Chapter 3: The Draft CFR
18. The interim DCFR presented to the Commission
in December 2007 was the initial product of the research proposed
in the Commission's October 2004 Communication and is the combined
result of work done by the Commission on European Contract Law,
the Study Group and the Acquis Group. It contains, in seven books
and two annexes, principles, definitions and model rules of private
law. The final DCFR presented in December 2008 has added three
books and a statement of the principles underlying the model rules,
as well as changes to the articles in the model rules. The final
table of contents is set out in the box below.
BOX
Table of contents
Introduction
Academic contributors and funders
Principles
Table of Destinations
Table of Derivations
Model Rules
Book I—General provisions
Book II—Contracts and other juridical acts
Book III—Obligations and corresponding rights
Book IV—Specific contracts and the rights and
obligations arising from them
Book V—Benevolent intervention in another's
affairs
Book VI—Non-contractual liability arising out
of damage caused to another
Book VII—Unjustified enrichment
Book VIII—Acquisition and loss of ownership
of goods
Book IX—Proprietary security rights in movable
assets
Book X—Trusts
Annex—Definitions
19. The Minister paid tribute in his opening
remarks to the "hugely impressive" academic work done
by very clever and independent academics from all over Europe.
Professor Vogenauer described as "unique" the process,
initiated by academics but encouraged and to some extent funded
by the Commission and backed by the European Parliament and the
Council of Ministers. We wish to add our own acknowledgement of
the highly impressive product of this work of European academic
cooperation. It has (as an incomplete academic draft) already
played some part in the development of the current proposals relating
to reform of the consumer acquis, which was (as this Committee
stressed in its previous reports) a main aim of any CFR. However,
we are less confident that the process of interaction with stakeholders
proceeded as originally envisaged by the Commission or achieved
the hoped-for synthesis between academic work and practical needs.
20. The authors of the DCFR stress, in the Introduction,
that their text is an academic one. That is, it originates in
an initiative of legal scholars and has value in its own right
as an academic research text, although it also aims to serve as
a basis for drawing up the CFR called for by the Commission's
Action Plan of 2003. They distinguish their work from a "political"
CFR, that is, any eventual document drawing on the DCFR approved
through the normal institutional processes. This is an important
distinction, emphasised also by Lord Bach (Q 73) and Jonathan
Faull (QQ 129, 134, 147). The Committee has heard and shares
some concerns which have been expressed about the general usability
of the CFR in its current form. The production of any final or
"political" CFR may therefore be more difficult than
was hoped for.
21. The scope of the DCFR is broad. The interim
version covers not only matters which would be considered as falling
within the general law of contract by practitioners of English
law but also contracts for the sale of goods, financial securities,
intellectual property rights and software, and unjustified enrichment.
Professor Vogenauer said that, apart from those numbered
I to III, the books "obviously go far beyond the scope of
contract law" (Q 2) and that "The DCFR, as published
in 2007, is much more than a 'toolbox' for a revision of the acquis,
and it even goes beyond a potential European Contract Law Instrument.
It is clearly meant to be a blueprint of a European Civil Code
in the area of patrimonial law" (p 3 and Q 28).[16]
The additional material in the final version goes still further,
covering ownership of goods, certain matters of the law relating
to movable property and trusts. We interpose that a European law
of trusts might well be of considerable interest to common law
eyes, but it is a topic with wide implications falling well outside
the law of contract. Jonathan Faull agreed that the DCFR goes
beyond the scope of the Commission's action plan, and made clear
that the Commission's current intention is to confine itself to
contract law in any future work, while noting that there may well
be differences of view about what even contract law is (Q 129).
22. Professor Reiner Schulze of Münster
University, a member of the Acquis Group, is on record
as regretting the adoption by the DCFR of "a structure appropriate
for a codification of private law, or at least 'civil law', rather
than a structure determined by the needs of a toolbox—or
indeed the needs of an optional instrument",[17]
and he notes that the approach adopted has complicated Book III
by addressing "obligations" in a sense going far beyond
the contractual. Professor Schulze has argued strongly for
the need for a recontractualisation especially of Book III, if
it is to serve as a useful point of reference for legislators
or even for a draft optional instrument.[18]
23. The DCFR is to be supplemented by publication
of underlying material identifying the acquis (where it
exists), discussing and explaining decisions made in the text
of DCFR, referring to any alternative options considered and rejected,
and setting out comparative law material drawn from the laws of
Member States (QQ 98, 100). Such material appears to the
Committee to be likely to be of great potential interest and future
value for academics and European and national legislators, whatever
use is made of the DCFR itself. Jonathan Faull identified the
comparative law value of the work done (QQ 132, 135). But
the project was of course conceived and justified as something
more than an academic comparative law study. Mr Faull said:
"This has been in part an academic exercise but we are not
an academic institution—but I think I speak for my Commissioner
as well—our interest in this is not academic" (Q 149).
