New Features in Contract Law Reiner Schulze (Ed.) Sellier. European Law Publishers
. ISBN 978-3-86653-036-2 Die Deutsche Nationalbibliothek verzeichnet diese Publikation in der Deutschen Nationalbibliografi e; detaillierte bibliografi sche Daten sind im Internet über http:// dnb.d-nb.de abrufbar. 2007 by Sellier. European Law Publishers. Dieses Werk einschließlich aller seiner Teile ist urheberrechtlich geschützt. Jede Verwertung außerhalb der engen Grenzen des Urheberrechtsgesetzes ist ohne Zustimmung des Verlages unzulässig und strafbar. Das gilt insbesondere für Vervielfältigungen, Übersetzungen, Mikroverfi lmungen und die Einspeicherung und Verarbeitung in elektronischen Systemen. Gestaltung: Sandra Sellier, München. Herstellung: Karina Hack, München. Druck und Bindung: AZ Druck und Datentechnik, Kempten. Gedruckt auf säurefreiem, alterungsbeständigem Papier. Printed in Germany.
The New Challenges in Contract Law Reiner Schulze (Münster) I. Facets of the global challenge Contract law is facing new challenges. They predominantly arise from the deep-seated change currently underway in business, politics and law and which is usually summarised under the term globalisation. 1 It not only affects cross border contractual relationships, rather it increasingly also impacts on contractual practice in the national context. Certain facets of this change must be mentioned (I.), before we take a closer look at specific challenges for European contract law (II.) and focus on some illustrative research themes concerning the new developments of contract law (III.) 1. The globalisation of contract law Before the middle of the 20 th century important legal points of origin for the development which later extended into globalisation were already emerging. In addition to the founding of the United Nations (UN) in 1944 they include in particular the ratification of the General Agreement on Tariffs and Trade (GATT) in 1947, which opened the way for the establishment of the World Trade Organization (WTO) in 1994. 2 Against this background, in the second half of the 20 th century the political and economic importance of efforts to reach uniform rules for contracts for international transactions grew. Central hereto since the 1920s were the works on a harmonisation of contract law for cross border deliveries of 1 See e.g. W. Twining, Globalization and Legal Theory, Evanston 2001; M. Barr/ R. Avi-Yonah, Globalization, Law and Development: Introduction and Overview, Michigan Journal of International Law, 2004, pp. 1 et seq.; H. Van Loon, Globalisation and the Hague Conference on Private International Law, International Law FORUM du droit international, 2000, pp. 230 et seq. 2 See e.g. M. Matsushita/T. J. Schoenbaum/P. C. Mavroidis, The World Trade Organization: law, practice, and policy, 2 nd edition Oxford 2006; A. F. Lowenfeld, International Economic Law, Oxford 2003; C. Herrmann/W. Weiß/C. Ohler, Welthandelsrecht, 2 nd edition, Munich 2007.
4 Reiner Schulze goods. The success of these efforts with the conclusion of the Hague Convention of 1964 3 constitute the beginning of a new era for the area of contract law, in which the needs of world trade became a material factor in its development. The Hague Sales law however was essentially created by states of the western world. An important precursor of globalisation over the next decade were the negotiations for the Vienna Convention on Contracts for the International Sale of Goods (CISG) of 1980, which displaced the Hague sales law. The need for change arose from the last wave of decolonisation until 1960 when numerous new states entered the international legal community. From their perspective the Hague sales law was in no way the representative of the whole world. Together with other states of the so-called third world they therefore demanded a part in the creation of this law. 4 In the 1990s there followed a further great change in the topography of contract law: With the transition of the former socialist countries of central and eastern Europe to market economies contract law acquired fundamental economic importance and a central position in the legal orders. In China a corresponding gradual change had already begun to take root, in the course of which a uniform contract law for the People s Republic of China emerged in 1999 and a civil code is currently being prepared. For a large part of mankind it is only these most recent developments which gave contract law the prominent importance (or at least opened the way), that it already enjoyed in the western world. 2. Technological change Alongside the aforementioned political changes, above all technological change created new conditions and challenges for contract law in the course of globalisation. Improved production technologies and in particular cost effective transportation technologies promoted the emergence of world wide production channels and distribution systems. In contract law this is expressed for example in new, complex combinations of numerous bilateral contracts and in many kinds of multilateral network contracts. The reduction of transportation costs as a consequence of new technolo- 3 Convention relating to a Uniform Law on the International Sale of Goods, The Hague, 1.7.1964. 4 P. Schlechtriem/I. Schwenzer (eds.), Commentary on the Convention for the International Sale of Goods (CISG), 2 nd (English) edition, Munich 2005, Introduction, p. 2, with further references; P. Schlechtriem/I. Schwenzer (eds.), Kommentar zum einheitlichen UN-Kaufrecht (CISG), 4 th (German) edition, Munich 2004, Einleitung, p. 29.
