Salvatore Mazzamuto, University of Rome 3
Contract and remedies in European Law
1. Community Law versus a European civil code
It is not the main task of Community legislation to create pillars of European law in progress out of the similarities revealed among different systems. The sole aim of Community legislation is to produce precise adjustments to the rules governing the market (antitrust, intellectual property, consumer protection): a pragmatic undertaking which takes little notice of conceptual frameworks or of reconciling the various legal systems to harmonization. Examples include delivery and repair in sale of consumer goods. European civil law can at present only arise out of the uniformity created by those Directives whose implementation, whatever similarities and differences we may observe among national legal systems vis à vis the Roman tradition, is having a profound effect on the former, for instance in the transition, again in sales of consumer goods, to specific performance from a system of guarantees. In my opinion, our collective contribution as jurists consists first and foremost in furthering this process of trasformation. I think also that at this stage in the process the only useful role for Europe-wide bodies of jurists is in a continuous monitoring, a kind of
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Restatement, of the outcomes of this trasformation, as exemplified in part by the Principles of the Lando Commission, although these have manifested a certain tendency to arbitrary theorising. At the same time, I propose that equivalent bodies at national level become a kind of taskforce to ensure a consistent reconciliation of law, practice and precedent wifh EU legislative innovations. It is not as if we have a vacuum that needs to be filled by unlikely conceptual schemes emanating from any and every source. For the rest, as in music, the major themes have been stated; all that remains is to weave variations. The risk inherent in a codification starting from a clean slate on the basis of abstract generalities, essential to any common codified civil law, is that it might be built on the insecure foundation of legislative interventions in the market which the EU never regarded as of universal applicability. This might in turn entail modification, repeal or introduction of other more specific rules in a manner perhaps best left to the well-known wisdom of the EU legislative process, with its capacity for fitting regulation to its subject matter.
1.1 First perspective: good faith The almost obsessive resort to the general good faith clause which characterizes the Lando Principles appears prima facie to be running ahead of events in an uncontrolled manner. The attempt to attribute a substantive content to a general clause of this nature follows two distinct lines of thought. The first assigns to good faith its traditional role as a term implied by law which, not being grounded in any established legal framework, risks becoming the Trojan horse that allows into the terms agreed by the parties market standards such as price or balance of terms obtainable in a comparable, though perfectly competitive market. The
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second sees good faith as an aspect of terms implied into the parties‟ intentions, not merely within the scope of collateral obligations, but also in the contract taken as a whole, as regards a balance which, while not an initial feature of the contract, is achieved by virtue of good faith thus creating, by a kind of analogy, a presumption built on the expressed intention of the parties. These two perspectives are diametrically opposed in terms of the rationes which inform EU law-making. This, being of a specific and uncoordinated nature, does not admit any interpretation whereby the market can be seen as a model for a spontaneous comprehensive rationality on which to base the imposition of contractual rules, nor one which states individual intention as the basis for unlimited selfregulation. In the terms of the first interpretation, the various community directives instead draw their inspiration from a consistent desire to regulate the market and to rationalise it from the ground up, that is on the basis of individual contracts. The new sale of consumer goods regime is a case in point. Among the various highly important things that emerge from this is the elevation of the purchaser into an agent of the rationality of the market at the very moment in which he is obliged to begin by exercising the rights aimed at remedying any breach: repair or substitution of the detective goods. We are, however, still a long way from the position where market logic by itself could provide a definitive framework capable of making good any gaps in contracts and of modifying their terms when market standards so require. And yet, allthoug this tendency is not consistent with the developing trend of community law, it embodies a real risk since, in the absence of any commonly accepted set of values and principles within
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the E.U. capable of forming the basis of a European private law, judges called upon to apply the principle of good faith in individual cases might well look to the market for a point of reference. This has happened in Italy where judges in interpreting the constitutional requirement of “adequate salary” have referred to base rates agreed in collective bargaining albeit reserving the right, at least in theory, to modify them according to constitutional values. One view of the function of good faith is safeguarding in cooperation with the will of the parties their interests in situations on which the contract is silent, by discovering the terms the parties would have agreed had they considered the matter, without going so far as to create a fiction of undeclared intent. This formulation may serve in the restricted case where parties avail themselves of the Principles, but it fatally undermines two of the essential characteristics of the idea of good faith. One of these is its role in importing external values into the socalled web of obligations, values that diverge from purely safeguarding the common intention of the parties and belong in the realm of society‟s expectations. The second is the role in modifying contract terms agreed by the parties, that good faith has taken on in the wake of community legislation above all regarding unfair terms. This role of adapting the content of the contract, superseding the traditional distinction between rules of validità and rules of behavior and liability, can be seen for example in the assertion of so-called relative nullity.
