Category Archives: 5

Towards a Social Value Convergence: a Comparative Study of Fundamental Principles of Contract Law in the EU and China

Junwei Fu*

(2009) Oxford U Comparative L Forum 5 at | How to cite this article


One of the remarkable differences in contract law between legal systems in the European Union and China is the definition and status of contractual freedom. Historically, contractual freedom has not been commonly recognized in China, and social ethics had played a greater role in its civil law. In contrast, in European legal systems, freedom have been accepted as a core element in private law, with social elements having been commonly ignored, particularly during the time of 18th and 19th century. However, in modern times, China has started to accept the concept of freedom in its civil law, and the consideration of social elements has been diminished gradually since the late 1990s. On the contrary, in Europe, mainly due to the correction of market failures, social elements have increasingly been considered in order to maintain the substantive justice of contract, and contractual freedom as unfettered ideology has diminished since the late 19th century. It could be thus reasonable to say the modern social values between the east and west have been converging progressively.

Table of contents


With the rapid development of economic interaction between the EU and China, private law concerning the social and economic relations between citizens provides the basic rules which govern economic transactions, property rights and compensation for wrongs.1 At the heart of private law are the rules governing contracts,2 which make a profound impact on business transactions based on the assumption that “contracts are an important economic institution to allow the exchange of goods and services, which, in turn, allows an efficient allocation of these goods and services”.3 Contract law is arguably held to be the most dynamic area of private law.4
The Chinese Uniform Contract Law (hereafter referred to as CLC), which was drafted mainly by Chinese academic jurists between 1993 and 1999, was adopted by the National Congress of the People’s Republic of China to replace the previous three contract laws from the 1980s – the Economic Contract Law, the Technology Contract Law and the Foreign Economic Contract Law.5 The CLC is designed to reflect the contemporary Chinese social and economic life.6 On the one hand, it mirrors current market and globalisation developments, and on the other it reveals the limited freedom which is endowed in Chinese social life. The tensions between the imperatives of state control and individual freedom are arguably mirrored in the CLC.
During recent decades, convergence in private law has brought a new legal culture to the European society. Directives from the council and parliament, and the case law from the European Court of Justice serve as the legal basis for the Europeanisation of contract law. Work undertaken by a variety of scholarly groups, including those working on the Gandolfi Code, Trento Common Core project, Ius Commune Research School, etc., has stressed the convergence in European contract law.7 Among these scholarly outcomes, the Principles of European Contract Law (hereafter referred to as PECL), a “product of work carried out by the [Lando] Commission”,8 attempt to reflect the “common core of solutions to problems of contract law” and “assist the European courts and legislatures concerned to ensure the fruitful development of contract law on a Union-wide basis”,9 has received “a favourable reception in (at least) academic circles”.10 Not only could the PECL represent the characteristics of modern European contract laws, but it is also expected to serve as a foundation for the future European Civil Code. Its successor, the Study Group on the European Civil Code has adopted most of the provisions in the part of law of obligations in the Draft Common Frame of Reference (hereafter referred to as DCFR) which it has elaborated together with the Research Group on Existing EC Private Law (Acquis Group).11
In this article, fundamental principles are understood as abstractions from various contractual doctrines which guide the explanations for the whole contract law. Not only do they represent the essence and spirit of law, but they are also the guiding principles for the drafting, interpretation and implementation of the law.12 Furthermore, the principles could in practice served for guiding or informing, or even as the legal basis for the resolution of various contractual disputes.13 This article therefore attempts to examine the fundamental principles in the CLC and the PECL in order to reveal some main features and social value orientations of both contract laws. The core research question of whether the underlying social values from both sides have converged will be answered after the analysis.

1. Fundamental principles of Chinese contract law

Like many other laws, the CLC contains some certain fundamental principles which represent the underlying policies on the basis of which the legislation is formulated, and which influence the law throughout.14 Although the CLC transplants many terms and provisions of Western origin, significant fundamental concepts in Western laws often carry a different meaning in Chinese law.15 This part therefore attempts to discuss the fundamental principles in the CLC to reveal its own characteristics.
The following characterises the fundamental principles in the CLC:

  1. Not only do the fundamental principles guide the rules of implementation, but they can also reflect the spirit as well as value orientation of the contract law. They are determined by the social and economic life, and guide all stages of a contract.
  2. Fundamental principles are uncertain, because they did not refer to the concrete rights and obligations of parties, with the effect that the contractual parties cannot predict the precise consequences which these principles will have on their rights.
  3. Fundamental principles are mandatory rules. The contractual parties cannot exclude the application of fundamental principles in their contracts. Fundamental principles are part of mandatory statutory law which provides legitimacy to the judgment of a court.
  4. Fundamental principles serve for the interpretation of law and may apply to specific cases where the law fails to govern specific rules.16

Although the principles of equal legal status between parties, of fairness, of respect for social ethics and morality, of obedience of law and regulations are often regarded as fundamental of the CLC,17 some scholars hold the view that “contract law is primarily influenced by three major principles, namely, freedom of contract, good faith and fostering transactions”.18 Others such as Jiang Ping have argued that the designing of the CLC is based on the principles of uniformity, freedom of contract, protecting the interests of creditors and functionalism.19 Some others also believe the fundamental principles of the CLC are equality, voluntariness, fairness, exchange of equivalent values, good faith, and complying with the laws and policies of the state.20 By combining these viewpoints with the guiding principles21 as well as the purpose of the contract law, namely “protecting the lawful rights and interests of the contractual parties, safeguarding social and economic order and promoting socialist modernization”,22 the author in this article believes the fundamental principles of the CLC could be analyzed as involving voluntary contract and socio-economic valuation.

1.1 Voluntariness

The wording of Art. 4 CLC implies that “voluntariness” is to be used rather than “freedom of contract”.23 One should remember that “freedom of contract” has not been accepted in China until recently, in spite of the fact that since the beginning of 20th century, Chinese contract theory has been derived from Continental European and Common law system. The reasons for this reluctance are as follows:
Firstly, freedom of contract, to a large extent, represents the concept of “individual” or “liberty”. Most scholars agree that Chinese legal history and the spirit of modern law are influenced by Confucianism. However, Confucianism has no room for the development of liberty or individualism.24 Hence, it is reasonable to say Confucianism is largely averse against “freedom of contract”.
Secondly, since the establishment of the People’s Republic of China in 1949, the economy has been strictly centrally planned, with the effect that it was impossible for individuals or business entities to have free access to the market. The economic plan and mandatory policies were playing an essential role at that time. Accordingly, it was impossible to recognize “freedom of contract” as a fundamental principle under a system of centrally planned economy.
Last but not least, freedom of contract had long been criticized in China as a capitalist concept, which any socialist system must avoid.25 In China, it was for long believed that the “ideology of individualism” marks the main difference between capitalism and socialism. This belief continues to influences minds even in China today. This is why the CLC uses the notion of “voluntariness” rather than that of “freedom of contract” in the context of contract formation, reflecting the transformation from a centrally planned economy to a market economy, and considering the purpose of developing a socialist market economy.
Basically, the principle of “voluntariness” contains two elements which are: (1) the rights of contractual parties to enter into a contract voluntarily and within the limits of law; (2) the prohibition on others to interfere with the contract illegally. Admittedly, it is often believed in Chinese academic circles that “voluntariness” is the same as “freedom of contract”. However, the following will reveal the considerable differences which exist between these two notions.
First of all, as concerns the content, “freedom of contract” recognizes the autonomy of individuals to enter into a binding agreement, to choose the other contracting party, to determine the terms and contents of the agreement, to modify or terminate the contract by mutual consent, and to choose the form of a contract.26 By contrast, “voluntariness” is much narrower and essentially limited to the autonomy to enter into a contract.27 And while “freedom of contract” governs every stage of the contracting process, “voluntariness” relates only to the initial stage of contract formation, giving parties a narrower power to determine their affairs through agreements.
Secondly, as concerns the essence, some scholars have argued that “freedom of contract” focuses on maximum economic efficiency, promotes the parties’ ability to exercise their full creative potential, and establishes appropriate business relationships that possess all the specific nuances required in such a relationship.28 “Voluntariness”, by contrast, is subject to government intervention.29
Lastly, as concerns the background, “freedom of contract” was historically derived from the consensus contract in Roman law, and became the cornerstone of modern contract law after the French civil Code was adopted in 1804.30 It represents the essence of a market economy, while “voluntariness”, which has been derived from the General Principles of the Civil Law of the People’s Republic of China (hereafter referred to as GPCL) in 198631, reflects the planned economy or the transition from the planned economy to the market economy.32
It is interesting to note that when the redrafting process for contract law began in 1993, an intensive debate arose over whether freedom of contract should be incorporated as a general principle. Some scholars held the view that, although the ideology had been rapidly developed during the time of classical contract law and in the 20th century, many states have strengthened their intervention in contracts, with the effect that this principle has gradually declined. So in Chinese contract law, the incorporation of necessary limitations to the contractual freedom must be included in order to maintain the public interest and to protect the weaker parties.33 This viewpoint, however, was criticized by most of the scholars who insisted that although many developed nations have indeed strengthened the intervention in the contracts, the principle of freedom of contract still remains as fundamental. Considering the long Chinese history of intense centralized planning, the elimination of autonomy and intensive interference from the government in private law matters, an expansion of contractual freedom rather than further restrictions are what is needed by the markets.34 So in the first drafting proposal in January 1995, freedom of contract was stated as a general principle, namely that “the parties shall have the freedom of contract within the boundary of law and no unit, organization, or individual shall unlawfully interfere with”.35 This provision, however, was revised into “the parties shall have the right equally and voluntarily to make contract according to law. None of the parties shall impose its own will on the other and no unit or individual shall unlawfully interfere with the parties’ right” on May 14, 1997.36 Later on August 20, 1998, the provision was changed again as “a party is entitled to enter into a contract voluntarily under the law, and no entity or individual may unlawfully interfere with such right”, which was adopted in 1999.37
The history of this drafting process reveals that although “voluntariness” replaced contractual freedom, the basic notion of freedom of contract has been widely accepted amongst academics. The concept of “voluntariness” embodies the core essence of freedom of contract, which endows the contractual party with the autonomy and freedom to decide on the transactions they entered into, and contributes to bring about efficient allocation of social and economic resources. However, due to the influence of Confucianism and a history of centrally planned economy, it is necessary for the state to exercise the intervention measures to ensure that contracts are sufficiently fair and equal, and also that the parties’ interests are not detrimental to the welfare of the state and society. Therefore, the CLC also imposes limitations on freedom of contract to prevent its abuses and for the state to regulate the economy as well as to maintain public order.38

