Green Paper from the Commission on policy options for progress towards a European Contract Law for consumers and businesses
Date: 2010-07-01
Institutions: European Commission
Subjects: EU law, contract, domestic market

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EUROPEAN COMMISSION 

Brussels, 1.7.2010 
COM(2010)348 final 

GREEN PAPER FROM THE COMMISSION 

on policy options for progress towards a European Contract Law for consumers and 
businesses 

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GREEN PAPER FROM THE COMMISSION 

on policy options for progress towards a European Contract Law for consumers and 
businesses 

1. 

PURPOSE OF THE GREEN PAPER 

The internal market is built on a multitude of contracts governed by different national contract 
laws. Yet, differences between national contract laws may entail additional transaction costs 
and legal uncertainty for businesses and lead to a lack of consumer confidence in the internal 
market.  Divergences  in  contract  law  rules  may  require  businesses  to  adapt  their  contractual 
terms.  Furthermore,  national  laws  are  rarely  available  in  other  European  languages,  which 
imply that market actors need to take advice from a lawyer who knows the laws of the legal 
system that they are proposing to choose.  

Partly  for  these  reasons,  consumers  and  businesses,  in  particular  small  and  medium 
enterprises  (SMEs)  having  limited  resources,  may  be  reluctant  to  engage  in  cross-border 
transactions. This reluctance would in turn hinder cross-border competition to the detriment of 
societal welfare. Consumers and businesses from small Member States might be particularly 
disadvantaged. 

The Commission wants citizens to take full advantage of the internal market. The Union must 
do more to ease cross-border transactions. The purpose of this Green Paper is to set out the 
options on how to strengthen the internal market by making progress in the area of European 
Contract Law, and launch a public consultation on them. Depending on the evaluation of the 
results  of  the  consultation,  the  Commission  could  propose  further  action  by  2012.  Any 
legislative proposal will be accompanied by an appropriate impact assessment.  

BACKGROUND  

2. 
With  its  2001  Communication  on  European  Contract  Law1,  the  European  Commission 
launched a process of extensive public consultation on the problems arising from differences 
between Member States' contract laws and on potential actions in this field. In the light of the 
responses, the Commission issued an Action Plan in 20032, proposing to improve the quality 
and  coherence  of  European  Contract  Law  by  establishing  a  Common  Frame  of  Reference 
(CFR) containing common principles, terminology and model rules to be used by the Union 
legislator  when  making  or  amending  legislation.  It  was  also  proposed  to  review  the  Union 
acquis  in  the  area  of  consumer  contract  law,  to  remove  inconsistencies  and  fill  regulatory 
gaps3. As a result of the review, in October 2008, the Commission submitted a Proposal for a 
Directive on consumer rights4, a measure designed to boost the retail internal market. 

The Commission financed through a grant under the 6th Framework Programme for Research 
and  closely  followed  the  work  of  an  international  academic  network  who  carried  out  the 

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COM(2001) 398, 11.7.2001. 
COM(2003) 68, 12.2.2003. 
See  also  Commission  Communication  on  "European  Contract  Law  and  the  revision  of  the  aquis:  the 
way forward" - COM(2004) 651, 11.10.2004. 
COM(2008) 614, 8.10.2008. 

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preparatory  legal  research  in  view  of  the  adoption  of  the  CFR.  The  research  work  was 
finalised  at  the  end  of  2008  and  led  to  the  publication  of  the  Draft  Common  Frame  of 
Reference (DCFR)5. The DCFR covers principles, definitions and model rules of civil law6, 
including  contract  and  tort  law.  It  contains  provisions  for  both  commercial  and  consumer 
contracts. 

The DCFR has built on several projects previously undertaken at European and international 
level. A network of eminent European academics7 has elaborated the Principles of European 
Contract Law (PECL) with the aim of providing the internal market with a uniform contract 
law. Various international and regional organisations, recognising that diverging contract law 
rules  create  obstacles  to  international  trade, have  been  working  to  reduce  such  obstacles  by 
providing uniform model rules. The United Nations Commission on International Trade Law 
(UNCITRAL)  has  created  an  almost  worldwide  standard  for  business-to-business  sales  of 
goods – the Vienna Convention on International Sales of Goods8 - which applies by default 
whenever the parties have not chosen to apply another law. The International Institute for the 
Unification  of  Private  Law  (UNIDROIT)  has  developed  the  Principles  of  International 
Commercial  Contracts,  which  represent  model  rules  on  sales  of  goods  and  provision  of 
services.  These  instruments  have  created  standards  which  have  served  as  model  rules  for 
legislators around the world9 and for parties to commercial contracts who may not designate 
them as the law governing certain aspects of their contracts but can nevertheless incorporate 
them  by  reference,  as  Article  3  in  conjunction  with  Recital  13  of  the  Rome  I  Regulation10 
makes clear. However, their scope is limited to business-to-business contracts, and in the case 
of the Vienna Convention, to sale of goods. Moreover, there is no mechanism to ensure their 
uniform  interpretation  in  the  Member  States.  Finally,  these  instruments  cannot  restrict  the 
application of national mandatory rules. 