1.2 Second perspective: obligation and specific performance Private European law connects principally the forms of protection directly to the contract without any intervening obligation. As a corollary, non-performance leads directly to the prospect of remedies,
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instead merely of rights requiring action to enforce them. The appropriate terminology thus becomes remedy-centred, and a doctrine of remedies requires a regime which disregards the framework of contractual obligation. In other words, the pursuit of a remedy no longer depends primarily on the edifice of obligation or on the traditional distinction between duty to render and duty to act. The explanation lies, particularly since the new regime governing sale of consumer goods, in the combination of non-performance and guarantee to produce the legal category of „conformity to contract‟. Thus the introduction of the legal category of “failure to conform” has eliminated the doctrinaire obstacles which traditionally inhibited the availibility of certain remedies, such as an action to make good a defect in the absence of a positive obligation to act on the part of the seller. Although the Lando Principles and the Gandolfi code arise from a contractual perspective, they lead nonetheless towards a general theory of obligation, rendering obligatio fully independent of its source. On the other hand it has been said that the regime of obligations in Lando Principles are not regarded as being exclusively ex contractu and it would be wrong to conclude that the Principles set up a common law model according to which obligation arises purely from the undertaking (specifically here the contract) itself. The Lando Principles and Gandolfi code have sought to link the concept of obligation to an insistence on the absolute priority of specific performance over recovery of damages. This seems an inopportune choice since the priority of specific performance, though clearly inseparable from the idea of a binding obligation, still needs to be adequately balanced. For this reason I have always maintained that the priority of specific performance should be regarded as a „guiding principle‟ in our legal rules rather than absolute in character. Balance is
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certainly not absent either from the Principles nor the Code, but it appears inadequate in various respects. The Gandolfi code modifies the principle of priority of specific performance by drawing on such traditional concepts as the division of obligations into duty to deliver a specified item, duty to deliver a given quantity of a commodity, and positive and negative duties. This is a position deriving from a view of legal transactions inspired principally by the logic of exchange, and exchange of material goods at that. The Principles, on the other hand, balance the principle of specific performance with reference to ideas of unreasonable effort or cost, and of the personal nature of the provision of work or services. Leaving aside the opacity and vagueness of the concept of reasonableness, so unfamiliar to our civil law tradition, the first issue raised by such a choice is the disregard of requirements associated with the “rationes” of merchant law, with their insistence that the relationship between specific performance and compensation by way of damages is not based on such an extreme either/or position as is taken by the Principles. There are situations where the demands of market balance lead to the privileging of compensation by way of damages over specific performance even where the cost is not unreasonable and the services are not personal in nature. So, this discussion might usefully proceed by considering the extent to which judges, in general and subject to specific exceptions, should be able to exercise dicretion over choice of compensatory or mandatory forms of remedy. We may add here that parts I and II of the Principles were finalized before dir. 44/99 was issued and therefore take no account of an element which is nonentheless one of the inspirations of the new sale of consumer goods regime: that is to say, a hierarchy of available remedies. This makes the buyer seek first of all repair or substitution and only then
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price reduction or rescission of contract in the following cases: where repair or substitution are impossible or unduly burdensome; where the seller does not make good the deficiency within a reasonable time; and where to provide repair or substitution would involve significant disadvantages to the consumer. Such a hierarchy admits by a side door a pursuit of interests other than those of the consumer: to all intents public interests, among which may be included the above mentioned demand for rationality and morality in the market. A general regime of performance could not fail to take this latter model into account, even if only to treat it as exceptional. A further reason for dissenting from the Principles arises from the doctrine which interprets the limitation of unreasonable cost or effort as a positive confirmation of equality of status between actions for performance and specific forms of damages according to art. 2058 of the civil code. Aside from doctinaire and systemic objections, another risk is implied by this construction. In using the monetary value of effective detriment as a basis for determining what amounts to unreasonable effort, a financial limit is established beyond which specific forms of damages or specific performance are unobtainable. The danger is that this limit will be applied also to astreinte (aggravated damages) to enforce strict observance of personal duties between the parties arising from the existence of the contract. These duties and astreinte, being obligatory, can not be limited to any monetary equivalent, at least when the duties are intended to protect the contracting party in person from risks involving his personal sphere that are increased by undertaking the relationship importing the duty. As I have had occasion to remark elsewhere, the description of an action for performance as one for damages in a specific form complicates disproportionately the relationship with possible indirect