1.2 Socio-economic valuation

“Socio-economic” literally means involving social and economic factors. It is frequently used for areas of law which are closely connected to social issues, such as labour law. The present article use it to describe Chinese contract law. It has been demonstrated above that the CLC reveals strong Chinese characteristics, even though it transplants numerous concepts and provisions from western norms and international treaties. As law is generally embedded in culture, contract law reflects the social life of a particular people. In the case of Chinese contract law, the present author believes that certain characteristics have evolved from traditional social ethics and from the current economic situation. In the following part, several fundamental principles in the CLC which are the result of such a socio-economic valuation will be analyzed.
1.2.1 Traditional social ethics
When performing obligations and rights under a contract, parties must adhere to the generally accepted moral, social and commercial standards. “Confucianism made a practical importance to the Chinese traditional ethics, for twenty-five centuries it has been the life and spirit of the dragon kingdom”.39 Even nowadays, Confucianism deeply influences the moral and social ethics of society. This part therefore attempts to analyze the principles of fairness, good faith and public interests from the roots of Confucianism.
A. Fairness
The principle of fairness requires equality in the value of the respective obligations between the contractual parties and reasonableness in allocation of risks, of which the function is primarily to prevent the stronger party from abusing its bargaining power and from imposing unconscionable terms on the weaker party. The fairness has its root in the idea that “the relation between the contractual parties shall be maintained to the extent that the rights and obligations are reasonably and justly allocated and shared”,40 which, according to the opinion of the author, is consistent with the concept of righteousness (yi) of Confucianism. From some current arguments, the Confucian idea of righteousness (yi) is similar to the notion of “justice” in the west.41 As pointed out by John Rawls, justice is the same as fairness,42 and it is reasonable to say that the concept of righteousness (yi) in Confucianism, to some extent, also bears resemblance to the western notion of “fairness”. In Confucianism, righteousness (yi) focuses principally on what is right or fitting which depends on the reasonable judgment. 43 It may be construed as “reasoned judgment concerning the right thing to do in particular exigencies”,44 or be construed as “the oughtness of a situation which focuses mainly on the right act as appropriate to the particular situation that a moral agent confronts”.45 But nevertheless, the virtue of righteousness (yi) constitutes the fundamental principle of morality, as it forms the necessary component to a virtuous life and “restrains the inclinations towards material goods and desires of pleasure and comfort”.46
Righteousness (yi) is a guiding principle for all human relations47 and it is always trying to achieve a situation in which both sides are satisfied.48 Under the influence of righteousness (yi) in Confucianism, both the GPCL and the CLC have placed the concept of “fairness” as a fundamental principle. As stated in the GPCL, “fairness and making equal compensation should be obeyed”.49 And the CLC requires the contractual parties to “abide the principle of fairness in defining the rights and obligations of each party”.50
In general, fairness mainly concerns the contents of contract. It is purposed to achieve a balance in the rights and obligations between the parties,51 and its function plays an essential role in Chinese contract law. The essence of fairness is to realize the “social justice” in the society, which is the spirit of the CLC. It is even reasonable to say the achievement of “social justice” is the animating force of Chinese law.52
Since the notion of “fairness” is difficult to define, it has been left to the courts to apply on a case by case basis. In judicial practices, two rules are commonly used for determining whether “fairness” has been achieved. The first is the “fair distribution of rights and obligation” rule,53 under which a party is required to afford the other party rights which are proportionate to the rights which this party has or claims to have under the contract. The issue concerning the remedies for invalid contracts, for instance, requires the party at fault to indemnify the other for its final loss sustained. If both parties are at fault, then both have to afford their liabilities respectively.54 The other rule is “reasonable and just allocation of risk”.55 In business transactions, there are many unpredictable risks which can materialize at any time. The principle of “fairness” requires the contractual parties to share the risks equally and justly. Taking the case of “force majeure”, for instance, both parties have to share the risks and damages fairly and justly accordingly to the circumstances and performance of both parties.56
There is therefore no doubt to say “fairness” is a fundamental principle in the CLC which origins from the righteousness (yi) of Confucianism.
B. Good faith
There is an express provision in the CLC which requires the parties to “conduct themselves honorably, to perform their duties in a responsible way, to avoid abusing their rights, to follow the law and common business practice”.57 The principle, according to the opinion of the author, is rooted in the concept of benevolence (ren), the most primary virtue of Confucianism. Ren could also be construed as goodness or faithfulness.58 The golden rule from Confucius could be used to explain the essential meaning of Benevolence (ren) which is “Do not do to others what you do not want them to do to you (ji suo bu yu, wu shi yu ren)”.
It is believed that “Confucius is nothing more or less than the way that he as a particular person chose to live his life”, of which the goal is to “achieve the harmony and enjoyment for oneself and others through acting appropriately in those roles and relationships that constitute one”.59 In order to achieve this harmony, the concept of benevolence (ren) plays an important role. Not only does it recognize the personal character as a consequence of cultivating one’s relationships with others, but it is also fostered to deepen the relationship which takes on the responsibility and obligations of communal living and life.60 Based on the essential concept, man who achieves the standards of gentleman (junzi61), which consists of trustworthiness and credibility as well as reliability, is considered to be the ideal sage. Confucius expected that all the human virtues – filial piety, fraternal love, loyalty and truthfulness – would be obtained to achieve the appropriate relationships between persons.62
Benevolence (ren) is not only rooted in everyday conduct, but also is an essential moral obligation for the commercial business in China. The standard is applied in particular cases depending primarily on the nature of the contract and other surrounding circumstances. By tracing the principle of good faith, the GPCL recognized this traditional morality and business ethics in 1986 to require “honesty and credibility should be observed in the civil activities”,63 which has been succeeded by the provision in the CLC whereby “the parties shall abide by the principle of good faith in prescribing their rights and obligations”.64
However, similar to fairness, good faith has not been defined in the CLC either. It is most commonly construed as honesty and trustworthiness. Three functions of the principle of good faith in the CLC could be distinguished:
First of all, it is a basic principle to balance the interests between the parties, and between the parties and society. As pointed out above, benevolence (ren) aims to harmonize the relationships between persons, and advocates people to be honest and responsible to the others. So in the CLC, the doctrines of pre-contractual liability, ancillary duties and post-contractual liability are incorporated,65 which require the parties to obey the principle in every stage of the contract.
Secondly, the principle of good faith requires the parties to keep their words. As advocated by Confucianism, benevolence or faithfulness (ren) which is matching one’s words with one’s deeds, and failure to deliver on a promise is thus a failure of morality.66 The CLC therefore requires the parties to abide by contract. Even if the contract is deficient in some way, the contractual parties still have to endeavor to cure the defects and try their utmost to perform their obligations.67
Lastly, while tremendous social and economic changes are occurring in China, many laws and regulations are not suitable to the current economic situations. The principle of good faith, however, could fill the legal vacuum and help to interpret contracts and laws to achieve the necessary balance of interests between the parties.68
In many civil law countries, the principle of good faith has since the 1970ies been considered as the highest guiding principle for the law of obligations. In China, it is also a significant important principle both because of the traditional ethics and current economic situations. Some scholars even illustrate good faith in the CLC into more detailed aspects as follows:69

  1. Before a contract is concluded, especially during the negotiations for an agreement, the parties have a duty to treat each other, and to cooperate to make the contract, in a good and faithful manner.
  2. After concluding the contract, the parties should take all the necessary steps to prepare and cooperate for the performance of contract.
  3. While the contract is being performed, parties should assist each other and faithfully notify each other of relevant events.
  4. After the contract has been performed, the parties have under an obligation to keep confidential the business secrets which they have obtained from each other during the contract period.
  5. When a dispute arises which is related to the contract terms, the parties must interpret them in a truly fair and reasonable way which respects the mutual benefits.

It is worth mentioning that in the first draft of the CLC, two additional provisions served to confirm and respect for the status of good faith, namely: 1. the principle of good faith could be relied on directly in a judgment when there was a vacuum in the law or the application of a particular provision would be detrimental to social justice;70 2. the lower courts must refer the case to the Supreme Court for a preliminary ruling, as approval from the Supreme Court is required if the lower courts resort directly to the principle of good faith.71 Eventually, however, these two provisions were deleted. It was feared that they would give too much discretionary power to judges in a context of problematic judicial independence and might even encourage judicial corruption. Nevertheless, this background reflects that the principle of good faith has been widely respected in the CLC.
C. Public interest
In most legal systems, public interest is just considered to be a limitation to the contractual parties’ freedom. In the CLC, however, it is a fundamental principle to realize the interests of the state and society. In western legal systems, the boundary of public interest is always defined in a narrow way in order to respect the will and freedom of the parties, whilst in China the definition of public interest should be construed in a broad way to reflect the idea that the socio-economic order and state mandatory planning as well as the state policy are vehicles formaintaining and realizing the interests of the state.
Public interest is always used together with the concept of social ethics. The term of “social public interest” has been adopted in both the GPCL and the CLC. Generally, it is understood to include the concept of social morals and public order. A civil conduct72 shall be invalid if violating the public interest. Some scholars would see all of the following as violating the social public order: (a) damage to national interests, (b) hampering family relations, (c) violation of sexual morals, (d) violation or infringement of human rights or human dignity, (e) restriction of economic or business activities, (f) violation of fair competition, (g) illegal gambling, (h) infringement of consumer interests, (i) violation of labour protection, (j) seeking usurious profits.73 According to the traditional culture, obedience to the public interest is a kind of morality to citizens. “Familial loyalty, ancestor worship, respect for elders and the family as a fundamental basis for an ideal government” are the core principles advocated by Confucius.74 In the family, the father has absolutely power over his wife and children. Being respectful towards elders is seen as good morality which promotes a harmonious family relationship. The family, rather than the individual, is regarded as the most basic and fundamental unit of society.75 Confucianism advocated that we are living in the web of a big family – the state. In this big family, we have to be loyal to each other, which means that citizens should obey the ruler, and individual interests must bow towards state interests. The three cardinal principles advocated by Confucianism, which should be observed in order to maintain the stability of the country, are: “ruler over subject, father over son and husband over wife”.76 Under the influence, it is acceptable that in Chinese contract law, public interest is prior to the individual interests, and it is also understandable that policy and state mandatory plan as well as the socio-economic order are essential vehicles to limit the individuals’ freedom to maintain and realize the public interest.
Since the establishment of the Republic of China in 1949 until 1980s, policy rather than law has been essential for maintaining the order and interests of the state. Even nowadays, it is reasonable to say that policy plays a significant role in society. However, it is unclear if there was any difference between state policy and party policy in Chinese law. In the words of Wang Hanbin, vice-chairman of the standing committee of National People’s Congress, the role of law in China is to establish “a legal system with Chinese characteristics”.77 It is also argued by some scholars that the policy of the Chinese Communist Party could dominate these Chinese characteristics.78 The economic policies of the Chinese Communist Party, which include but are not limited to the socio-economic order and state mandatory plans, are mainly designed to accommodate the situation for the interests of the state or for the majority of its citizens.
It is generally accepted that policy is a supplementary source of law. In current China with its dramatic changes of the social and economic situation, policy can react flexible to these changes and can thus be a useful tool for the government to take measures in an area where the law is unclear.79 However, two aspects make this use of policy somewhat problematic. The first is that policy is difficult to predict, so that it can make contracts uncertain.80 Parties will require certain rules in order to predict their risks and interests before concluding the contract. And more unpredicted and uncertain elements would be caused by the policy to the consequences of civil conduct. The second aspect concerns transparency. Generally speaking, most governmental policies in China take the form of internal documents, or are contained in speeches of political leaders. Sometimes, they are not openly accessible to the public.81 Nevertheless, in practice, these policies would be considered by the judges, and sometimes treated as ranking above the law. Even after the adoption of the GPCL, the People’s Court frequently applied government policy to civil laws.82
The requirement of observing the public interest was incorporated into the GPCL in 1986. Article 6 GPCL required that civil activities must be in compliance with state policies, and Article 7 stipulated that civil activities must respect social ethics and must not harm the public interest, undermine state economic plans or disrupt the socio-economic order. One could, of course, argue that these provisions are simply the consequence of the centrally planned economy in 1980s. But the CLC was designed in the late last century. It attempts to reflect social life and economic changes at the turn of the 21st century, in particular China’ change towards a market economy. And yet, several provisions still serve to strengthen the status of public interests. For example, Article 7 CLC requires parties to abide by administrative regulations as well as social ethics, and not to not disrupt the socio-economic order or harm public interests. One can therefore say that the domination of the state over private autonomy is mainly resulted from the traditional ethics, and Confucianism still dominates modern Chinese society and social life.
It is interesting to note that the role of Administration of Industry and Commerce (hereinafter called AIC) was debated during the drafting of the CLC. In the previous three contract laws in 1980s, the AIC had a broad power to supervise that contracts were not detrimental to the public interest. They could even invalidate a contract which they believed to be harmful to the state or society. But with the development of the rule of law, some scholars argued that the power of administration should be curbed, and that only courts should be allowed to declare a contract void. So the drafting committee decided to give no such power to the administration. However, the AIC argued as follows in favour of it retaining the power to supervise contracts:83