An instrument of European Contract Law could help the EU to meet its economic goals and 
recover from the economic crisis. The Stockholm Programme for 2010-201411 states that the 
European judicial area should serve to support the  economic  activity  in the  internal  market. 
The  Programme  invites  the  Commission  to  submit  a  proposal  on  the  CFR  and  to  examine 
further  the  issue  of  contract  law.  The  Commission's  Communication  "Europe  2020"12 
recognises the need to make it easier and less costly for businesses and consumers to conclude 
contracts  with  partners  in  other  EU  countries,  notably  by  offering  harmonised  solutions  for 
consumer contracts, EU model contract clauses and by making progress towards an optional 

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Von  Bar,  C.,  Clive,  E.  and  Schulte  Nölke,  H.  (eds.),  Principles,  Definitions  and  Model  Rules  of 
European Private Law. Draft Common Frame of Reference (DCFR), Munich, Sellier, 2009. 
Some  of  those  have  been  inspired  by  principles  and  model  rules  produced  by  the  Association  Henri 
Capitant and Société de législation comparée ("European Contract Law. Materials for a Common Frame 
of Reference :  Terminology, Guiding Principles, Model Rules", Ass. H. Capitant et SLC, 2008, Sellier 
European law publishers). 
The network, entitled 'Commission on European Contract Law', was composed of academics from all 
the Member States and activated, under the chairmanship of Ole Lando, between 1982 and 2001. 
The  Vienna  Convention  has  been  ratified  by  74  countries  so  far.  Notable  exceptions,  among  the  EU 
countries, are the United Kingdom, Portugal and Ireland. 
For example, the Organisation for the Harmonisation of Business Law in Africa has been working on 
developing a Uniform Act on Contracts largely inspired by the UNIDROIT Principles of International 
Commercial Contracts. The UNIDROIT Principles and PECL have also inspired the Chinese Contract 
Act of 1999. 
Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the 
law applicable to contractual obligations (OJ L 177, 4.7.2008, p. 6). 
Council act of 2 December 2009, No 17024/09. 
COM(2010) 2020, 3.3.2010. 

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European Contract Law. The Digital Agenda for Europe13, the first flagship initiative adopted 
under the Europe 2020 strategy, aims at delivering sustainable economic and social benefits 
from a digital internal market by eliminating legal fragmentation. The action it proposes refers 
to  "an  optional  contract  law  instrument  to  overcome  the  fragmentation  of  contract  law,  in 
particular as regards the on-line environment".  

The Union could fill contract law gaps by adopting effective tools for the removal of market 
barriers  relating  to  diverging  contract  laws.  An  instrument  of  European  Contract  Law,  if 
sufficiently  user-friendly  and  legally  certain,  could  also  serve  as  a  model,  in  particular  to 
international organisations which have taken the Union as a model for regional integration14. 
The  Union  could  thus  play  a  leading  role  in  setting  uniform  international  standards  in  this 
field, which could in turn give the European economy a competitive advantage in the world.  

In order to carry out its mandate, the Commission has set up an Expert Group15 to study the 
feasibility  of  a  user-friendly  instrument  of  European  Contract  Law,  capable  of  benefiting 
consumers  and  businesses  which,  at  the  same  time,  would  provide  for  legal  certainty.  The 
Group will assist the Commission in selecting those parts of the DCFR which are directly or 
indirectly  related  to  contract  law,  and  in  restructuring,  revising  and  supplementing  the 
selected provisions. It will also take into consideration other relevant sources in this area, as 
well as the contributions to the present consultation. The Group gathers the expertise from the 
Union's  different  legal  traditions  and  stakeholders'  interests.  Members  were  selected  from 
among  reputable  experts  in  the  area  of  civil  law,  in  particular  contract  law,  and  are  acting 
independently  and  in  the  public  interest.  The  results  of  the  public  consultation  launched  by 
this Green Paper will inform the on-going work of the Expert Group. 

3. 