Some differences compared with
the Common Law and other national laws
24. We did not investigate the contents of the
DCFR in detail. The model rules differ in significant respects
from the current law of contract in England and Wales, both in
specific areas and, more fundamentally, in some measure as a matter
of general philosophy (p 4 and QQ 6-14, 43, 48). Lord Bach
agreed that the draft CFR raised some big philosophical problems,
and thought that the Commission also appreciated this (QQ 93-94).
We consider below only a few of areas of difference.
25. Professor Vogenauer pointed out that
the model rules also differ from the laws of other Member States.
This is not surprising as the DCFR is the result of an exercise
both in comparative law and in providing—in accordance with
the Commission's action plan—what the academic authors propose
as "best solutions" in cases where there is no current
European legal acquis and no single solution to be found
in the laws of the Member States (p 4 and Q 4).
Specific examples of areas of
difference
26. Professor Vogenauer identified a number,
of which we take only three examples:
THE CONCEPT OF CONTRACT
27. This in English law is one of bargain (a
typical example being supply for a consideration, such as of goods
and services for a price), whereas in civil law the concept may
extend to one-sided transactions such as an agreement for a gift.
The DCFR adopts this civilian approach (see Book II, article 4.101).
Professor Vogenauer pointed out that the English doctrine
of consideration affects not only the formation of contracts,
but has a role in the concept of "privity of contract"
(the rule that normally only the parties can rely on a contract)
and in relation to variation of contracts (Q 9).
PRE-CONTRACT NEGOTIATIONS
28. With limited exceptions, these are not admissible
in English law as an aid to interpretation. Professor Vogenauer
recalled that this rule was once described by Lord Steyn as "a
sacred cow of English contract law" (Q 13). It is a
rule not generally shared by civil law systems, but traditionally
justified in an English context as promoting certainty and avoiding
costly, lengthy and often inconclusive investigation of pre-contractual
discussions and subjective intentions. The model rules in the
draft CFR again adopt the civilian approach (see Book II, article
8.102).
MISTAKE AS A GROUND FOR SETTING ASIDE
A CONTRACT
29. Professor Vogenauer identified the relatively
broad scope of the doctrine of mistake incorporated in the DCFR
(Book II, article 7:201-203) as a further difference from English
common law.
More fundamental areas of concern
30. These are associated with the general philosophical
approach adopted by the DCFR, to which the second and third specific
areas above (pre-contractual negotiations and mistake) can also
be related.
PARTY AUTONOMY AND CONTRACTUAL CERTAINTY
31. Professor Vogenauer noted that the DCFR
had been the subject of considerable criticism, not merely in
this country, but also in Germany and France, both as being too
detailed and at the same time, paradoxically, as involving too
much discretion, and so uncertainty, by use of "an astonishing
number of vague and ambiguous terms, concepts such as 'reasonableness'
and 'good faith'" (QQ 51-52).
32. In contrast to English contract law, the
draft CFR contains an overarching principle of good faith and
fair dealing, which applies to the process by which a contract
is brought into being as well as to the performance of the contractual
obligations (see Book II, article 3.301 and Book III, article 1.103).
This difference was described by Professor Vogenauer as a
"classic example where English law deviates very much from
continental systems" (Q 14). Professor Vogenauer
referred the Committee to an article by Professor Ulrich
Huber of Bonn University[19]
which contains a vigorous critique of the whole approach to sales
contracts taken in Book IV. Professor Huber concluded by
commenting that "The rules need in their entirety to be re-formulated
anew"[20] and by
noting a general philosophical problem raised by the limitation
of party autonomy by reference to an unspecific reservation of
"good faith and fair dealing".[21]
33. The latter comment is one that applies generally
to the basic contractual principles addressed in Books I to III.
These make good faith and fair dealing a fundamental requirement
(basically incapable of being excluded or limited) in relation
to all aspects of the interpretation and development of the rules
of the CFR, as well as of interpretation and performance of any
contract subject thereto (see e.g. Books I, article 1:102-103,
II, article 8:102 and III, article 1:103), and this general
approach is further manifested in a number of more specific provisions,
such as those imposing potentially wide-ranging duties of pre-contractual
disclosure of information on suppliers of goods, assets and services
(e.g. Book II, article 3:101 et seq.). The DCFR contains
some generalisations from the consumer acquis to other
areas in a manner which Professor Vogenauer argued is not
necessarily appropriate (Q 4). Although reference is also
made to legal certainty (Book I, article 1:102) and party autonomy
(Book II, article 1:102), this conjunction of different principles
may as much add to, as reduce, uncertainty about the underlying
philosophy and add to the scope for argument in individual cases.