  1. Chinese state-owned enterprises frequently failed to take responsible care of state assets, causing enormous losses in recent years. Their business operation should be supervised for the protection of state assets.
  2. Chinese enterprises are often poorly managed. Their lack of self-discipline and self-protection often causes unnecessary losses, which requires the AIC to supervise.
  3. The courts do not have sufficient resources to deal with all the problems, and judicial remedies do not compensate for loss of state interests.

Therefore, Article 127 CLC eventually stipulated that the “AIC shall be responsible for monitoring and dealing with any illegal act which harms to the state interests and public interest in accordance with the laws and regulations.” However, this provision is too vague. While it endows the AIC with the right to supervise contracts, it fails to spell out in which way and in which areas the AIC can supervise contracts. This lacuna remains to be closed.
1.2.2 Current economic situation
Modern Chinese contract law is not only influenced by Confucianism, but also inspired by the current economic situation. China has opened its doors to the world and is willing to integrate into an international market. In consequence, some concepts and provisions have to be transplanted from other legal systems in order to diminish the obstacles for the cross-border transactions. There can be no doubt that the CLC is also influenced by this current economic situation. The following will attempt to analyze two fundamental principles of the CLC which result from the current economic situation, namely equality and promotion of business transactions.
A. Equality
Inequality between certain groups of persons was advocated by Confucianism, such as father having absolutely power over his wife and children, the emperor having absolute power over his citizens. Women should respect men, younger persons should respect elders, and only the oldest son would succeed to the authority of the family, etc. These strict hierarchy and descent-lines are part of morality (Li), which was consistent with the needs of a ruler in a feudal state. So, to some extent, this is the reason why Confucianism has been the official philosophical thought and teaching since the Han Dynasty (206BC -220AD). Under the priority of this philosophy and public interests, it was really difficult for a private company during the 1980ies to be treated equally with a state owned enterprise. It is particularly true that the government has a clear preference to protect the state-owned enterprises because their interests were directly involved. Due to the fact that judicial power is not independent in China, it is understandable why equality was not respected in the previous contract laws and practice in the 1980ies.
However, with the development of the economy and with China knocking on the door of the World Trade Organisation, all parties that are willing to enter into the contract are to be treated equally. It is true to say that the market calls for equality between the contractual parties. The principle of equality has therefore been incorporated into the CLC as a fundamental principle. It includes three aspects:84
The first is equal capacity. In the previous economic contract law, only legal persons had the right to conclude what was referred to as the “economic contract”, a contract which is established for economic purposes. But in fact, all parties in a market require the same capacity to contract and it is reasonable for them who were involved to have an economic purpose. So the CLC endowed all the parties, including natural persons, legal persons, and other organizations with the same capacity to enter into a contract.85
The second is equal legal standing. All the parties are required to negotiate and conclude the contract voluntarily. But in practice, many large scaled companies or monopolies could conclude contracts without negotiation with other parties or could use their superior bargaining position for concluding unequal contracts. This was frequently observed for consumer contracts. So in order to maintain the equal legal standings of all parties and to ensure that contracts are based on true consent and manifest mutual benefits, the CLC provides that a party to a contract can require the court or arbitration tribunal to amend or rescind the contract if it was apparently unreasonable at the time of concluding.86 The party who supplied the standard terms has to be given more responsibility to inform about the contract.87
The last requirement is equal treatment. As stated above, in the past, private companies were treated differently from state-owned companies, both during formation of the contract was concluded and after disputes arose. The principle of equality requires not only equal legal status of the parties before a contract is made, but also equal treatment once disputes arise after the conclusion of a contract. In current China with its remaining socialist orientation, there are still many state-owned companies. If courts or arbitration tribunals treat state-owned companies better in the adjudication of disputes, parties would be very reluctant to enter into contracts with state-owned companies, which in turn would be harmful to the economy development. So the courts or arbitration tribunals are required to treat all the parties equally without considering the owner and status.
Therefore, equality, an underlying principle in the CLC, is required at every stage of the contract from the negotiation to disputes resolution. It serves as a logical premise which reflects the notion of autonomy and freedom that contractual parties in a free market could compete and co-operate on an equal footing.88
B. Promoting business transactions
Like many other countries at the time, ancient China implemented a policy of “emphasize agriculture while restraining commerce”, a policy which is rooted in the legal culture. When the central planning of economy introduced after the establishment of the People’s Republic of China in 1949 was gradually replaced and the CLC drafted, most members of the drafting committee argued that contract law should set out the fundamental legal rules which govern market transactions. It was believed that the promotion of business transactions had been ignored in China for such a long time that it should be incorporated in the new unified contract law in order to accelerate economic development.89
According to some scholars, there are three aims for the promotion of business transactions in the CLC.90 The first is to promote the development of a market economy, under which “contractual relationships constitute the most basic legal relationships” and “a fundamental objective of contract law must be to foster and encourage the transactions”.91
The second is that the promotion of business transactions contributes to increased efficiency and social wealth. “This is not only because different entities and individuals can satisfy their needs for different goods or services and their desire to increase their wealth only through the transactions, but also because only through freely-negotiated transactions can resources be distributed optimally and utilized most efficiency”.92 In most societies, the market serves as the principal mechanism for the production and distribution of wealth,93 and contract law is to facilitate efficient exchange and repair market failures. The CLC thus attempts to contribute to the creation of social wealth,94 by promoting efficient transactions.
The last aim is to protect the freedom of contract. Promoting business transactions is consistent with the wills of the parties, and it encourages people to negotiate freely for the contract according to their wills. So most scholars advocated that the principle of promoting business transactions should be incorporated into the CLC.
Promoting business transactions is also a guiding principle for drafting. It has found its way into the CLC in at least the following aspects:

  1. Formation of contract. Previous contract laws operated without the notions of offer and acceptance. The CLC, however, adopts offer and acceptance as elements of contract formation under the principle of promoting business transaction, on the ground that they make business transactions more convenient and efficiency. Previous contract laws used chiefly formal elements, such as signatures, for establishing a contract. In contrast, the CLC allows contracts to be established by conduct, namely performance.
  2. Invalid contracts. In the GPCL, seven situations can invalidate civil activities.95 Their scope was too wide. Invalidity was used for contract termination to a degree which was harmful to the economic development. This was remedied in the CLC. For some of the situations in which the GPCL envisaged invalidity, the CLC provides that certain terms are amended or the contract rescinded instead of invalidated, if the contract was entered into by fraud or duress, or by taking advantage of the other party.96 It is interesting to note that the CLC also distinguishes between “invalid contracts” and “contracts with pending validity”. For instance, a contract concluded by an agent without any authority, or who exceeded his authority, or whose authority had lapsed, would be valid after the ratification by the principal.97
  3. Interpretation of contract. Previous contract laws lacked rules on interpretation. In practice, contracts were generally held to be invalid when their content was too vague. The CLC adopts a rule of interpretation which allows such contracts to stand, thus making business transactions more predictable and certain.98

It is worth mentioning that business transactions must be legal and must not be harmful to public interests. The CLC encourages only lawful transactions, which means that the transactions must be voluntary, within the law and regulations, and must reflect the true intentions of the parties.