CHALLENGES FOR THE INTERNAL MARKET 

The  completion  of  the  internal  market  faces  a  number  of  barriers,  which  prevent  it  from 
delivering on its full potential. Regulatory, linguistic, and other obstacles16 hinder the smooth 
functioning  of  the  internal  market.  Divergences  between  national  contract  laws  feature 
amongst  these  barriers,  as  has  emerged  in  the  course  of  the  consultation  launched  with  the 
2001  Communication  in  European  Contract  Law,  in  Eurobarometer  surveys17  and  other 
studies18.  

3.1. 

Business-to-consumer contracts 

Divergences  exist  not  only  in  areas  which  have  not  been  regulated  by  EU  law  (e.g.  general 
contract law), but also in areas  which have  been partially harmonised at Union level on the 
basis  of  minimum  harmonisation  (e.g.  consumer  protection  law).  This  has  left  room  for 
different national approaches to consumer protection legislation.  

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See  Communication  from  the  Commission,  "A  Digital  Agenda  for  Europe"  -  COM(2010)  245, 
19.5.2010. 
For  example,  the  Association  of  Southeast  Asian  Nations  (established  in  1967),  or  the  recently 
established Union of South American Nations (2008). 
Commission Decision of 26 April 2010 setting up the Expert Group on a Common Frame of Reference 
in the area of European Contract Law (OJ L 105, 27.4.2010, p. 109). 
E.g. delivery problems with postal services, problems with payments.  
See,  for  example,  Special  EUROBAROMETER  292  (2008)  and  Flash  EUROBAROMETER  278 
(2009). 
See, for example, the Clifford Chance Survey in European Contract Law, (2005). 

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In business-to-consumer contracts, the Union has put into place uniform conflict-of-law rules 
which  aim  to  protect  consumers  when  seeking  redress  with  businesses  from  other  Member 
States  with  whom  they  have  contracted.  More  specifically,  under  Article  6  of  the  Rome  I 
Regulation,  where  the  business  party  pursues  his  commercial  activities  in  or  directs  this 
activity to the country of habitual residence of the consumer, the law of this country applies in 
the absence of choice. If the parties choose a law other than the law of the country of habitual 
residence  of  the  consumer,  the  contract  cannot  deprive  the  consumer  of  the  protection 
afforded by his law19. As a result of this rule, consumers can be confident that, in the event of 
dispute, courts will ensure that they will benefit from at least the same level of protection as 
guaranteed in their country of residence. 

For  businesses,  this  rule  means  that  when  they  sell  across  borders,  the  contracts  that  they 
conclude with consumers are subject to the different rules in force in the countries in which 
these  consumers  are  resident,  irrespective  of  whether  a  choice  of  law  is  made  or  not. 
Businesses wishing to engage in such cross-border trade may face high legal costs when their 
contracts are subject to foreign consumer law. In extreme cases, some businesses may even 
refuse to sell across borders and thus potential consumers of that company may be locked in 
their national markets and be deprived of the enhanced choice and lower prices offered by the 
internal  market.  This  may  be  particularly  relevant  in  e-commerce  transactions.  Even  if  the 
website of a seller could be accessed by consumers from all the Member States, because of 
the related costs and risks, the seller may refuse to conclude contracts with consumers from 
other  Member  States.  For  example,  for  61%  of  cross-border  e-commerce  offers,  consumers 
were  not  able  to  place  an  order  mainly  because  businesses  refused  to  serve  the  consumer's 
country.20  Thus,  the  potential  of  cross-border  e-commerce  remains  partly  unfulfilled,  to  the 
detriment of both businesses, in particular SMEs, and consumers. 

The  Commission's  Proposal  for  a  Consumer  Rights  Directive21  addresses  some  of  these 
problems  by  aiming  at  simplifying  and  consolidating  the  existing  legislation  in  the  area  of 
consumer contract law, on the basis of a fully harmonised set of key internal market aspects of 
consumer  contract  law.  However,  even  if  adopted  as  proposed,  it  would  not  render  fully 
compatible the national contract laws of the Member States in the non-harmonised areas. Also 
in  the  areas  of  fully  harmonised  provisions,  there  would  be  a  need  to  apply  them  in 
conjunction with other national provisions of general contract law22. Moreover, two years of 
intense negotiations in the European Parliament and Council have highlighted that there are 
limits  to  an  approach  based  on  full  harmonisation.  Consequently,  differences  between  the 
contract  laws  of  the  Member  States  will  remain  a  reality  even  after  the  adoption  of  the 
Directive and businesses wishing to sell cross-border will have to comply with them. 

