A review of contract law has been launched by the EU with a view to introducing a single EU contract law regulation.
The review, which is being carried out in the 15 member states, looks at existing contracts between national legal systems to see whether they obstruct the EU from functioning as a single internal market. A discussion paper has been published expressing concern that national contracts hinder harmonisation and suggesting the introduction of a single contract. Brussels has also launched a public consultation and will present comments to the EU heads of government who are attending a summit meeting in Laeken in Belgium at the end of the year. Brussels is arguing that the introduction of euro currency at the beginning of next year and the growing volume of e-commerce will lead to an increase in the number of cross-border contracts being written, and that the current rules for contracts are inadequate. One concern is that small and medium-sized enterprises, which often have little knowledge of other contract law regimes, might avoid cross-border transactions. Another concern is that researching legal information and possible litigation will lead to high transactional costs. White & Case's London head of banking Maurice Allen says that if the proposals relate just to contract law then the changes will not make a great deal of difference. The main difference is in the way that contracts are enforced and the differences in the terms implied. In the UK, contracts can be shorter because a lot of conditions are implied, but in international deals they have to be clearly set out. Allen added: "The other difference relates to third parties. The US has always had third-party agreements, but in Europe some countries can and some can't." But a Law Society spokesperson said there was some concern that harmonising contract law would put the UK at a disadvantage. "UK contract law is used in many international contracts, but this could be threatened if a EU law comes into effect and there is no longer any reason to choose the British pattern over that of any other EU country," he said. It is expected that a preliminary decision will be made at the summit meeting in December.