2. Fundamental principles of PECL and DCFR

In recent years, private law Europeanisation has been an intensively discussed topic.99 The words “unification”, “harmonization” and “convergence” have often been used to distinguish various levels of Europeanisation. While the concept of “unification” indicates a complete integration of legal concepts and rules as well as cultures, the word “convergence” reveals a more natural way for the integration compared with the term “harmonization”, which suggests a more active process through the unification.100 The present author therefore prefers to speak of “convergence” rather than “harmonization” or “unification”.
In the process of private law Europeanisation, the European Union has made use of treaties, regulations, directives and recommendations.101 The case law from the European Court of Justice, the academic debate as well as educational projects have also contributed to the process of convergence. Amongst the available instruments, directives in particular have served to achieve a substantial level of integration among the laws of member states, especially in the area of consumer law. Some observers believe that such regulation has contributed to the smooth operation of the internal market, having removed many obstacles to free movement of person, good, service and capital which resulted from differences between national laws.102 However, there is ample evidence within the academic debate and political actions by the EU to demonstrate that the present EC contract law rules, which form part of the acquis communautaire, are not satisfactory.103 This is mainly due to the following reasons:
Firstly, European legislation has, even when seen over the last decades, only touched a very small area of the huge ocean of private law. Most of the directives, for instance, concerning various individual aspects of consumer protection.104 But for a true Europeanisation of private law, a higher degree of general principles and a broader scope of areas would have to converge. It is worth noting that when Europeans speak of “private law”, they mostly mean the law of obligations, and sometimes include family law, other consumer law, labour law etc. 105 But it is undeniable that contract law is an essential and significant part of any such convergence.
Secondly, the legal instruments adopted by the European Union are not without flaws. The directives are often non-consistent and sometimes hinder rather than promote convergence. 106 Norms used in the directives are often rather vague, and notions employed by one directive cannot be transferred to others. Taking the notion of “damage”, for example, the European Court of Justice held that the definition in the Package Travel Directive cannot be applied to the Product Liability Directive, with the result that different definitions of “damage” operate for different sectors of law.107 Furthermore, directives frequently adopt no more than a minimum level of protection of weaker parties, leaving intact higher levels of protection in many member states, and a corresponding diversity between the domestic laws.
Thirdly, problems arising from the enforcement of the instruments cause as problems to the process of convergence. It is generally accepted that transposition is needed for implementation.108 However, national courts often find it difficult to apply the abstract notion adopted in the directives to given cases. For example, the notion of “good faith” which is employed i.a. by the Unfair Terms Directive will be more difficult to apply by lawyers from legal systems based on common law,109 which can impair the effect of directives.
Therefore, although what has been done over the last decades has indeed promoted the Europeanisation of private law, a higher level of contract law convergence is still required for persons, goods, services and capital to move freely within the European Union.
Several working groups and international model laws have contributed to the process of Europeanisation of private law. The UN Convention for the International Sale of Goods (CISG) in particular has to some extent inspired the work on PECL.110 However, PECL is more concerned with presenting the common core of contract law in Europe, while the CISG seeks to establish common rules for sales contracts at the international level.
The work on PECL began in 1982, when an independent body of experts, the “Commission on European Contract Law” headed by Professor Ole Lando and comprising 20-25 members from all the EU member states, started to work on a European contract law.111 The members mostly consisted of academics and the odd practicing lawyer. They were not selected by any government and did not represent their countries officially. In 1995 Part One of PECL, dealing with performance, non-performance and remedies, was published. Subsequently Parts One and Two, which cover the core rules of contract, formation, authority of agents, validity, interpretation, contents, performance, non-performance and remedies were published in 1999, followed by Part Three in 2003, which covers plurality of parties, assignment of claims, substitution of new debt, transfer of contract, set-off, prescription, illegality, conditions and capitalization of interest.112
Mention should also be made of the work of Professor Gandolfi on his Code of Contract Law. 113 In contrast to PECL, the Gandolfi Code was drafted by a single person, and the drafting language was French rather than English.114
The Study Group on a European Civil Code, a network of academic lawyers headed by Professor von Bar),115 has made an enormous contribution to this convergence with their “Principles of European Law”, which, on the basis of PECL, extend to the entire law of obligations and some aspects of property law.
Mention has been made above of the Research Group on the Existing EC Private Law (Acquis Group), whose Acquis Principles restate the existing contract law as currently found in EC directives and regulations, and judgments of the European Court of Justice. Study Group and Acquis Group have jointly produced the recently published Draft Common Frame of Reference of European Private Law, which also goes well beyond the area covered by PECL and include specific contracts, torts, unjust enrichment, negotiorum gestio and securities in movable property.116
The PECL and the DCFR can serve various needs:117
Firstly, economic needs. The core essence of private law Europeanisation in fact is for the ideal of “a single market”. A converging contract law can encourage market transactions, whereas differences in contract law structure and terminology, fundamental concepts, classifications, and legal policies can be seen as inimical to the efficient functioning of a single market. Standard contracts can exemplify the issue of European private law convergence. Different member states have adopted different levels of control of standard terms based on different notions of protection against unfair terms. A business which wishes to operate across the European Union must draft standard contracts in many versions, which raises costs considerably. Contract law convergence could overcome these obstacles and contribute to a smooth functioning of the single market. EC legislation in the area of contract law has gone some way to removing obstacles from the free movement of persons, goods and services by way of convergance of contract laws.
Secondly, political needs. Since 1989, the European Parliament has twice118 taken the initiative to begin work on a European civil code. Under the Dutch presidency of EU, in 1997 a conference on a European Civil Code was held in Scheveningen in the Netherlands. Although the conference did not advocated the drafting of a European Code to bind all the member states, it was at this meeting that Christian von Bar began to set up the Study Group for a European Civil Code.119 In 1999 the Tampere European Council called for an overall study on the need to approximate member state’s legislation in civil matters in order to eliminate obstacles to the smooth functioning of civil proceedings.120 Later, on July 11, 2001 the Commission published a communication121 to Council and Parliament to request responses from academic and practising, lawyers, legislators, stakeholders, etc., to investigate whether the diversity of contract law caused a problem for business transactions and how to prepare for the legislation. Four options were presented in the communication: 1. no community action, leaving the problem to the market; 2. the development of non-binding principles of European contract law; 3. improvement and consolidation of the existing private law; 4. wide-ranging legislative actions.122 During 2001 and 2002 the Commission received about 180 responses from both academics and practitioners. The Commission responded to these contributions in February 2003 with its Action Plan123 and reaffirmed partly in the 2004 Follow-Up Communication. According to the Action Plan, the following three strategies are highly desirable: to improve the coherence and consistence of the EC acquis in the field of contract law,124 to promote the elaboration of the EU-wide standard contract terms,125 and further reflection on the need and value of a horizontal optional instrument respectively.126 The publication of PECL between 1995 and 2003 should be seen in this context; the DCFR, which was handed over to the European Union and the general public at the end of 2008, is intended to serve as draft for a Common Frame of Reference to be adopted by the European legislator.
Thirdly, judicial needs. Not only the legal systems as such, but also methods of law finding and terminology differ greatly among the EU member states. In order to prepare a European civil code, it is necessary to have a common language for the future discussion. PECL provides some common principles and terminologies and can serve as a basis for future convergence. Most parts of the PECL have, with some modifications, found their way into the DCFR.
It is therefore reasonable to say the PECL and DCFR are the foundation of European contract law harmonization, and indicate the common core of contract laws in Europe. There are several characteristics for the fundamental principles in PECL and DCFR:

  1. They are shared by most of the legal systems of Europe and are evidenced in most of the European national contract laws.
  2. Fundamental principles are the leading rules of PECL and DCFR. They are used to guide the drafting and interpretation of all the provisions of contract law.
  3. They are mandatory rules which cannot be excluded by the parties in their contract.
  4. PECL and DCFR reflect modern contract law. Their fundamental principles reveal some features of modern contract law and manifest the valuation of modern society.
  5. Fundamental principles are required in all stages of a contract. They are required in the formation, performance, the exercise of the rights of the parties, and the enforcement of their duties.

The general, binding principles of PECL include freedom of contract, good faith and fair dealing, duty to co-operate, duty of care, as well as reasonableness.127 However, the duty to co-operate and the duty of care, in the opinion of the author, are the more specific reflections of good faith and fair dealing, which means they just make the principles of good faith and fair dealing more concrete. The same can be said for reasonableness, namely that it is also a concrete expression of fair dealing. This part therefore attempts to describe the three fundamental principles evidenced in PECL and DCFR, which are freedom of contract, good faith, and fair dealing.

2.1 Freedom of contract

Like most national legal systems in Europe, PECL acknowledges the right of both legal and natural persons to decide with whom they will make contracts and to determine their contents.128 The idea of freedom reveals that individuals should be given the choice whether to enter into the contract, and implies that individuals can also choose freely the provisions of their contract.129 “It sees in the general license to enter binding contracts an enhancement of freedom since this facility permits the new forms of co-operative endeavors which last over a period of time”.130
There are two concepts which are closely connected with contractual freedom, the first of which implies that the contract is based on mutual assent.131 However, it does not mean the parties have indeed agreed in their innermost minds, or that they really agreed at all or at least intended to agree. Mutual assent is measured only by the words and other conduct of the parties, which could lead a reasonable person to assume they have agreed. This is a kind of objective test. The second concept manifests and is the result of the idea of free choice, which should not be intervened in by the government or other external interference.132
Freedom of contract is rooted in the will theory of classical contract law from the eighteenth and nineteenth centuries. Since the establishment of classical contract law, the essential purpose of the law of contract has become the one that focused upon the free choices of individuals.133 Freedom of contract, which is the essence of the will theory, attracted both civil and common lawyers in the nineteenth century.134 Before this time, lawyers focused on the discussion of contract law in terms of promise rather than the consensus and wills of the contract. Only around 1800 did lawyers and judges begin to focus on the will or consensus of the contracting parties. As express by Morton J. Horwitz, “modern contract law is fundamentally a creature of the nineteenth century”.135
As reflected in the theory, contracts are entered into by the will or consent of the parties. Their contractual liability stems from their meeting of minds. The commitments are enforceable because of the “will” of the promisor to choose to be bound by his commitment, and he cannot complain about force being used against him as he “intended that such force could be used when [he] made the commitment”.136
It is pervasive to say that freedom of contract as a fundamental principle in contract law had been rapidly developed in the 19th century and reached its highest level in the 1870s. In modern accounts of contract law, we still cannot ignore that the foundation of traditional concepts of contract law was based on the idea of facilitating free choice. It is an essential tool to understand the market relations and legitimating legal decisions. Some scholars have argued that modern private law convergence could be regarded to serve two reasons: one is to the functioning of integrated market while the other is to construct a European citizen.137 For the second reason, the private law Europeanisation, which is to establish what the relation between the individuals in Europe, should be mainly concerning the definition of contractual freedom and its limitations.138
PECL subscribes to freedom of contract, as is evidenced in Article 1:102, whereby parties are free to enter into contracts and to determine their contents. It is one of the cardinal principles of PECL. Not only was it a convenient way to understand the economic virtues of the free market system as the contract law governs the rules for the exchange of wealth produced and allocated by the market, but it also manifests the legitimacy of state in that the power of the state is limited in order to maximise, respecting and even enforce the liberty of citizens. Traditionally, the vague notions of “public policy” or “good morals” have been used as limitations to party autonomy. But the importance and value as well as standards employed are rather vague and uninformative.139 Since the 20th century, when protection of weaker parties and of fundamental rights began to play a greater role, various limitation have been imposed on that freedom. While PECL acknowledges freedom of contract, it also states that the freedom is restricted by the requirements of good faith and fair dealing, and also by mandatory rules, which include national, supranational and international rules.140
The notion of freedom of contract is, however, also closely associated with the development of a single free market.141 It encourages the free choice of contractual parties which undoubtedly accelerates the development of a single market to make it possible for the citizens and undertakings to engage in the economic and other activities throughout the European Union under the same conditions. In the past several decades, the establishment of a single market has been considered as a political issue for the EU countries. One could even say that all EU legislation serves to promote and maintain an efficient and competitive single market. While contract law is rather a complex regulatory code designed to channel, encourage and shape the market transactions, the work of European contract law convergence serves and provides for the development of a single market.
The DCFR adopts the same approach as PECL and recognizes freedom of contract as a fundamental principle of contract law. As stated in the Introduction to the DCFR, “as a rule, natural and legal persons should be free to decide whether or not to contract and with whom to contract. They should also be free to agree on the terms of their contract. This basic idea is recognized in the DCFR.”142
However, in modern contract law, the meaning of “freedom” has changed somewhat when compared to that prevailing at the time of classical contract law. Nowadays, social elements have been widely included in order to maintain justice within a society, for instance, to protect the consumers in the contract, to protect small and medium-sized enterprises (SMEs) etc. The notion of social justice therefore is understood as a significant element which limits contractual freedom.
Finally, when compared with the CLC, contractual parties are endowed with more freedom in PECL, which is revealed by the principle of freedom of contract. The CLC, rather than acknowledging freedom of contract, uses instead the expression “contract voluntariness”. As has been shown above, contract voluntariness is within the scope of freedom of contract. The latter acknowledges the freedom to choose the contractual parties, to conclude and determine the contents of contract, whereas contract voluntariness only grants the freedom to choose the contractual parties and conclude the contract.