3.2. 

Business-to-business contracts 

In a business-to-business contract, the parties have the freedom to choose the law governing 
their contract. They can also incorporate into their contracts existing instruments, such as the 
Vienna  Convention  on  the  International  Sale  of  Goods  or  the  UNIDROIT  Principles  of 

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Similar conflict-of-law rules which aim at protecting the weaker party exist in respect of other types of 
contracts,  such  as  for  example  insurance  contracts  and  contracts  of  carriage,  see  Article  7  and  5 
respectively of the Rome I Regulation. 
See Communication from the Commission on Cross-Border Business to Consumer e-Commerce in the 
EU - COM(2009) 557, 22.10.2009. 
COM(2008) 614. 
For example, on remedies for breach of information duties. 

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International  Commercial  Contracts.  However,  businesses  do  not  have  the  option  of  a 
common European Contract Law which could be applied and interpreted uniformly in all the 
Member States.  

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Large companies with strong bargaining power can ensure that their contracts are subject to a 
particular national law. This may be more difficult for SMEs and therefore raise obstacles to 
pursuing  a  uniform  commercial  policy  across  the  Union,  thus  preventing  businesses  from 
grasping  opportunities  in  the  internal  market.  Furthermore,  ensuring  compliance  with 
different systems of contract law or obtaining information about the law applicable in another 
Member State and in another language might increase legal costs.  

Whereas  for  certain  specialised  types  of  contract  having  a  strong  international  dimension, 
such  as  shipping  contracts,  businesses  may  already  have  become  familiar  with  the  laws 
commonly used for governing this type of transaction, this is not necessarily always the case. 
In  addition,  for  more  general  commercial  transactions,  businesses  might  benefit  from  an 
instrument setting out a uniform set of rules of European Contract Law which would be easily 
accessible  in  all  official  languages.  This  could  provide  greater  reassurance  to  businesses 
engaged in cross-border trade, which might quickly familiarise themselves with such a system 
by using it in all dealings with businesses in other Member States. In such dealings, it could 
also  come  to  be  seen  as  an  alternative  to  the  Member  States  national  contract  laws  and  a 
neutral modern contract law regime drawing on the common national law traditions in a clear 
and user-friendly manner. Such an option could be particularly attractive for SMEs venturing 
into new markets for the first time.  

4. 

CHOOSING THE BEST INSTRUMENT FOR EUROPEAN CONTRACT LAW 

An  instrument  of  European  Contract  Law  should  respond  to  the  problems  of  diverging 
contract  laws  identified  above,  without  introducing  additional  burdens  or  complications  for 
consumers or businesses. In addition it should ensure a high level of consumer protection. In 
the area it covers, the instrument should be comprehensive and self-standing, in the sense that 
references  to  national  laws  or  international  instruments  should  be  as  much  as  possible 
reduced.  Several  options  have  been  identified,  in  respect  of  the  legal  nature,  the  scope  of 
application and the material scope of the future instrument.  

4.1.  What should be the legal nature of the instrument of European Contract Law? 

An instrument of European Contract Law could range from a non-binding instrument, aiming 
at  improving  the  consistency  and  quality  of  EU  legislation,  to  a  binding  instrument  which 
would  set  out  an  alternative  to  the  existing  plurality  of  national  contract  law  regimes,  by 
providing  a  single  set  of  contract  law  rules.  As  a  general  observation,  a  Union  instrument 
would  be  made  available  in  all  official  languages.  This  would  benefit  all  stakeholders 
involved, legislators seeking guidance, judges applying rules and parties negotiating the terms 
of their contract.  

Option 1: Publication of the results of the Expert Group 

The outcome of the work of the Expert Group could be made easily available, by immediate 
publication on the website of the Commission, without any endorsement at Union level. If the 
Expert Group produces a practical and user-friendly text, this could be used by European and 
national  legislators  as  a  source  of  inspiration  when  drafting  legislation  and  by  contractual 
parties  when  drafting  their  standard  terms  and  conditions.  It  could  also  be  used  in  higher 
education  or  professional  training  as  a  compendium  drawn  from  the  different  contract  law 

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traditions of the Member States. Extensive use of this work could contribute, in the long term, 
to the voluntary convergence of national contract laws.  

However, this solution could not address the internal market barriers. Divergences in contract 
law would not be significantly reduced by a text which has no formal authority or status for 
courts and legislators. 