The New Challenges in Contract Law 5 gies also calls into question the traditional assumption that, in the context of non-performance of obligations from international contracts, supplementary performance is regularly too burdensome. It is therefore for instance worthwhile reconsidering whether UN sales law is still up to date, insofar as a fundamental breach of contract does not entitle the debtor to effect supplementary performance, but entitles the creditor to simultaneously terminate the contract (cf. Art. 49 (1) lit. a CISG). 5 One particular technological challenge for contract law, which is perhaps comparable with that of industrialisation in the 19 th century, are the changes in communication and market behaviour through the electronic revolution. New communications technologies have made physical proximity and personal contact unnecessary in numerous transactions and enabled contracting on a global scale, not only for high value transactions but also for the provision of everyday goods of services. A lively international discussion attends the consequences for numerous legal issues of preparation, conclusion and performance of such contracts in e-commerce. 6 A number of issues must be considered in this context, which arise for substantive law and private international law in the area of contract law. They arise from the peculiarities of electronic communication in relation to the classification of statements in personal, territorial and temporal terms and the actions of the contractual parties. For example, this communication before, during and after conclusion of contract can occur more or less irrespective of location and without the contractual parties mutual knowledge of one another s personal identity or domicile. Furthermore a very far reaching automisation of the processes for different phases and eventualities of preparation and performance of contract can make it difficult to apply the traditional criteria for the determination of the relevant contractual party s conduct in personal and temporal terms. 3. Change in contractual language and style The political and technological changes of recent decades, with the immense increase in cross border delivery of goods and services, of international capital movement and mobility for professional and personal reasons, have not only led to a corresponding increase in the number of 5 R. Schulze, Gemeinsamer Referenzrahmen und acquis communautaire, Zeitschrift für Euopäisches Privatrecht (ZEuP) 2007, pp. 130 et seq (140). 6 See for example J. Dickie, Producers and Consumers in EU E-commerce Law, Oxford 2005; G. Spindler/F. Börner, E-Commerce-Recht in Europa und den USA, Berlin 2003; D. W. Dorn/C. Krämer (eds.), E-Commerce Produkte und Dienstleistungen im Internet die rechtlichen Grundlagen, Berlin 2003.
6 Reiner Schulze international contracts. They have also considerably increased the importance of international contract law in business practice and law firms and also attracted increasing attention from the academic community. A further consequence was the emergence and the rapid expansion of new contractual designs and types. Franchising, Factoring, Merger and Acquisition or Swap entered common international usage and not only for international contracts. Moreover, they have also found entry into national laws and also denote internal contractual relationships in the framework of the relevant legal order. The spread of such notions also indicates the increasing use of the English language in contract law. At least for international transactions English has clearly established itself as the dominant contractual language for business. Furthermore, English appears to be more commonly used in certain branches of the economy, also outside of the common law states, as the contractual language for purely internal transactions. This tendency of business follows academia, insofar as the multilateral exchange of experience on national contract laws for example at international congresses is frequently conducted in English. Despite the bond between legal language and the relevant legal tradition, recourse to a global lingua franca clearly proves to be indispensable, to enable communication between considerably more than one hundred legal orders each with its own contract law. Associated with contractual language, international practice has in part increasingly adapted contractual style to the model of the English speaking countries and their common law tradition. This is particularly evident in the widespread adoption of detailed provisions in contractual documents to cover all future developments and conceivable disputes. Such extensive contractual texts are less used in the continental European civil tradition because the great codifications can complement the contractual text with their precise provisions, with the general clauses on good faith and good morals providing a corrective in the individual case. Nevertheless, the common law tradition in this respect appears to influence not only international contractual practice, but spread disseminated in particular by the internationally established law firms in part also the design of contracts for internal transactions in civil law countries. 4. Freedom of contract and needs of protection a) The aforementioned changes, which predominantly occurred in business practice and without state regulation, indicate that freedom of contract and private autonomy are immensely significant for the new developments in contract law (b). This is admittedly only one side of the coin
The New Challenges in Contract Law 7 which characterises contract law and private law as a whole in view of the challenges of globalisation. To look at this alone would correspond to the somewhat (neo-) liberal political objective rather than the considerably complex reality of current legal developments. Indeed, on the other side of the coin the regulatory functions of private law and the corresponding regulation by states and supranational institutions have increased, to ensure framework conditions for private action and to reduce structural disparities: (c). b) The developments of international contract law occur largely outside of the areas which individual states, with their traditional regulatory mechanisms, namely their legislation, can or want to regulate. A decisive driving force is the freedom and power of individual persons, businesses and self-regulating associations. The independent construction of legal relationships on this basis replaces to a certain extent lacking state regulation and in part even state law enforcement. Material actors in this further development of contract law in the context of private autonomy include together with the internationally orientated law firms the numerous large and small businesses with cross border business activity as well as the international business associations, chambers of commerce and institutions (such as UNIDROIT in Rome) 7. They have designed and disseminated many kinds of standard terms, model contracts and codes of conduct. International contractual practice and frequently also internal contractual practice thus flows from sets of terms and bodies of rules which emerged without legislative action by the state. 8 In this way alongside private international law and international uniform law (such as UN sales law) a third area of contract law for cross border transactions has strongly developed: the self made transnational law of business, which is frequently (in whole or in part) termed lex mercatoria. 9 Consequently, wide areas of international business contract law are not based on state legislation, but on the independent design of the parties and the self regulation of business, i.e. on individual and collectively ap- 7 International Institute for the Unification of Private Law (UNIDROIT), see M. J. Bonell, An International Restatement of Contract Law: The UNIDROIT Principles Of International Commercial Contracts, 3 rd edition, Ardsley, New York 2005. 8 See for example in this volume Part II, G. Cordero Moss, The Function of Letters of Intent and their Recognition in Modern Legal Systems; Part IV, C. Twigg-Flesner, Standard terms in International Commercial Law the example of documentary credits. 9 See e.g. U. Blaurock, Übernationales Recht des Internationalen Handels, ZEuP 1993, pp. 247 et seq.; K. P. Berger in A. S. Hartkamp/M. Hesselink (eds.), Towards a European Civil Code, 3 rd edition, Dordrecht 2004, pp. 43 et seq.