2.2 Good faith

As Aristotle pointed out: “if good faith has been taken away, all intercourse among men ceases to exist“.143
Good faith has been considered as vitally important ingredient in modern contract law. “The draftsmen of the PECL appear to have regarded it as part of the common core of European contract law”.144 However, as the notion is closely connected with the cultural diversity of the communities and has been regarded as injecting moral notions into law, the meaning of good faith differs considerably according to different scholars. Some academics, such as Professor Powers, define good faith as “an expectation of each party to a contract that the other will honestly and fairly perform his duties under the contract in a manner that is acceptable in the trade community”.145
Not only are there many ways in which good faith can be defined, but these have also varied considerably over time. In Roman law, good faith or bona fides was always “associated with trustworthiness, conscientiousness and honorable conduct”.146 Cicero gave a complete definition of good faith: “These words, good faith, have a very broad meaning. They express all the honest sentiments of a good conscience, without requiring a scrupulousness which could turn selflessness into sacrifice; the law banishes from contracts ruses and clever maneuvers, dishonest dealings, fraudulent calculations, dissimulations and perfidious simulations, and malice, which under the guise of prudence and skill, takes advantages of credulity, simplicity and ignorance”.147 However, the medieval jurists spoke of good faith in contract law as the description of three types of conduct expected by the parties:148
Firstly, keeping one’s word. According to the medieval jurists, one must keep his words as a matter of faith, equity and the ius gentium. The term of pacta sunt servanda is the reflection of this notion.
Secondly, a party to a contract must not take advantage of the other by misleading that party, or by use of unequal bargaining power.
Thirdly, both parties must fulfil such obligations that an honest person could be expected to, even if they were not expressed in the contract.
The jurist Baldus associated good faith with equity and conscience.149 The requirement of good faith he gave was: “no one should be enriched at another’s expense”.150 He argued that the judge should take account of good faith in a contract for two purposes: the first is to know whether contracts are binding, and the second is to know what the parties’ obligations are and whether they have been fulfilled.151 From the interpretation and analysis, the essence or substantive element of good faith is “just and honest conduct”.
In most civil legal systems, good faith was recognized as an overriding principle in making and carrying out the contracts.152 It requires the contractual parties to act reasonably and extends the obligations under a contract. For example, contractual parties owe each other a pre-contractual duty to negotiate fairly and honestly. However, there is a distinction between subjective good faith and objective good faith. The first one is always regarded as a subjective state of mind while the latter is normally considered as a norm for the conduct of parties. In common law systems, historically, good faith was not given legal recognition.153 However, in many cases, the implied term “reasonable expectations of honest people”, which is perhaps the closest substitute in common law that has been found for the notion of good faith in civil legal system,154 has been used to establish the same standard of good faith in particular circumstances.155
PECL establishes good faith as a basic principle running through the Principles from the formation to the enforcement of contract.156 Roughly speaking, the notion of good faith has at least three functions in PECL:157

  1. Interpretative: as circumstances often change considerably in practice and there are always some ambiguities in the contract, good faith is thus regarded as a yardstick for the interpretation to protect the justified expectation of contractual parties. It is an efficient way to implement the “spirit of bargain” and to recognize the minimum principles of fairness and honesty.
  2. Supplementary: as the contractual parties cannot express all the circumstances in the contract, good faith is therefore considered as a implied term to supplement the contract in determining the nature and scope of justified expectations.
  3. Restrictive: good faith also has a restrictive function that when a rule binding upon the parties does not apply to the extent, or in a given circumstance that it would be unacceptable to a reasonableness person, then the judges can apply this principle to restrict the scope of bargaining.

The notion of good faith can be linked to many PECL rules, such as those which acknowledge pre-contractual liability, ancillary duties, and post-contractual liability. These have been deduced, to a large extent, from the notion of good faith. A similar observation can be made about the DCFR.158 It can thus be said that good faith, the recognition of moral rights [as above] in the law, is acting as an overarching principle of modern contract law.
In China, however, good faith originates from the moral standard of Confucianism. It was used to maintain the hierarchy order of the society and has been rooted in Chinese culture, whereas in European contract law good faith helped commercial development, as the bona fides are closely associated with commercial elements. Nowadays, in both the EU and China, the spirit of good faith has been integrated into the society and closely associates with the commercial practice. Both contract laws therefore recognize it as an overarching principle.

2.3 Fair dealing

Good faith and fair dealing are always combined into one notion and are often considered as a single rule in the PECL. It has been argued by some scholars that the reason for this combination is to make it less irritable to the English legal community, as good faith is not widely accepted by English lawyers.159 However, are they indeed the same? Before answering this question, it would be interesting to start with the interpretation of these words from the Oxford English Dictionary: “Fair” is defined as “equitably, honestly, impartially, just; according to rule”160, while “dealing” means “acting (in some specified way) towards others”.161 It is surely true that “fair dealing” means to show just, honorable behavior towards others, whereas in the definition of “good faith”, the notions of “just” and “honest” are always present. So it is reasonable to say good faith is a kind of subjective test to the just and honesty behavior, while fair dealing is the objective one. The first one focuses on the minds of the parties, whereas the latter emphasizes their conduct.162
The concept of fair dealing is to a certain extent linked to the notion of fairness. Some scholars even argue that the notion of fair dealing is a typical translation of fairness from the Anglo-American world,163 and that the terms “fair dealing” and fairness are closely related. The present article will consider “fair dealing” and “fairness” as one and the same notion.
The principle of fairness has played an essential role in the process of European contract law convergence. Since the second half of the 1980s, the EC has adopted numerous directives which aim to protect the interests of consumers. The first directive, commonly referred to as Doorstep Selling Directive, was adopted in 1985,164 and then followed by the Consumer Credit Directive in 1987,165 the Unfair Contract Terms Directive in 1993,166 the Timeshare Directive in 1994,167 the Distance Selling Directive in 1997,168 the Injunctions Directive in 1998,169 the Consumer Guarantees Directive in 1999170 and the Distance Selling of Financial Services Directive in 2002171. The main purpose of these directives is to improve the protection of consumers or weaker parties in the member states, with improving the functioning of the internal market as an additional aim.172
Nowadays it is widely accepted that “in order to achieve distributive justice, [we] must impose standards of fairness in contracts”.173 It is generally held that modern contract law has been shifting from the procedural fairness, which ensures there is no undue influence, to the substantive fairness, which concerns a fair outcome. The traditional view, whereby the main purpose of contract law is to enforce the contract instead of ensuring the fairness of contract, has been criticized in recent years.174 PECL therefore acknowledges the doctrine of fair dealing as one of the overarching rules in the Principles, which is required at all stages of a contract. It includes both procedural and substantive fairness:

  1. Substantive fairness: PECL provides that unfair terms which have not been individually negotiated are invalid.175 A term which has not been individually negotiated is considered unfair if it causes a significant imbalance between the parties. This provision extends the scope of application of the general clause of the EC directive on the Unfair Terms in Consumer Contracts (1993).176 Another example for substantive fairness in PECL, also in line with the laws of most EU member states, is the doctrine of change of circumstances, which is used to correct any injustice which results from an imbalance caused by supervening events. The acknowledgement of these doctrines reflects the shift from the classical fairness concept to the modern notion.
  2. Procedural fairness: in line with classical contract law, PECL employs notions of fairness to scrutinize the process of bargaining. It ensures that contracts are not unfair as a result of procedural impropriety during the negotiation procedure through the doctrines of fraud, misrepresentation, duress and undue influence.

The emphasis on the substantive justice in the PECL reveals that the weaker party protection has been considered as part of internal market philosophy in current Europe. For a long time, the aim of internal market philosophy was to improve, simplify and promote the cross-border trade and competition within the European Union. However, nowadays the weaker party protection has been gradually absorbed into this internal market philosophy.

3. Conclusion

For economic and political purposes, China has transplanted a large range of norms and terms from western contract law. The current Chinese law is not consistent with its own legal history. One can observe a break at the beginning of the 20th century, when China started to transplant underlying norms from the west. At first sight, one could gain the impression that Chinese contract law no longer differs significantly from European contract law. However, law is influenced by the culture, history and society in which it is embedded. Contract laws in both China and Europe are thus rooted in their own legal history and culture. Seemingly identical concepts thus take different meanings in different systems. When compared with Europe, Chinese Confucianism and its particular legal history determine that the contractual autonomy should be more limited, particularly in relation to the public interest. In contrast with China, party autonomy has been more respected in Europe since the Roman times. These historic and cultural roots of modern contract laws account for considerable differences until today.
Indeed, a comparison of fundamental principles which underlie contract laws in China and in Europe reveal significant differences in party autonomy. It is reasonable to say the freedom in China is much more limited by public interest when compared with Europe. Moreover, the vague term of “public interest” in China has be given a wide scope which includes not only the interest of the state, but also the interest of the ruling political party.
Another interesting difference which emerges from a comparison of fundamental principles of contract law is that in China, for a long time, contract law was chiefly used to achieve substantive justice among the society, whereas procedural justice was always ignored. In contrast, in Europe, the emphasis was long on procedural justice as main contractual tool for maintaining justice in a society. Traditionally, “justice” in contract law was thus mostly related to issues of “substantive fairness” in China, whilst in Europe, it mostly concerned “procedural fairness”. However, modern Chinese society has witnessed a transformation from state oriented to the individual oriented, and procedural justice has consequently been advocated for protecting the interests of individuals. On the contrary, European societies have transforming from being chiefly individual oriented to being increasingly society oriented, so that more prominence has been given to notions of substantive justice. So while the departing points for the notion of “justice” have differed considerably between China and Europe, we are currently witnessing a convergence of social values which will ultimately also lead to a convergence between Chinese and European contract laws.


* Junwei Fu, Doctoral Candidate, Tilburg University School of Law, the Netherlands; currently Visiting Scholar at Washington University School of Law, USA.

1 Study Group on Social Justice in European Private Law, Social Justice in European Contract Law: A Manifesto, European Law Journal vol. 10 (2004) 654.