Option 2: An official "toolbox" for the legislator 

a) 

Commission act on a "toolbox" 

Drawing  on  the  results  of  the  Expert  Group,  the  Commission  could  adopt  an  act  (e.g.  a 
Communication  or  Commission  Decision)  on  European  Contract  Law  to  be  used  as  a 
reference  tool  by  the  Commission  to  ensure  the  coherence  and  quality  of  legislation.  The 
Commission  would  use  the  "toolbox"  when  drafting  proposals  for  new  legislation  or  when 
revising existing measures. Such an instrument would be effective immediately upon adoption 
by  the  Commission,  without  the  approval  of  the  Parliament  and  Council.  However,  in  this 
case,  the  Parliament  and  Council  would  not  be  required  to  take  its  recommendations  into 
consideration when tabling their amendments.  

b) 

Interinstitutional agreement on a "toolbox"  

A "toolbox" in European Contract Law could be the object of an interinstitutional agreement 
between  the  Commission,  Parliament  and  Council  to  make  consistent  reference  to  its 
provisions when drafting and negotiating legislative proposals bearing on European Contract 
Law.  A  proposal  for  an  interinstitutional  agreement  would  require  negotiations  between  the 
three lawmakers before it becomes effective, but it would have added value in its implication 
of the three institutions which will be required to take its recommendations into consideration 
while preparing and adopting new legislative instruments. 

The disadvantage of any "toolbox" is that it would not provide immediate, tangible internal 
market benefits since it will not remove divergences in law. Furthermore, a "toolbox" for the 
legislator could not ensure a convergent application and interpretation of Union contract law 
by the courts.  

Option 3: Commission Recommendation on European Contract Law 

instrument  of  European  Contract  Law  could  be  attached 

to  a  Commission 
An 
Recommendation  addressed  to  the  Member  States,  encouraging  them  to  incorporate  the 
instrument into their national laws. Such a Recommendation would allow the Member States 
to gradually adopt the instrument into their national laws on a voluntary basis. Furthermore, 
the  Court  of  Justice  of  the  EU  would  have  jurisdiction  to  interpret  the  provisions  of  the 
Recommendation.  

Two possibilities can be envisaged: 

a) 

The  Recommendation  could  encourage  the  Member  States  to  replace  national 
contract  laws  with  the  recommended  European  instrument.  Such  an  approach  has 
been  successfully  implemented  in  the  United  States,  where  a  Uniform  Commercial 

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Code elaborated by experts in commercial law and endorsed by neutral, quasi-public 
organisations23 has been adopted by all but one of the 50 states. 

b) 

The  Recommendation  could  encourage  the  Member  States  to  incorporate  the 
European Contract Law instrument as an optional regime, offering contractual parties 
an  alternative  to  national  law.  In  those  Member  States  opting  for  this  method,  the 
European optional instrument would stand beside other alternative instruments which 
can be chosen as the law applicable to contracts, such as the UNIDROIT Principles. 

Such  a  Recommendation  would  have  no  binding  effects  on  the  Member  States  and  would 
allow them discretion in how and when to implement the instrument into their national laws. 
Therefore, this solution bears the risk of an incoherent and incomplete approach between the 
Member States, which might enact the Recommendation differently and at different moments 
in time or not at all. 

Option 4: Regulation setting up an optional instrument of European Contract Law 
A  Regulation  could  set  up  an  optional  instrument,  which  would  be  conceived  as  a  "2nd 
Regime" in each Member State, thus providing parties with an option between two regimes of 
domestic contract law24. 

It would insert into the national laws of the 27 Member States a comprehensive and, as much 
as possible, self-standing set of contract law rules which could be chosen by the parties as the 
law regulating their contracts25. It would provide parties, primarily those wishing to operate in 
the internal market, with an alternative set of rules26.  The instrument could be applicable in 
cross-border contracts only, or in both cross-border and domestic contracts (see Section 4.2.2 
below).  

By  its  very  nature,  an  optional  instrument  could  only  constitute  a  sensible  solution  to  the 
problems stemming from regulatory divergences if it is sufficiently clear to the average user 
and  provides  legal  certainty.  These  are  preconditions  for  building  the  confidence  of  the 
contracting  parties  in  the  instrument  so  that  it  would  be  chosen  as  the  legal  basis  of  the 
contract in the first place. In particular, consumers should be reassured when entering into a 
contract  on  this  basis  that  their  rights  will  not  be  compromised.  To  be  operational  from  an 
internal  market  perspective,  the  optional  instrument  would  have  to  affect  the  application  of 

