Contract Law

The Single Market makes it possible for citizens and undertakings or companies alike to engage in economic and other activities throughout the European Union under largely the same conditions. In many cases, e.g. when goods and services are being purchased or leased, this involves concluding a contract which defines the conditions under which the transaction takes place.

It is not surprising therefore that, when the European Union sought to eliminate obstacles to free circulation, it also dealt with contract law. Indeed, certain mandatory provisions in the contract law of a member state may well make it more cumbersome or occasionally even impossible to offer the same goods and services under the same or similar conditions throughout the Single Market.

Thus the EU legislator has adopted directives aimed at eliminating such obstacles, in particular through harmonisation. These can be found in a number of areas such as electronic commerce, the insurance and banking sectors, intellectual and industrial property and in the consumer protection area as well as the policy aimed at small and medium-sized companies.

A debate has been going for two decades, mainly in academic circles, about the impact those "harmonised" provisions have on the national contract laws into which they are included. This has led to calls for abandoning the current problem-related approach to harmonisation in favour of across the board harmonisation or so-called codification (laying down a fully-fletched European contract code).

The EU does not possess general regulatory power in areas such as contract law but can only intervene in case actual problems exist which require a solution at EU level, as the European Court of Justice stated in its tobacco judgment. This is why, in a Communication of 11 July 2001, the Commission sought to obtain information about problems which would require such a change of policy.

None of the replies to this Communication indicated that the sectoral approach as such leads to problems or that it should be abandoned. Moreover, there was widespread support for measures which would increase the degree of coherence of the contract law provisions in the various existing or future sector-specific instruments.

In February 2003 the Commission adopted a further Communication which laid down a draft Action Plan, consisting of the following measures:

1. actions to increase coherence between the various contract law instruments, inter alia through the adoption of a Common Frame of Reference;
2. promotion of the adoption of Standard Terms and Conditions (STCs) for use throughout the EU rather than in a single member state;
3. further reflection on the opportunism of a non-sector specific contract law instrument.

On January 19th, 2004, the Commission hosted a workshop to promote the development and use of EU-wide STCs.