2 Ibidem.

3 Martijn. W. Hesselink & Gerard. J. P. de Vries, Principles of European Contract Law (Kluwer 2001) 80.

4 Stefan Grundmann, An Academic Green Paper on European Contract Law (Kluwer 2002) 1-15.

5 Liming Wang, Fundamental Principles of China’s Contract Law, Columbia Journal of Asian Law (1999) 2.

6 Huixing Liang, zhong guo he tong fa qi cao guo cheng zhong de zheng lun dian [The Debates over the Drafting of Chinese Contract Law], fa xue [Jurisprudence] vol. 2 (1996) 13-14.

7 Jan Smits, The Future of European Contract Law: on Diversity and the Temptation of Elegance, paper presented at the conference Towards a European Ius Commune in Legal Education and Research (2001) 3-4.

8 Ole Lando & Hugh Beale, Principles of European Contract Law: Parts I and II (Kluwer 2000) xxi.

9 Ibidem xxii.

10 Smits (note 7) 4.

11 Principles, Definitions and Model Rules of European Private Law. Draft Common Frame of Reference (Outline Edition), prepared by the Study Group on a European Civil Code and the Research Group on EC Private Law (Acquis Group) (2009); see also Christian Twigg-Flesner, The Europeanisation of Contract Law (Routledge-Cavendish 2008) 13-15.

12 Wang (note 5) 9.

13 Ibidem.

14 Guodong Xu, min fa ji ben yuan ze jie shi[Interpretation of Fundamental Principles of Civil Law], (China University of Political Science and Law Press 1992) 8-15.

15 Haflidi Larusson & Davis J. Sharp, West Meets East: The New Chinese Contract Law, Ivey Business Journal (1999) 67.

16 Bing Ling, Contract Law in China (Sweet & Maxwell Asia 2002) 39-54.

17 Feng Chen, The New Era of Chinese Contract Law: History, Development and A Comparative Analysis, Brooklyn Journal of International Law vol. 27 (2001) 169.

18 Wang (note 5) 2.

19 Ping Jiang, Drafting the Uniform Contract Law in China, Columbia Journal of Asian Law (1996) 245-255.

20 Zhao Yuhong, Law of Contract, Wang Guiguo & John Mo, Chinese Law (kluwer 1999) 227-228.

21 The guiding principles for the drafting are: 1. Considering the situations of reforming and the door-opening policy, developing socialist market economy, establishing the uniform and integrating into the international market, the legislation should conclude our own legal experience and learn widely from other developed countries in order to be consistent with the international treaties and custom laws, and reflect the same rules of modern economy market; 2. For presenting the principles of party autonomy in order to protect the freedom of contract within the law, public order and social ethics, the legislation should not limit the freedom of contract without serious proper reason; 3. Considering the era characteristics of law making and implementing, the legislation should be suitable to the requirements after the success of the socialist economy market, also shall be suitable to the transforming from the centrally planned economy to the market economy; 4. The values of the contract law are: economic efficiency, social justice, convenience and security transaction. The legislation should focus on the development of productivity and social interests, protecting the interests of consumer and employee, safeguarding the social order of economy market. It should reflect the simply and rapid characteristic of modern market economy and convenience transaction as well as the form and procedure for the transaction security; 5. The provisions should be operational and the expression should be simple and exact. From: Guangxing Zhang, zhong hua ren min guo he guo he tong fa de qi cao [Drafting Contract Law of People’s Republic of China], fa xue yan jiu [Chinese Journal of Law] vol. 5 (1995) 4-7.

22 Article 1 the CLC.

23 Article 4, the CLC: a party is entitled to enter into contract voluntary under the law, and no entity or individual may unlawfully interfere with such right.

24 Chaibong Hahm, Confucianism and the Concept of Liberty, Asia Europe Journal (Springer-Verlag 2006) abstract.

25 Mo Zhang, Chinese Contract Law Theory and Practice (Martinus Njihoff Publishers 2006) 242.

26 Ping Jiang, lun xin he tong fa zhong de he tong zi you yuan ze yu cheng shi xing yong yuan ze [The Principles of Freedom of Contract and Good faith in New Contract Law], zheng fa lun tan [Politics and Law Forum] vol. 1 (1999) 3-5.

27 Ibidem.

28 Zhang (note 25) 246.

29 Ibidem.

30 Ibidem 241.

31 Article 4 of GPCL (Adopted at the Fourth Session of the Sixth National Congress of People’s Republic of China on 12 April, 1986): in civil activities, the principles of voluntariness, fairness, making compensation for equal value, honesty and credibility shall be observed.

32 Jiang (note 19).

33 Jiang (note 26).

34 Ibidem.

35 The Introduction to the Contract of Law of China and its Major Drafts, edited by the Civil Law Office, the Legal Affairs Committee of the Standing Committee of the National People’s Congress, (China Law Press 2000) 8-18

36 Zhang (note 25).

37 Ibidem.

38 Ling (note 16) 40-41.

39 Keijiro Nakamura, The History and Spirit of Chinese Ethics, International Journal of Ethics vol. 8 (1987) 86-87.

40 Zhang (note 25) 74.

41 Jiadong Zheng, on the Confucian Idea of, the full text is available at: (last assessed in Oct. 2007).

42 John Rawls, A Theory of Justice, Belknap Press of Harvard University (1999).

43 A.S. Cua, Yi (l) and Li: Rightness and Rites, Antonio S. Cua, Encyclopedia of Chinese Philosophy, (Routledge 2003) 842.

44 Ibidem.

45 A.S.Cua, Junzi (Chun-tzu): The Moral Person, Ibidem 333.

46 A.S. Cua, Yi (l) and Li: Rightness and Rites, Ibidem 842.

47 Sam Dragga, Ethical Intercultural Technical Communication: Looking through the Lens of Confucian Ethics, Technical Communication Quarterly vol. 8 (1999) 369.

48 Quanyu Huang & Richard S. Andrulis & Tong Chen, A Guide to Successful Business Relations with the Chinese: Opening the Great Wall’s Gate, New York: International Business (1994) 192-193.

49 Article 4, the GPCL.

50 Article 5, the CLC.

51 Zhang (note 25) 74.

52 Philip C.C. Huang, Civil Justice in China: Representation and Practice in the Qing (Stanford University Press 1996) 5-9.

53 Zhang (note 25) 73-76.

54 Article 58, CLC.

55 Zhang (note 25) 73-76.

56 Article 107-122, CLC.

57 Wang (note 5) 15.

58 Sam Dragga (note 47) 367.

59 Pei-jung Fu, Confucianism: Constructs of Classical Thought, Cua (note 43) 67.

60 Ibidem 68.

61 Junzi has been translated as superior man, noble man, gentleman, etc. In this paper, the author translated into gentleman.

62 Pei-jung Fu, Confucianism: Constructs of Classical Thought, Cua (note 43) 65.

63 Article 4, the GPCL.

64 Article 5, the CLC.

65 Jiang (note 26) 8-12.

66 Dragga (note 47) 371.

67 Article 119, the CLC: where a party breached the contract, the other party shall take the appropriate measures to prevent further loss, where the other party sustained further loss due to its failure to take the appropriate measures; it may not claim damages for such further loss.

68 Wang (note 5) 15-17.

69 Ping Jiang, zhong hua ren min gong he guo he tong fa jing jie [A Detailed Explanation of Contract Law] (China university of Political Science and Law Press 1999) 6-8.

70 Huixing Liang, guan yu zhong guo tong yi he tong fa cao an di san gao [The Third Draft of Chinese Contract Law], jin ji fa zhi [Economics and law] vol. 2 (1997) 49.

71 Ibidem.

72 Article 54, the GPCL: a civil conduct shall be the lawful act of a citizen or legal person to establish, change or terminate civil rights and obligations.

73 Huixing Liang, shi chang jing ji yu gong xu liang shu yuan ze [Market Economy and the Principles of Public Order and Good Morals], min shang fa lun cong [Civil and Commercial Law Review] vol. 1 (1999) 57.

74 Axel Hagedorn, Cultural Characteristics in the Chinese Contract Law: A Multidisciplinary Approach, final thesis from Free University of Amsterdam (1996) 72.

75 Hahm (note 24) 487.

76 Zhang (note 25) 54.

77 Hanbin Wang, NPC Creates Good Legal Environment for Reform and Opening-up, Interview with Wang Hanbin, vice-chairman of the Standing Committee of the NPC, China Law vol. 1 (1995) 57-60.

78 Axel Hogedorn, Cultural Characteristics in the Chinese Contract Law: A Multidisciplinary Approach, final thesis from Free University of Amsterdam (1996) 17-18.

79 Zhang (note 25) 82.

80 Ibidem.

81 Ibidem.

82 Ling (note 16) 37.

83 Ibidem 48.

84 Liming Wang, he tong fa yan jiu [Study in contract law], People’s University Publisher vol. 1 (2002) 25-60.

85 Article 2, the CLC.

86 Article 54, the CLC.

87 Article 41, the CLC.

88 Ling (note 16) 41-42.

89 Lixing Yang & Shaofeng Zhang, On A Few Problems in Making Laws of Unified Contract-comments on the Problems Deserving Attention in Making of Unified Contract Discussed in the Annual Meeting of Civil Law and Economic Law Research Society of China Law Science Society and Hainan Academic Seminar, Law of Hebei vol. 3 (1996) 3.

90 Wang (note 5) 23-33.

91 Ibidem.

92 Ibidem.

93 Hugh Collins, The Law of Contract (LexisNexis 2003) 1-5.

94 Martijn. W. Hesselink & Gerard. J. P. de Vries, Principles of European Contract Law (Kluwer 2001) 80.

95 Article 58, the GPCL: civil acts in the following categories shall be null and void: (1) those performed by a person without capacity for civil conduct; (2) those that according to law may not be independently performed by a person with limited capacity for civil conduct; (3) those performed by a person against his true intentions as a result of cheating, coercion or exploitation of his unfavorable position by the other party; (4) those that performed through malicious collusion are detrimental to the interest of the state, collection or third party; (5) those that violate the law or public interest; (economic contracts that violate the state’s mandatory plans; (6) those that performed under the guise of legitimate acts conceal illegitimate purposes.

96 Article 54, the CLC.

97 Ibidem.

98 Huixing Liang, he tong de jie shi gui ze [The Interpretation Rule of Contracts], min shang fa lun cong [Civil and Commercial Law Review] vol 6 (1997) 539-545.

99 Mark van Hoecke, The Harmonisation of Private Law in Europe: Some Misunderstandings, Mark van Hoecke & Francois Ost, The Harmonisation of European Private Law (Oxford 2000) 1.

100 Ibidem 2-3.

101 Ewoud Hondius, European Private Law – Survey 2000-2002, European Review of Private Law (2002) 865.

102 Arthur Hartkamp, Perspectives for the Development of a European Civil Law, The paper was presented to the Trento Conference of July 15 (1999) 2-3.

103 Brigitta Lurger, The Future of European Contract Law between Freedom of contract, Social Justice, and Market Rationality, European Review of Contract Law vol. 5 (2005) 443.

104 Ibidem, p. 2.

105 Duncan Kennedy, Thoughts on Coherence, Social Values and National Tradition in Private Law, Martijn W. Hesselink, The Politics of a European Civil Code, Kluwer Law International (2006) 9.