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pecuniary means of execution, reducing them to pale reflexions of equivalent-value compensation and impeding any kind of graduation of such measures in relation to the importance of the right infringed. In effect, the new primacy given to specific performance will have the opposite outcome, namely the reestablishment of the old Napoleonic primacy of damages. And while this is bad enough in itself, even worse is the situation where personal, not property, rights are at stake, where limitations on specific form protection designed for equivalent-value damages would be inappropriate. This results in an ecomomic reductionism of the kind of which community law has been accused. While community law seems at the moment to be getting the better of this tussle, another dispute will need to be resolved in future on the issue of implementation of community law
2. Schuldrechtsmodernisierung versus piecemeal statutory additions to or modifications of the Code
2.1 Advantages of the German reform: systematic coordination from the ground up, through legislation, of the existing domestic law and law emanating from the EU avoids the possible undesirable effects of merely having more than one level of law-making. Italy, for example, has experienced the problem of an juxtaposition of new and traditionally-recognised remedies to protect consumers in the area of sale of goods set out in article 1519 (8th insertion) of the Civil Code. Here, almost by accident, the most correct solution seems to be to consider granting one of the traditional remedies only when they are compatible with the new ones. It will be recalled that the priority of specific remedies is provided in the new regime with the double aim of safeguarding existing contractual arrangements (for obvious reasons of
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market efficiency) while at the same time encouraging correct behaviour on the part both of the consumer and the seller, precluding both from seeking damages except as a last resort The seller in particular is thus obliged to compete on the basis of quality and the organisational capacity to deliver all he has promised to the consumer, instead of merely on the basis of persuasion and taking advantage of unequal access to information, with only the risk of a possible damages award, the cost of which he can in any case pass on to other unfortunate consumers. The reform has also afforded the opportunity for a thorough reconsideration of the whole subject and to unravel some knots of long standing; it has for example permitted the development of the idea of breach with the codification of the positive Forderungsverletzung, the regime of culpa in contrahendo and of Geschäftsgrundlagenstörung, the recognition of the complex structure of mutual obligation arising from the imposition of a duty of protection, and so on. All of this represents an undoubted advance at a systemic level.
2.2 Disadvantages of the German reform include certain inopportune over-generalisations due to the methodology of the reform designed to reverse the imbalance between general and specific laws which in the old Schuldrecht favoured the latter. In attempting to generalise remedies the Schuldrecht has acquired several special rationes; an example of the undesired consequences of this is the extension into business-to-business dealings of the hierarchy of pursuable remedies belonging to the sale of goods regime, inconsistently with the express provisions of the Vienna Convention that provide for a choice between specific and compensatory remedies in dealings between professionals.
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Compelling businesses to put up with the delays involved in specific performance, or in rectifying inadequate performance, or in the substitution of goods, thus inhibiting an immediate resort to other suppliers, entails at the same time a slowing of the tempo of participation in the market, and so restricts the opportunities for profit. The task of assuring correct behaviour on the seller‟s part can without qualms be given to the consumer, because it is he who is seeking the use value that the purchased goods represent. In business-to-business dealings, on the other hand, the same objective can be better attained by other means, for example, those provided by antitrust laws or the rules against unfair competition.
2.3 Advantages of ad hoc updating: the chance to coordinate European law and domestic law as well as improuving the quality of implementing laws and overall interpretation, with comparatively little risk of over-generalisation or premature development, and a more gradual impact on national law.
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