The European Commission (the "Commission") has long been of the opinion that the smooth operation of the internal European market has been hindered by the divergence of national contract laws between Member States. The Commission believes that cross-border trade has been inhibited by the differences in national contract laws, which often result in additional transaction costs (e.g. adapting contractual terms and commercial policies or obtaining translations of the applicable laws), legal uncertainty for businesses and a lack of consumer confidence in the internal market. The European Commissioner for Justice, Viviane Reding commented:
"I want a Polish, German or Spanish consumer to feel safe when doing business with an Italian, Finnish or French company online as when they are at home. 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".
In order to overcome these alleged obstacles to trade, in 2003 the Commission set about the task of producing a "common frame of reference" ("CFR") for contract law, with the aim of establishing a set of common principles to be used by Member States when making or amending legislation. Although the purpose of the CFR has changed since its inception, at the time of its draft publication in early 2009, the European Parliament gave its support to using the CFR as a basis for an optional European Contract Law.
What is the Commission proposing?
In April 2010, the Commission set up an expert group to review the draft CFR with the aim of using it as the basis to consider and revise those parts relating to contract law. On 1 July 2010, the Commission published a Green Paper in which the following policy options to achieve a more coherent approach to contract law:
Publication of the expert group's findings setting out model contract rules. These rules could be voluntarily adopted by European and national legislators when drafting legislation. A binding or non-binding "toolbox" for legislators when adopting new legislation to ensure better and more coherent rules. A European Commission Recommendation on European contract law. The Commission would encourage all Member States to incorporate a European contract law into their national laws. This would allow Member States voluntarily to adopt the European contract law. A similar scheme has...