Harmonisation of European Contract Law: Default and Mandatory Rules

Abstract

This Chapter argues that the current harmonisation of European contract law will eventually fail. Supporters of the harmonisation suggest that the divergence in national contract laws not only generates unnecessary costs for cross-border trade, but also undermines fair competition in the European market. Thus, legal harmonisation is the necessary solution. Unfortunately, the harmonization movement has failed to understand the crucial distinction between default and mandatory rules. The current and proposed harmonization measures have focused on the development of sets of default rules. In fact, divergence in national contract laws is mainly due to differences in their mandatory rules. This harmonisation effort suffers from two major defects. Firstly, it assumes that the national default rules are in need of harmonisation in order to facilitate trans-border transactions. In fact, here is no conclusive empirical evidence that differences in national default rules have retarded European trade. Conversely, several existing studies have indicated the opposite that harmonisation of default rules at the regional level actually increases the complexity of contract law and trans-border trading. Secondly, even if a regional harmonised contract law were produced, it would not provide the certainty needed to warrant the effort due to problems of multi-jurisdictional interpretations. The Chapter concludes that a European contract law regime, at this time and in its current form will lead to an unnecessary layer of legal complexity to European trade.