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The  Uniform  Commercial  Code  is  frequently  revised  and  approved  jointly  by  the  Uniform  Law 
Commission, which has the aim of drafting and promoting the enactment of uniform state laws, where 
uniformity  is  practical  and  desirable,  and  by  the  American  Law  Institute,  which  produces  influential 
scholarly work to clarify, modernise and improve the law. 
See also Opinion of the European Economic and Social Committee, INT/499, 27.5.2010. 
This set of contract law rules would form part of each Member State's national law also for the purposes 
of private international law. 
See Mario Monti's Report to the President of the European Commission "A New Strategy for the Single 
Market", 9 May 2010: "The advantage of the 28th regime is to expand options for business and citizens 
operating in the single market: if the single market is their main horizon, they can opt for a standard and 
single legal framework valid across Member States". See also the recommendation of the Report to the 
European  Council  by  the  Reflection  Group  on  the  Future  of  the  EU  2030,  "Project  Europe  2030: 
Challenges and Opportunities", May 2010: "Action should be taken to provide citizens with the option 
of resorting to a European legal status (the "28th regime") which would apply to contractual relations in 
certain areas of civil or commercial law alongside the current 27 national regimes". 

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the  mandatory  provisions,  including  those  on  consumer  protection  27.Indeed,  this  would 
constitute the added value compared with the existing optional regimes, such  as the  Vienna 
Convention, which cannot restrict the application of national mandatory rules. 

The optional instrument would need to offer a manifestly high level of consumer protection28.  

Consistent reference to a single body of rules would remove the necessity for judges and legal 
practitioners  to  investigate  in  certain  cases  foreign  laws,  which  is  currently  the  case  under 
conflict-of-law  rules.  This  could  not  only  reduce  costs  for  businesses,  but  also  alleviate  the 
administrative load on the judicial system.  

Such  an  optional  instrument  could  bring  about  important  internal  market  benefits  without 
necessitating  further  in-roads  into  national  law.  Therefore,  in  line  with  the  principle  of 
subsidiarity,  an  optional  instrument  could  constitute  an  alternative  to  full  harmonisation  of 
national laws, by offering a proportionate solution to internal market barriers stemming from 
diverging national contract laws. 

On  the  other  hand,  a  European  optional  instrument  might  be  criticised  for  complicating  the 
legal environment. By adding a parallel system, the legal environment would continue to be 
challenging and require clear information to allow consumers to  understand  their  rights  and 
thereby  make  an  informed  decision  as  to  whether  they  want  to  conclude  a  contract  on  this 
alternative basis.  

Option 5: Directive on European Contract Law 

A Directive on European Contract Law could harmonise national contract law on the basis of 
minimum common standards. Member States would be able to retain more protective  rules, 
subject to compliance with the Treaty. It could also be foreseen that the resulting differences 
are notified to the Commission and then published to increase transparency for consumers and 
businesses operating across borders.  

In respect of business-to-consumers contracts, the Directive would be based on a high level of 
consumer protection, as required by the Treaty, and would complement the consumer acquis, 
including the provisions of the future Directive on Consumer Rights.  

Such  a  Directive  could  decrease  legal  divergences,  by  achieving  a  degree  of  convergence 
between national contract laws. This in turn could lead to more confidence, in particular for 
consumers  and  SMEs,  in  venturing  to  operate  across  borders.  However,  harmonisation 
through  directives  based  on  minimum  harmonisation  would  not  necessarily  lead  to  uniform 
implementation  and  interpretation  of  the  rules29.  Businesses  offering  goods  and  services 
across  borders  would  still  need  to  abide  by  the  different  consumer  contractual  rules  in  all 
those  countries.  The  existing  consumer  contract  acquis  demonstrates  the  limitations  of 
minimum  harmonisation  directives  in  reducing  regulatory  divergences.  In  business-to-
business cross-border contracts, the Directive might not be able to deliver the necessary legal 
certainty and businesses would thus continue to incur compliance costs.  

27 

28 
29 

It  would  be  necessary  to  articulate  in  the  instrument  itself  the  relationship  with  the  provisions  of  the 
Rome I Regulation.  
See Article 12 of the Treaty on the Functioning of the European Union. 
For  this  reason,  the  Monti  Report  recommends  that  harmonisation  should  be  pursued  through 
Regulations, p. 93. 

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Option 6: Regulation establishing a European Contract Law  

A  Regulation  establishing  a  European  Contract  Law  could  replace  the  diversity  of  national 
laws with a uniform European set of rules, including mandatory rules affording a high level of 
protection for the weaker party. These rules would apply to contracts not upon a choice by the 
parties, but as a matter of national law. The Regulation could replace national laws in cross-
border transactions only, or it could replace national laws in both cross-border and domestic 
contracts (see Section 4.2.2 below). 