34. Professor Vogenauer drew our attention
to a "highly critical" article by distinguished German
professors demonstrating that not only common lawyers feel a certain
unease in relation to the current DCFR.[22]
In its concluding section, it pays tribute, as we ourselves have,
to the "immense achievement" of the participating academic
groups in producing such a comprehensive body of rules in such
a short time, but it goes on:
"None the less, the verdict on the published
Draft must be negative. The text suffers from a great number of
serious shortcomings. These include unresolved or unconvincing
policy decisions as much as ill-adjusted and inconsistent sets
of rules. Especially alarming is the fact that the Draft paves
the way for a massive erosion of private autonomy which goes far
beyond existing tendencies to "materialise" private
law. Good faith and fair dealing are no longer merely taken to
guide the interpretation of contracts and the process of determining
issues which the parties have failed to regulate. Rather, the
content of what the parties to a contract may agree upon appears
to be placed under the general proviso of good faith, fair dealing
and general usage. Moreover, to a considerable extent, contract
law is no longer conceived as providing rules which parties may
or may not choose to accept as suitable for their transaction,
but as regulatory ius cogens. Thus, the responsibility
for the content of a contract is shifted from the parties towards
the law and the judiciary. This is all the more alarming as the
Draft lacks clear core aims and values on the level of both principles
and rules. Given the arbitrary catalogue of core aims set out
in the Introduction, the abundance of general provisions and open-ended
legal concepts signifies a massive expansion of uncontrolled judicial
power."
35. In their final paragraph, the authors conclude
with a comment, which the Committee believes pertinent, that:
"The academic discussion about the structure,
core aims and values, and the rules of European private law will
not find its conclusion with the DCFR. It will have to continue.
This raises the question of an appropriate procedural and institutional
setting to channel such discussion. For without such framework
it will not be possible to formulate a coherent reference text
which, in the medium or long term, might constitute the basis
for an (optional) Civil Code … The creation of a European
Law Institute on the model of the American Law Institute may be
the next step that has to be taken. At any rate, the DCFR deserves
and requires a broadly based discussion among the jurists of all
the Member States."
36. Summarising the position, Professor Vogenauer
suggested that a general principle of good faith might be seen
as giving contract law a less commercial and less hard-nosed approach,
which was more open to considerations of substantive justice and
fairness (Q 43); but that might be at the price of predictability
which was particularly important in commercial relationships where
parties want clear-cut rules (Q 48). Lord Bach saw some significant
problems with the approach taken in the draft CFR (Q 93).
Jonathan Faull would not be drawn, at this stage, on the question
whether principles and model rules in the draft CFR find common
ground in the laws of the Member States or even in EU law but
said that he could "well imagine that some aspects of it
are more satisfactory than others because of the difficulties
of the disparities between nation contract law systems" (Q 128).
37. We are conscious that we have focused on
some negative aspects of a formidable work. Clearly there is room
for debate as to how far and when the general common law approach
or the approach taken in the draft CFR is preferable as matter
of policy. But, even if some of the criticisms may well in the
last analysis prove to be rebuttable or capable of being met by
amendment, the fact is they come from weighty sources and call
for serious and deep consideration; this itself is going to involve
time, effort and cost, before any formal CFR could be produced,
and this is so whether the ultimate CFR were ultimately to incorporate
the existing or different provisions.
38. We do not venture further into the policy
debate on the merits of the general philosophy of the DCFR or
the detailed rules adopted to regulate particular situations.
It is clear however that these are in a number of respects controversial.
This is not just because they differ in significant respects from
the common law, and from well-established laws of other Member
States. That is in considerable measure inevitable in any process
which aims at suggesting harmonised language, principles or rules
for use at a European level. It is rather that the approach adopted
and choices made appear vulnerable to suggestions that they will
not be beneficial or usable in a practical sense.
16 Professor Vogenauer supplied the Committee with
a copy of the Zeitschrift für Europäisches Privatrecht
in which Professor Gerhard Wagner of Bonn University refers to
DCFR as an "ugly phrase" (Wortungetüm) behind
which hides nothing less than a draft European Code of Civil Law.
'Vom akademischen zum politischen Draft Common Frame of Reference',
ZEuP (4/2008). Back
17
Professor Whittaker's report for the Ministry of Justice, p.78,
citing R. Schulze, 'The Academic Draft of the CFR and the EC Contract
Law', published in Common Frame of Reference and the Existing
EC Contract Law (Sellier 2008). Back
18
See Professor Schulze's article cited in footnote 17 and also
Le nouveau Cadre Commun de Référence et l'Acquis
Communautaire, Revue des Contrats No. 3-2008. Back
19
'Modell regeln für ein Europäisches Kaufrecht', Zeitschrift
für Europäisches Privatrecht (4/2008). Back
20
Ibid. p 742. Back
21
Ibid. p 744. Back
22
'The Common Frame of Reference for European Private Law-Policy
Choices and Codification Problems' by Professors Eidenmüller,
Faust, Grigoleit, Jansen, Wagner and Zimmermann. Oxford Journal
of Legal Studies Vol 28, No 4 (2008). Back
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