IP Draughts attended a meeting today, hosted by the Law Society of England and Wales, to discuss the European Commission’s proposal to introduce a European sales law. It is, in effect a stand-alone, contractual code that could govern both consumer contracts and business-to-business contracts, within the European Union. It would apply to contracts for the sale of goods (including items supplied electronically) with or without services.
Topics that would be covered by the code include:
- how contracts are formed
- implied terms in a contract of sale (analogous to the English Sale of Goods Act 1979)
- unfair terms that are not enforceable
- consumer protection provisions, including information to be supplied to consumers, where they may sue, etc
The idea of a European contract law has been quietly rumbling away in the European Commission since in the 1970s. Now it looks as though it may happen. Commissioner Reding has made it her priority and has support from the European Parliament.
The draft law states that it will only apply if the parties want it to. There is a fear, though, that it may be revised during the legislative process to allow consumers to require it to apply to their transactions within the EU.
Many of the terms of the new law are unobjectionable as statements of general principle. The problem lies more in the legal mechanisms for applying those principles. A recital to the legislation states that traders will be able to rely on this stand-alone law without reference to national laws. This seems to be nonsense. It will be necessary to fill in the gaps of the legislation somehow (eg as to how and when title will pass, and whether the parties have legal capacity) by reference to other legal principles. This is likely to result in differences in interpretation in different EU countries, which goes against the idea of a comprehensive code.
The case for introducing such a law appears to be more political than economic. In particular:
- It is not clear that consumers will be in any better position if their transactions are governed by the new law. In some countries, existing laws may already provide greater consumer protection.
- Transactional costs are likely to be increased, as parties seek advice on the new law and have template agreements drafted to reflect its provisions. There will be greater uncertainty than at present, as there is not an established set of legal principles to govern issues not addressed in the law, or not addressed in detail.
The European Commission proposes to introduce this law under Article 114 of the Treaty on the Functioning of the European Union. The significance of this route is that countries that are hostile to the law (eg the UK – see the comments of the Justice Secretary, Ken Clarke, here) do not have a veto on legislation passed under Article 114. There is, apparently, European case law to indicate that a law of this kind should be introduced under Article 352, where individual member states would have a veto.
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