This  solution  would  remove  legal  fragmentation  in  the  field  of  contract  law  and  lead  to  a 
uniform  application  and  interpretation  of  the  Regulation's  provisions.  Uniform  contract  law 
rules  could  facilitate  the  conclusion  of  cross-border  contracts  and  present  an  efficient 
mechanism for settling disputes.  

However,  this  solution  could  raise  sensitive  issues  of  subsidiarity  and  proportionality. 
Replacing the plurality of national laws, in particular if domestic contracts are also covered, 
with a single set of rules might not be a proportionate measure to deal with the obstacles to 
trade in the internal market.  

Option 7: Regulation establishing a European Civil Code 

This solution goes one step further than the Regulation establishing a European Contract Law, 
in  the  sense  that  it  would  cover  not  only  contract  law,  but  also  other  types  of  obligations  
(e.g. tort law and benevolent intervention). Such an instrument would reduce even further the 
need to fall back onto national provisions. 

Although impediments to the smooth functioning of the internal market exist also in areas of 
law other than contract law, it is yet to be established to what extent an extensive instrument 
such as a European Civil Code could be justified on grounds of subsidiarity.  

4.2.  What should be the scope of application of the instrument? 

An instrument of contract law could cover several areas of application.  

4.2.1. 

Should  the  instrument  cover  both  business-to-consumer  and  business-to-business 
contracts?  

An instrument could be applicable in all types of transactions, whether business-to-business or 
business-to-consumer. There are certain general contract law provisions which are relevant to 
all contracts without distinction, but the instrument could also contain specific provisions, the 
application  of  which  would  only  be  triggered  in  certain  types  of  contracts,  for  example, 
mandatory provisions ensuring a high level of consumer protection. These would come into 
play when a transaction involves a consumer and a business party30.  

Separate instruments for business-to-consumer and business-to-business contracts could also 
be envisaged. In principle, separate instruments could better tackle issues which are specific 
to  these  types  of  contracts  and  would  be  easier  to  elaborate  and  use.  However,  the 

30 

For  reasons  of  consistency,  the  instrument  of  European  Contract  Law  will  have  to  complement  the 
relevant  consumer  acquis,  by  integrating  its  requirements,  including  progress  made  on  consumer 
protection in the internal market in the Consumer Rights Directive. 

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proliferation  of  instruments  bears  the  inherent  risk  of  overlaps  and  inconsistencies  in  the 
legislation. 

4.2.2. 

Should the instrument cover both cross-border and domestic contracts? 

The  problems  of  divergences  in  laws  are  normally  a  trademark  of  cross-border  contracts, 
where  several  national  or  international  instruments  may  come  into  play.  An  instrument 
covering  cross-border  contracts  only,  capable  of  resolving  the  problems  of  conflict  of  laws 
could  make  an  important  contribution  to  the  smooth  functioning  of  the  internal  market.  In 
business-to-consumer contracts, businesses would be able to operate on the basis of two sets 
of  terms  –  one  for  cross-border  and  one  for  domestic  contracts.  Consumers  would  also  be 
subject  to  two  sets  of  rules.  An  instrument  applicable  to  both  cross-border  and  domestic 
consumer contracts would further simplify the regulatory environment, but would impact on 
consumers  who  may  not  wish  to  venture  into  the  internal  market  and  prefer  to  preserve 
national levels of protection. 

On  the  other  hand,  in  business-to-business  contracts  where  the  principle  of  freedom  of 
contract is paramount, it may be unreasonable to deny the parties the possibility of choosing 
the  European  instrument  in  purely  domestic  transactions.  An  instrument  covering  both  
cross-border  and  domestic  contracts  could  represent  a  further  incentive  for  businesses  to 
expand  across  borders,  as  they  would  be  able  to  use  one  single  set  of  terms  and  one  single 
economic policy.  

The instrument could also focus on contracts concluded in the on-line environment (or, more 
generally, at a distance), although such an approach would not provide an exhaustive solution 
to  internal  market  barriers  beyond  that  specific  context.  These  contracts  constitute  a 
significant proportion of cross-border transactions in the internal market and have the highest 
potential  for  growth.  Therefore,  an  instrument  tailor-made  for  the  online  world  could  be 
developed. This could be applicable in both cross-border and domestic situations, or only in 
cross-border situations. 

