Formalism and Efficiency: Designing European Commercial Contract Law

Abstract

Although legal formalism is commonly regarded as desirable for business transactions because it produces certainty of entitlements, this essay argues that the form of calculability required by businesses in fact consists of the protection of expectations. These expectations are themselves grounded in three competing normative contexts: the business relation, the business deal, and the contract. Legal formalism tends to award priority to the contractual normative framework, and can, therefore, defeat business expectations. The merchants' rejection of legal formalism as an unsatisfactory regulatory tool for business transactions is discovered in the operation of the market for the adjudication of commercial disputes. The possibility that common law reasoning is superior to civil law reasoning in managing to avoid the closure of legal formalism is suggested, though it is acknowledged that the virus of legal formalism has penetrated deeply into the operations of common law reasoning as well. The key feature of new private law regulation of commercial contracts at European level must be the production of the capacity to protect business expectation (or calculability) by creating a legal discourse that can simultaneously evaluate the competing normative frameworks of the business relation, the deal, and the contract. This capacity requires the contextualisation of contractual disputes, an ability to differentiate between contexts in the light of custom and usage and the economic interests of the parties, and the power to reformulate regulation in the light of revisions of normative standards in the market. This capacity may also require a post-national legal structure that respects pluralism in regulation of different industrial sectors.