Out-Law News 2 min. read

Contract law reform: European Commission consults

The European Commission has outlined the various ways in which it could change contract law to encourage cross-border trading within the European Union. The Commission has published a Green Paper outlining seven kinds of new system the EU could adopt.

The Commission is consulting on the seven options which range from the publishing of suggested model contracts to an EU-wide law replacing all national contract laws.

The European Commission believes that contract law reform is necessary to stimulate cross-border trading, which has not been widely accepted by consumers or small businesses.

"Only 8% of consumers buy online from another member state," said a Commission statement announcing the consultation. "In addition, 61% of cross-border sales are rejected because traders refuse to serve the consumer's country. This is largely due to regulatory barriers and legal uncertainty about the applicable rules."

"I want a Polish, German or Spanish consumer to feel as safe when doing business with an Italian, Finnish or French company online as when they are at home," said Viviane Reding, the Justice Commissioner. "And I want Europe's small and medium-sized companies to offer their products and services to consumers in other countries without having to become experts in the national contract law systems of all other 26 EU countries."

The Commission Green Paper explains the seven kinds of new system the EU could adopt. These are:

  1. non-binding model contracts;
  2. a 'toolbox' for national legislators to use when passing national contract laws to improve consistency;
  3. a non-binding plea to countries to incorporate a 'European contract law' into their laws;
  4. the creation of an optional '28th system' EU contract law to add to the 27 member state legal systems;
  5. partial harmonisation of contract law through an EU directive;
  6. full harmonisation of contract law through a Regulation; and
  7. an EU civil code on contracts which would replace national contract law.

"This is certainly a time of crisis for Europe's economy. But it is also a time where we have an historic opportunity to drive economic growth by easing the cost of cross-border transactions," said Reding. "It is therefore now the time to make a quantum leap towards a more European contract law."

The Green Paper is the work of an expert group convened by the Commission to create a 'common frame of reference' on which discussions could be based. The expert group contains three UK-based academics. They are Professor Simon Whittaker of Oxford University, Professor Hugh Beale of Warwick University and Professor Eric Clive of Edinburgh University.

Reding said earlier this year that she backed the creation of a '28th system' of contract law.

"Business-to-consumer relationships are complicated by 27 different regimes for contractual relations," she said in February. "That means that a consumer may be able to return a defective product for a full refund within 15 days of the sale in one country, whilst a consumer in another nation may get three months."

"Such a European Contract Law would exist in parallel to the national contract laws and provide standard terms and conditions," she said. "The United States started with a uniform commercial code to become a globally competitive economy. Why couldn't we have, in the end, a European civil code for our single market?"

The consultation process is open until 31st January 2011.

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