Following the European Parliament’s backing of the proposal made by European Commission Vice-President Viviane Reding to introduce an optional Europe-wide contract law, the European Commission has proposed a Regulation on a Common European Sales Law, offering a single set of rules for cross-border contracts in all 27 EU Member States.
On 11 October 2011, the Commission published a proposal for a Common European Sales Law Regulation (the Proposed Regulation), often referred to as the “28th Regime”. The Proposed Regulation aims to harmonise the contract laws of the 27 EU Member States by creating a second contract law regime, identical throughout the European Union, that would sit alongside preexisting national contract legislation. The Sales Law would apply:
- To cross-border contracts, although Member States will also have the option of making the law applicable to domestic contracts.
- To contracts for the sale of goods, for the supply of digital content and for the provision of related services.
- To business-to-consumer (B2C) and business-to-business (B2B) transactions where at least one party is a small or medium sized enterprise (SME).
- If one party to the contract is established in an EU Member State, then parties from third countries may choose to apply the Sales Law to the contract.
- Only if all parties voluntarily and expressly agree to it. In B2C contracts, the choice of the Sales Law will be valid only if the consumer’s consent is given by an explicit statement separate from the statement indicating the agreement to conclude a contract.
Part I of the Proposed Regulation sets out the general principles of contract law that all parties will need to observe in their dealings, such as good faith and fair dealing. The principle of freedom of contract also assures parties that, unless rules are designated explicitly as mandatory, they can deviate from the rules of the Sales Law.
Part II on “making a binding contract” contains provisions on consumers’ rights to receive essential pre-contractual information. For example, a business concluding a distance or off-premises contract must disclose to the consumer any information concerning “the main characteristics of the goods, digital content or related services to be supplied”. Part II also contains specific provisions that give consumers a right to withdraw from distance and off-premises contracts. Finally it includes provisions on avoidance of contracts resulting from mistake, fraud, threat or unfair exploitation.
Part III contains general provisions on contract interpretation. Contracts are to be interpreted according to “the common intention of the parties, even if this differs from the normal meaning of the expressions used”. Moreover, in interpreting a contract, regard may be had to the circumstances in which it was concluded, “including the preliminary negotiations” as well as the general concepts of good faith and fair dealing.
Part III also contains rules on the content and effects of contracts as well as which contract terms may be unfair and therefore invalid. Certain terms will always be unfair, for example those excluding or limiting the liability of traders for any loss or damage to consumers caused deliberately or as a result of gross negligence. There are also contract terms presumed to be unfair, including those that exclude or limit remedies available to consumers against traders, or “enable a trader to alter unilaterally without a valid reason contractual terms”.
The Proposed Regulation makes provision for nonperformance, interest on late payments and a “model instruction on withdrawal” that must be provided to the consumer before a distance or an off-premises contract is concluded.
The Proposed Regulation has now been sent to the European Parliament and the European Council, which will work closely with the Commission and the parliaments of each of the 27 EU Member States to agree a definitive text. The Commission will also work closely with the relevant market participants, namely SMEs and consumers, to achieve broad acceptance of the Sales Law.