions: first, that the parties are free, subject to limitations imposed by the national laws, to contract on whatever terms they are able to agree (principle of the autonomy of the parties' will); secondly, that once the parties have entered into a contract, that contract must be faithfully fulfilled ( pacta sunt servanda ) and only in very exceptional circumstances does the law excuse a party from performing his obligations, viz., if force majeure or frustration can be established; and, thirdly that arbitration is widely used in international trade for the settlement of disputes, and the awards of arbitration tribunals command far-reaching international recognition and are often capable of enforcement abroad."  152 

As suggested in the passage quoted earlier by Lalive and Goode and underlined by the discussion throughout this paper, an increased attention to international commercial law and arbitration is merited in the law student's curriculum. Efforts by a number of institutions aimed at enriching student awareness, education and experience in this respect, through the arrangement of such international inter-collegiate activities as arbitration moots and essay competitions are commendable. Equally so are various international commercial law oriented Internet efforts that are of value to researchers and practitioners alike.  153 


 134. UNCITRAL Secretariat (1992) p. 253. Proposed by David (France) at the second UNCITRAL Congress and on later occasions put forward by Farnsworth (USA). For references on interpretation of the CISG by a supranational committee of experts or council of "wise men" see Bonell, Proposal for the Establishment of a Permanent Editorial Board for the Vienna Sales Convention , in International Uniform Law in Practice/Le droit uniforme international dans la pratique [Acts and Proceedings of the 3rd Congress on Private Law held by the International Institute for the Unification of Private law (Rome 7-10 September 1987)], (New York, 1988) pp. 241-244; and Drobnig, Observations in Uniform Law in Practice , supra. at p. 306.

 135. UNCITRAL Secretariat, id.

 136. UNCITRAL Secretariat, id.

 137. UNCITRAL Secretariat, id. p. 258.

 138. Sono (1992) p. 251. The suggestion by Louis Sohn found in, Uniform laws require uniform interpretation: proposals for an international tribunal to interpret uniform legal texts (1992) in 25th UNCITRAL Congress , pp. 50-54.

 139. UNCITRAL Secretariat, id.

 140. Which is not the same as to suggest that the idea would be new. As Goode points out "Truly there is nothing new under the sun. Nearly two thousand years have elapsed since Cicero proclaimed the virtues of legal harmonisation", see Goode (1991) p. 54.

 141. Robert Hillman, CISG Cross Reference and Editorial Analysis: Article 7 in CISG W3 Database , Institute of International Commercial Law, Pace University School of Law (New York, September 1997) ‹http://www.cisg.law.pace.edu/cisg/text/hillman.html

 142. It should be noted that whilst electronic media makes such a solution more practicable and attractive, the same thing is achieved through the age-old tradition of incorporation by reference.

 143. John Robert Cassidy Mahwah, An Undergraduate Course in Comparative Legal Studies in Rechtstheorie Zeitschrift für Logik, Methodenlehre Kybernetik und Soziologie des Rechts, Beiheft 12 Monistic or Pluralistic Legal Culture? Ed. Peter Sack, Carl Wellman, Mitsukunk Yasaki (Berlin, 1987) pp. 200-207 on p. 205. See also footnote 3 of this text.

 144. United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards New York, 1958 , Article II. The convention is available off ITL.

 145. Noted in the European Initiative on Electronic Commerce (1997) §45. "A number of Member States' rules governing the formation and the performance of contracts are not appropriate for an electronic commerce environment and are generating uncertainties relating to the validity and enforceability of electronic contracts (for example the requirements for written documents, for hand written signatures, or the rules of evidence that do not take into account electronic documents)..." ‹http://www.cordis.lu/esprit/src/ecomcomx.htm

 146. US Framework for Global Electronic Commerce (1997) ‹http://www.whitehouse.gov/WH/New/Commerce/

 147. UNCITRAL Secretariat (1992) p. 255.

 148. Schanze (1996) p. 62.

 149. Lalive, International Arbitration - Teaching and Research in Julian Lew (ed.), Contemporary Problems in International Arbitration (1987) at p. 18, quoting statement by Goode.

 150. Regionalisation may be a step towards internationalisation, but is not the same thing, and the subsequent step does not necessarily follow.

 151. See Lalive, id. reference to Goode and the Institute of International Law, Teaching of International Law, 1987 Committee chaired by Zourek.

 152. Report of the Secretary-General of the United Nations, Progressive Development of the Law of International Trade (1966). Report prepared for the UN by C. Schmitthoff.

 153. The Institute of International Commercial Law, Pace University School of Law, is engaged in the various activities mentioned in this paragraph with regard to the CISG .


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