The Structure of European Contract Law

Abstract

The internal market and the fundamental freedoms aim at extending party autonomy across borders. The instrument of party autonomy is the contract. The basic concepts and the legal measures on which EC contract law is based are recent. However, from both a conceptual and an empirical point of view, EC contract law has become indispensable. That applies even in purely domestic cases. Contract law is the core area of private law, EC contract law influences already more than half of all contracts, also domestic, and two thirds of all cross border transactions of the member states are now with other member states. EC contract law can be defined as covering all EC rules concerning the formation, the content and the termination of contracts. EC contract law emerging over the last decade focuses on a specific type of transaction, and also of a particular regulatory approach. It focuses on transactions which typically concern large volumes and that are not only domestic. It is mainly obstacles to these transactions which are overcome and it is primarily the risks of these transactions which are regulated. European contract law has to be conceived both as broader and as narrower than national contract law. Broader because it includes all rules pertaining to contracts, also public good regulation. Narrower because it includes only rules which take away obstacles. National rules only constitute obstacles when internationally enforced. The key structural issue in European contract law is the division between on the one hand rules that are internationally enforced according to articles 5–7 of the Rome Convention on the law applicable to contractual obligations. On the other hand are the rules that the parties can choose according to article 3 of the Convention. Only rules internationally enforced are subject to scrutiny on the basis of the fundamental freedoms of EC law. Both areas are further developed in specific sections of this article: There is virtually no harmonization where parties can choose the law applicable. There is intense harmonization for rules that are internationally enforced. There are in fact only very few national rules which are not harmonized in this area. It is argued that the major aim of harmonization here is to remedy two forms of market failure: restrictions of competition and (certain) information asymmetries. In the section concerning the policy decisions inherent to the structure it is argued that the instruments used are such that both over regulation and state failure tend to be avoided. The policy is not restricted to a laissez faire approach either. The framework and mechanisms adjust the intensity of regulation near to an optimal level. This framework deserves more truly international and interdisciplinary discussion than it has received so far.