4.3.  What should be the material scope of the instrument? 

The  material  scope  of  the  instrument  of  European  Contract  Law  could  be  interpreted  in  a 
narrow or in a broad manner. In any case, the instrument should cover mandatory consumer 
contract law rules, taking the Union acquis as a starting point. 

4.3.1.  A narrow interpretation of its scope 

An instrument of European Contract Law could be limited to rules on: definition of contract, 
pre-contractual  duties,  formation,  right  of  withdrawal,  representation,  grounds  of  invalidity, 
interpretation, contents and effects of contracts, performance, remedies for non-performance, 
plurality of debtors and creditors, change of parties, set-off and merger, and prescription31. Its 
scope  could  also  focus  on  mandatory  consumer  contract  laws  giving  rise  to  internal  market 
barriers  and  practices  causing  detriment  to  consumers  and  SMEs,  such  as  unfair  contract 
terms. 

31 

This terminology taken from the DCFR is indicative only and does not pre-empt either the structure or 
the terminology of the instrument. 

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4.3.2.  A broad interpretation of its scope 

An  instrument  of  European  Contract  Law  could  cover,  in  addition  to  the  matters  listed  in 
Section  4.3.1  above,  related  topics,  such  as  restitution,  non-contractual  liability,  acquisition 
and loss of ownership of goods and proprietary security in movable assets. 

4.3.3. 

Should specific types of contracts be covered by the instrument?  

In  addition  to  general  contract  law  provisions,  the  instrument  could  contain  specific 
provisions for the most prevalent types of contract. The most common and relevant from the 
internal market perspective is the contract for sale of goods.  

Service  contracts  are  also  very  important.  However,  given  their  heterogeneous  character, 
specific provisions will have to be made for specific types of service contracts. For example, 
the instrument could contain provisions for 'sale-like' service contracts, such as car lease, or 
for  insurance  contracts.  Furthermore,  contracts  in  the  financial  services  area  are  of  a  very 
specific and technical nature, particularly when concluded between professionals, and need a 
prudent approach as the legal environment in these areas changes rapidly. 

In respect of certain service contracts, model rules have already been proposed by researchers 
and could serve as inspiration. For example, the DCFR contains model rules for contracts of 
lease  of  goods.  The  Project  Group  "Restatement  of  European  Insurance  Contract  Law" 
elaborated the Principles of European Insurance Contract Law (PEICL)32. Assessment of the 
suitability of the principles is necessary for a decision as to whether and how they are to be 
applied to financial services contracts. 

4.3.4. 

Scope of a European Civil Code 

A European Civil Code would need to cover not only contract law, including specific types of 
contracts,  but  also  tort  law,  unjustified  enrichment  and  the  benevolent  intervention  in 
another's affairs.  

5. 

CONCLUSIONS 

The purpose of this Green Paper is to launch a public consultation to gather orientations and 
views  from  relevant  stakeholders  regarding  possible  policy  options  in  the  field  of  European 
Contract Law. 

be 

Paper  will 

the  Commission's  website 
published 
This  Green 
(http://ec.europa.eu/yourvoice/).  The  consultation  will  run  from  1  July  2010  to  31  January 
2011 and is open to any interested stakeholder. Individuals, organisations and countries that 
intend to participate in the consultation process are invited to send their contributions, in the 
form  of  answers  to  some  or  all  the  questions  presented  in  the  document  and/or  as  general 
comments on the issues that are raised in the document. 

on 

Contributions  received  will  be  published,  possibly  in  a  summarised  form,  unless  the  author 
objects to publication of their personal data on the grounds that such publication would harm 
his/her  legitimate  interests.  In  this  case,  the  contribution  may  be  published  in  anonymous 

32 

Principles of European Insurance Contract Law, Munich, Sellier, 2009. 

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form. Otherwise, the  contribution will  not be  published  nor, in principle,  will its  content be 
taken into account. 

Furthermore,  since  the  launch  in  June  2008  of  the  Register  for  Interest  Representatives 
(lobbyists)  as  part  of  the  European  Transparency  Initiative,  organisations  are  invited  to  use 
this  Register  to  provide  the  European  Commission  and  the  public  at  large  with  information 
about their objectives, funding and structures. It is Commission policy that submissions from 
organisations  will  be  considered  as  individual  contributions  unless  the  organisations  have 
registered. 

Contributions to the consultation should be sent to: jls-communication-e5@ec.europa.eu. 

Enquiries about this consultation can be made at the same e-mail address or at:  

European Commission, DG Justice, Unit A2, Rue de la Loi 200, B-1049 Brussels, Belgium. 

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