On 11 October the European Commission published its proposed Regulation on a Common European Sales Law (download pdf here), aimed at facilitating cross-border transactions in the EU. If adopted, it will insert into the national laws of the 27 EU member states an alternative set of contract law rules which contracting parties could choose as the governing law for their cross-border transactions. Member states will also have the option of allowing the new law to be used for domestic contracts.

The proposed Regulation follows the Commission’s consultation on its 2010 Green Paper on policy options for progress towards a European Contract Law, and the publication of a “feasibility study” in May this year which was in effect a draft contract code.

The proposed new law

The Common European Sales Law is a comprehensive set of uniform contract law rules. It covers the whole life-cycle of a contract dealing with matters such as pre-contractual information duties, conclusion of a contract, right of withdrawal, rights and obligations of the parties and remedies for non-performance. Although it starts from a position of freedom of contract, there are several mandatory articles which cannot be contracted out of. In addition there is a general principle that contracting parties must act in accordance with good faith and fair dealing, which is something unfamiliar to those used to a common law approach.

The new law will only apply to contracts for the sale of goods, including digital content contracts (music, movies, software or smart phone applications), where both parties agree and at least one party is established in an EU member state. It will be available for both business-to-business and business-to-consumer transactions. As noted above, it will only apply to cross-border contracts, unless a member state chooses to make it applicable to domestic contracts as well.

Next steps

The Commission aims to ensure the proposal is adopted in 2012 which is the 20th anniversary year of the Single Market.  To be adopted, the Regulation must be approved by both the European Parliament and the Council of Ministers.

The European Parliament has long supported the proposal for an optional instrument of EU contract law, but it is unclear at this stage how many member states will support the proposal.  The UK Government has robustly challenged the need for such an instrument, including in its response to the Commission’s Green Paper and more recently in comments by Ken Clarke, the Lord Chancellor.

For more information on the proposed Regulation see our European contract law reform e-bulletin dated 13 October.