106 Jan Smits, The Future of European Contract Law: On Diversity and the Temptation of Elegance, The paper was presented at the Conference Towards a European Ius Commune in Legal Education and Research, Maastricht Faculty of Law, 25-26 October (2001) 4.

107 Simone Leitner Case, Case C-168/00, [2002] ECR I-2631.

108 Ewoud Hondius, European Private Law – Survey 2000-2002, European Review of Private Law (2002) 865.

109 Jens Karsten & Ali R. Sinai, The Action Plan on European Contract Law: Perspectives for the Future of European Contract Law and EC Consumer Law, Journal of Consumer Policy vol. 26 (2003) 160.

110 Arthur Hartkamp, Perspectives for the Development of a European Civil Law, The paper was presented to the Trento Conference of July 15 (1999) 3-4.

111 Twigg-Flesner (note 11) 13-14.

112 Ibidem.

113 Giuseppe Gandolfi (Ed.), Code Europe’en des Contracts – Avant-projet, Giuffre'(Milan 2001).

114 Ewoud Hondius, European Private Law – Survey 2000-2002, European Review of Private Law (2002) 870-871.

115 Christian v. Bar, The Contribution of the Study Group on a European Civil Code to the European Convention (2002) 1.

116 Draft Common Frame of Reference (note 11).

117 Junwei Fu, ou meng ming fa dian cao an zhi shu ping [Commentaries on the DCFR], min shang fa lun cong [civil and commercial law review] vol. 43 (2009) 447-500.

118 O.J. EC 1989 C 158/400, O.J. EC 1994 C 205/518.

119 Ewoud Hondius, European Private Law – Survey 2000-2002, European Review of Private Law (2002) 870.

120 SI (1999) 800, the full text is available at: (last assessed in Feb. 2008).

121 European Commission Communication on European Contract Law Com (2001) 398, October 2001, the full text is available at: (last assessed in Feb. 2008).

122 Ibidem.

123 A More Coherent European Contract Law An Action Plan, COM (2003) 68 final, 12 Feb. 2003, the full text is available at: (last visited in Feb. 2008).

124 Ibidem 15-20.

125 Ibidem 21-23.

126 Ibidem 23-25.

127 Chapter 1: General Provisions, the PECL.

128 Lando & Beale (note 8) 99.

129 Collins (note 93) 25.

130 Ibidem.

131 P.S. Atiyah, An Introduction to the Law of Contract (Clarendon Press 1995) 5-48.

132 Ibidem.

133 Collins (note 93) 6-7.

134 James Gordley, The Enforceability of Promise in European Contract Law (Cambridge University Press 2001) 16.

135 Morton J. Horwitz, the Historical Foundations of Modern Contract Law, Harvard Law Review vol. 87 (1974) 917.

136 Randy E. Barnett, A Consent Theory of Contract, Columbia Law Review (1986) 269-275.

137 Maria Rosaria Marella, The Old and the New Limits to Freedom of Contract in Europe, European Review of Contract Law vol. 2 (2006) 257-258.

138 Ibidem.

139 George A. Bermann, Party Autonomy: Constitutional and International Law Limits in Comparative Perspectative (Juris Publishing 2002) 1-3.

140 Ulrich Schroeter, Freedom of Contract: Comparison between Provisions of the CISG (article 6) and Counterpart Provisions of the PECL, The Vindobona Journal of International Commercial Law and Arbitration vol. 6 (2002) 262.

141 P.S. Atiyah, The Rise and Fall of Freedom of Contract (Clarendon Press 1979) 398.

142 Principles, Definitions and Model Rules of European Private Law: Draft Common Frame of Reference (DCFR), Outline Edition (2009) 18.

143 Cited by William Tetley, Good Faith in Contract Particularly in the Contracts of Arbitration and Chartering, the text is available at: (last assessed in March 2008).

144 Reinhard Zimmermann & Simon Whittaker, Good Faith in European Contract Law (Cambridge University Press 2000) xiii.

145 P.J. Powers, Defining the Indefinable: Good Faith and the United Nations Convention on the Contracts for the International Sale of Goods, Journal of Law and Commerce vol. 18 (1999) 333.

146 H.A. Rommen, The Natural Law, A Study in Legal and Social History and Philosophy, St. Louis: B. Herder Book Co, translated by Thomas R. Hanley (1947) 117.

147 De Off, 3, 17. Quoted by Association Henri Capitant des Amis de la, Societe de Legislation Comparee, European Contract Law: Materials for a Common Frame of Reference: Terminology, Guiding Principles, Model Rules (European Law Publisher 2008) 152.

148 James Gordley, Good Faith in Contract in the Medieval ius commune, Zimmermann & Whittaker (note 144) 93-106.

149 Ibidem 108.

150 Ibidem.

151 Ibidem 109.

152 Art. 1134 Section 3 French Civil Code; 242 German Civil Code; Article 2 Swiss Civil Cde; Article 1175 & 1375 Italian Civil Cde; Article 762, Section 2, Portuguese Civil Code; Article 288 Greek Civil Code; Article 6:2 & 6:248 Dutch Civil Code

153 Atiyah (note 131) 213.

154 Tetley (note 143) 28.

155 Ibidem.

156 Lando & Beale (note 8) 114.

157 E.Allan Farnsworth, Duties of Good Faith and Fair Dealing under the Unidroit Principles, Relevant International Conventions, and National Laws, the text is available at: (last assessed in Dec. 2007).

158 Artice 1:103, Book I, the DCFR (2009).

159 Marjorie Hoch, Is Fair Dealing A Workable Concept for European Contract Law, Global Jurist Topics vol. 5 (2005) 17-18.

160 Oxford English Dictionary:

161 Ibidem.

162 Lando & Beale (note 8) 112-116.

163 G.P. Fletcher, Comparative Law as A Subversive Discipline, American Journal of Comparative law (1998) 5-40.

164 Directive 85/5777/EEC of 20 Dec. 1985 to protect the consumer in respect of contracts negotiated away from business premises.

165 Directive 87/102/EEC of 22 Dec. 1986 for the approximation of the laws, regulations and administrative provisions of the Member States concerning consumer credit.

166 Directive 93/13EEC of 5 April 1993 on unfair terms in consumer contracts.

167 Directive 94/47/EEC of 26 Oct. 1994 on the protection of purchasers in respect of certain aspects of contracts relating to the purchase of the right to use immovable properties on a timeshare basis.

168 Directive 97/7/EC of 20 May 1997 on protection of consumers in respect of distance contracts.

169 Directive 98/27/EC of 25 May 1998 on injunctions for the protection of consumers’ interests.

170 Directive 1999/44/EC of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees.

171 Directive 2002/65/EC of 23 Sep. 2002 concerning the distance marketing of consumer financial services.

172 Brigitta Lurger, The “Social” Side of Contract Law and the New Principles of Regard and Fairness, Arthur S. Harkamp etc., Towards a European Civil Code (kluwer 2004) 272.

173 Ibidem.

174 Hoch (note 160) 32-33.

175 Article 4: 110, the PECL.

176 Lando & Beale (note 8) 266.

© 2009 Junwei Fu. This HTML edition © 2009 University of Oxford.
The contents of this page may be downloaded and printed out in single copies for individual use only. Making multiple copies without permission is prohibited.

“Did God say, ‘You shall not eat of any tree of the garden’?”* Rethinking the “Fruits of the Poisonous Tree” in Israeli Constitutional Law

Mohammed Saif-Alden Wattad**

(2005) Oxford U Comparative L Forum 5 at | How to cite this article

You may freely eat of every tree of the garden; but of the tree of the knowledge of good and evil you shall not eat, for in the day that you eat of it you shall die.***

Continue reading

The search for a medieval Lex mercatoria

by Albrecht Cordes*

(2003) Oxford U Comparative L Forum 5 at | How to cite

The Argument

In the first winter of the Seven Years War, on the 14th of December 1756 to be precise, French pirates seized the English freighter “Sarah”. At this point she had covered 17 of the estimated 21 days of the journey from Newfoundland to Lisbon. The freight was not lost beyond retrieval, as three days later an English privateer was able to recapture the “Sarah”. The goods were then transported to England, where the privateer had to be rewarded for the re-seizure with half the total value of the goods1. What was the consequence of this loss for the freight due to the carrier? The shipowners and freighters Luke and associates and their customer, the merchant Lyde, argued as to how much of the ₤150 reward Lyde was liable to pay after this incident.
The case appeared before one of the most renowned jurists in English legal history, the recently appointed Chief Justice of the King’s Bench, Lord Mansfield2 who decided as the second and final instance. First of all, Lord Mansfield halved the disputed amount, i.e. ₤75. As half of the cargo’s value was to be paid to the privateer, half of the freight should be lost, too. But not even this second half was entirely granted to the petitioner. Lord Mansfield ruled that the sum payable to him was to be diminished in correspondence with the part of the journey which had in fact been covered. As the incident had occurred after 17 of 21 days, Lord Mansfield decided accordingly that the defendant should pay 17/21 of the ₤75 – i. e. ₤60 and 14 s. The principle of this decision is that of proportional freight – in Mansfield’s words freight “pro rata itineris”3. The contrary maxim is that of half freight: if the journey is interrupted by an incident for which the freighter is not responsible, nothing is due for the lost cargo, whereas for the saved cargo half of the freight has to be paid irrespective of the part of the journey covered4.
Lord Mansfield based his judgement in the first place on “common sense”. This sounds very British but is rather similar to a way of reasoning which became popular in Germany at that same time, i.e. to deduce arguments from the “Natur der Sache”5, the nature of the matter. Secondly, Lord Mansfield based his findings on the result of his own comparative investigation. He concluded that all past and present systems of law, from the ancient Lex Rhodia through the medieval maritime laws of the Catalan Llibre del Consolat de Mar and the French Rôles d’Oléron to the Hanseatic maritime laws and King Louis XIV’s Ordonnance de Commerce had come to this same decision6. Lord Mansfield concluded that Maritime Law was not the law of one particular country but instead a general law of nations: “Non erit alia lex Romae alia Athenis; alia nunc alia posthac; sed et apud omnes gentes et omni tempore una eademque Lex obtinebit7 – Neither Rome nor Athens had any other law, neither today nor previously; but in all countries and at all times the same rule would did apply.
A similar pattern of reasoning is used in today’s discussion about the principles of the so-called New Lex mercatoria8. According to its supporters, its rules emerge and come into being independent from the will of any particular national legislator9. The belief in the unchanging content of the rules may have been lost since the days of Lord Mansfield but there is a clear similarity in the conviction as such. Supporters of International Private Law challenge the idea of the so-called mercatorists that law could possibly come into being without the explicit enactment by a legislator10 – among other reasons because their own set of rules for norm collision might become superfluous in view of such a system of supranational law. Another objection they have against the New Lex mercatoria is that this supposed area of law appears so nebulous that it is impossible to determine its content and its standards11. But above all, a law without state authority is unthinkable for the scholars of International Private Law for theoretical reasons. In defence of their theory, the supporters of International Trade law have used a historical argument, which even provided them with a name for their new matter: “Lex mercatoria”. A law merchant such as that developing today, the argument states, had already existed in the Middle Ages12. Their suggestion that law develops without any national or transnational legislator having a word in the process demonstrates what dynamism the concept of a modern Lex mercatoria could unleash in times of globalisation of large areas of hitherto purely national law.
Alas, the legal historian is forced to water the wine of Lex mercatoria euphoria and state that this use of a legal system of the past is both inconsistent and unhistorical. A similar problem results from current attempts to resort to the early modern Ius commune for the purpose of creating a European order of private law13. In both cases the laws of the past are divorced not only from their theoretic but also from their social and economic context, and dragged into legal surroundings which are completely foreign to them.
In these two cases the robor antiquitatis, the vigour of (old) age, seems to strengthen the authority of a set of legal rules. On the other hand it would be easy to draw up a list of examples in which the antiquity of a legal institute is used against its continuation or renewal because it is démodé, outdated. Whether the fact that a particular set of laws once existed speaks for or rather against its “return”14 is an open question. In order to find an answer, one has to consider the reasons why it was renounced in its time and subsequently forgotten15.
The following expositions deal with the hypothesis which Harold Berman accentuated in the following way:

The crucial period of change were the late eleventh and twelfth centuries. It was then that the basic concepts and institutions of modern western mercantile law – Lex mercatoria, ‘the law merchant’ – were formed, and even more important, it was then that mercantile law in the west first came to be viewed as an integrated, developing system – a body of law.16

Accordingly, three features characterize the medieval Lex mercatoria: (1) its existence is not derived from any “national” – for the Middles Ages one should more accurately speak of “particular”17 – legislator, (2) it is a body of law in the sense of a coherent system of rules, and (3) its most fundamental concepts and legal institutes originate in the High Middle Ages.
The discussion of this threefold hypothesis will equally proceed in three steps. First of all, we will take a look at the historical roots of this unhistorical approach towards a “Lex mercatoria”, a search which will lead us to England in the late thirteenth century. Secondly, on a purely theoretical level, we will examine from what point and to what degree one can speak of an independent body of law in the sense of a coherent set of merchant laws at all in the Middle Ages – a search which takes us to an impasse once we leave the spheres of Roman and canon law. And finally, as a third step, we will have to look at those spheres of law which really were important for medieval merchants; the opening example of the allegedly universal principle of payment of freight for an unfinished journey fits within that context. Yet, the research which has so far been undertaken in this field is by no means sufficient to tackle this question in a sufficiently thorough manner which would en able us to visualise the outlines of medieval commercial law. Especially in the various fields of substantive law the (envisaged) search for ubiquitous principles frequently leads into an impasse as soon as crucial details are examined. In the area of legal procedure the search proves to be more promising. This does not mean that a universal system of legal procedure did exist. But there is no doubt that merchants all over Europe had similar interests when confronted with court or arbitration proceedings, and that their specific interests were attended to. Compared with regular proceedings, this concerned in particular a more rational law of evidence and a swifter procedure for the summoning of defendants, which helped to speed up trials as a whole.
(1) The earliest recordings of the term Lex mercatoria originate from this same area of legal procedure. They date back to late thirteenth-century England. The law book Fleta from around 129018 explains the writ of debt and describes in detail the rigid distribution of the burden of proof between plaintiff and defendant. In this context, it is a question of exceptions made in favorem mercatorum, in favour of the merchants. The plaintiff is granted a privilege by royal grace that under certain circumstances, namely in towns, at markets and between merchants, he may bring forward proof according to the Law merchant: “…quod parti affirmative secundum legem mercatoriam erit probacio19. The plaintiff was permitted to support his claim with his own proof, as opposed to regulations in continental law. There the merchants doggedly fought for the permission to maintain the oath of office of the defendant, which the church, conceiving this as an invitation to perjury, wanted to restrict20. This striking difference is probably an early reaction to the developing system of writs which made claiming debts a difficult enterprise in England. Simultaneously, merchants on the continent were preoccupied with another problem: the danger to be subjugated to an uncertain and possibly perilous process of establishing proof through duels and other ordeals. If this assumption is right, the same rational attitude of merchants lead to opposing expectations and demands according to the legal system under which the merchants conducted business. It is safe to say that the Lex mercatoria in late thirteenth-century England was connected to a royal privilege, which partially freed the merchants from the rigid law of evidence of the common law.
The law of evidence is also among the main subjects in a short treatise entitled “Lex mercatoria”. It was written around 1280 and thus represents the earliest reference of this term to be found to date21. It was included in the Little Red Book of the city of Bristol, which owed its name, like many other medieval town books, to the colour of its cover and to its size. It contained a variation of entries regarding the law of commerce, among others one of the oldest copies of the famous Rôles d’Oléron, a collection of maritime laws from the west coast of France dating from the middle of the 13th century.
In this treatise, Common law is depicted as the mother of Lex mercatoria, who endowed her daughter with certain privileges: “Lex communis, que est mater legis mercatorie et que suam filiam ex certis privilegiis et in certis locis dotavit22.Three differences between the two areas are named by way of direct contrast23. All three relate to speedier court trials and the simplified way of adducing evidence under the umbrella of the “daughter” Lex mercatoria. In other words, there are no traces of substantive merchant law to be found here. There is no mention of purchase deeds, methods of payment or fairs, nor of partnerships, trade companies, banks or insurance. In the perception of the treatise, as in the above-mentioned passage in the law book of Fleta, Lex mercatoria is a set of rules regarding only the merchant coming before the court.
Before carrying on with the search for a medieval Lex mercatoria on a theoretical level, it may be useful to continue with the history of the term up into early modern times. At the beginning of the seventeenth century, common law and the Lex mercatoria no longer appeared like mother and daughter, but rather like two hostile sisters. In 1622 the famous book by the merchant Gerard Malynes, entitled “Lex mercatoria or the Ancient Law-Merchant”, was published in London24. Malynes penned his work as a party supporter in a contemporary dispute in judicial politics. It concerned the question whether or not mercantile affairs fell under the jurisdiction of the English Common law courts. The merchants were quite content with the court of Admiralty handling their cases, as had become common practice since the fourteenth century. At first, the court had only heard cases regarding the law of the sea, but under the protection of King Henry VIII. the court’s competence had been extended to all trade matters, in which foreigners were involved. But at the beginning of the seventeenth century, in the course of the struggle for power between the Stuarts and Parliament, the court was suspected of being too close to the king. As a consequence, the competence of the Admiralty was reduced again in favour of the common law courts. In this situation, the merchants faced the challenge that they had to convince their new judges to apply the well-tried rules that had been in use at the Admiralty court. In order to achieve this, they argued their case by giving a new interpretation to the Lex mercatoria. They reasoned that this was a legal system that had been and remained in force in all countries and at all times, regardless of the will of any national legislator. Thus, the Lex mercatoria belonged to English law, even if it was not part of common law in a stricter sense. Therefore, the judges ought to take heed of the rules of the Lex mercatoria regardless of parties relied on this set of rules a court hearing.
Malynes thus took part in a juridical debate that had been ignited when in 1610 the House of Commons had installed a committee whose aim it was to stop the king from introducing new trade duties without the consent of Parliament. If it could be proved that there existed a system of trade law which had evolved separately from common law and therefore separately from the will of Parliament, this could strengthen the king’s point of view. The most important advocates taking part in the debate were James Whitelocke on the side of parliament and John Davies on the side of the king25.
This line of argument did not convince the judges, but that is not our point. It suffices to say that it was not before 1600 that the term “Lex mercatoria” was used in the sense of a system of substantive trade law – used in this sense by English merchants as an instrument against the disliked common law. Mentioning the Lex mercatoria’s respectable age in this context was quite evidently not meant to be a historical statement but an argument within a controversial legal discussion. Starting from here, the notion of the Lex mercatoria as a universal and uniformed system of law began a life of its own as became apparent in Lord Mansfield’s argumentation from the mid-eighteenth century. For him, the doctrine of a universal trade law no longer served as a weapon in a war for the competence of the court. To him, it was a fact, backed by his own investigations – a vivid example of how historical “facts” come into being. These “facts” still influence today’s discussion without ever having been examined from a critical historical perspective26. Yet, Lord Mansfield is to be credited for integrating the rules of trade law into the common law and thereby fundamentally contributing to a new dynamism of the latter. For this reason, he is nowadays rightfully deemed to be the father of mercantile law in England. He has, to use the Little Red Book’s terminology, reconciled mother and daughter.
To sum it up: in the Middle Ages, the term “Lex mercatoria” is used in the context of advantages and privileges granted to merchants in the field of civil litigation. This is quite different from the modern sense of a system of substantive trade law that cannot be traced back any further than to the seventeenth century. In this sense, Lex mercatoria formed part of an English dispute about court competence in which the merchants argued that the Lex mercatoria was an integral part of the English Ius Commune, i.e. the common law. Contrary to this, in contemporary Germany, trade law was not viewed as part of continental common law (in Germany: “Ius commune – Gemeines Recht”), but as a specific legal system based upon privileges, a Ius singulare27. Therefore the sources on the continent refer to “Ius mercatorum” instead of “Lex mercatoria”: a set of subjective rights, of privileges, with the merchants as the bearers of special rights, instead of a system of law with “mercantile” as its description28. Investigating the history of the term Lex mercatoria thus leads to a clear result: Lex mercatoria is not a term of European or international, but of English law. In English law, it stands for certain privileges in thirteenth-century legal procedure, maybe even for a separate system of judicial procedure. Until the seventeenth century, the term Lex mercatoria does not gain any meaning beyond that.
(2) This outcome leads to another question: if the use of “Lex mercatoria” in the sense of a body of substantive trade law can not be traced back to the Middle Ages, did a widespread, cross-border legal system of this kind nevertheless exist, perhaps under another name or without any denotation at all – a system which may well have served as an example to the modern international trade law? Has there been a Lex mercatoria avant la lettre? The Lex mercatoria has occasionally been called a universal trade law 29 but this is not very convincing. Only two areas of medieval law could claim to be universal (in the eurocentric sense of the word of before 1492): canon law and imperial law, the law of the catholic church and the law of the Roman Emperor30. From the late eleventh century, both were treated scholarly at Bologna and other northern Italian and French universities. As for the sphere of trade law, opinions differ greatly. It is even discussed whether a body of objective rules of law could have existed at all before 110031. Be that as it may, there is a consensus concerning one point: a theoretical concept of a substantive law of trade did not come into existence before the beginning of the twelfth century32. On the continent, the famous foundation charter of the market of Freiburg im Breisgau, located at the foot of the Black Forest, most likely from the year 1120, may well be one of the earliest examples for the term “Ius mercatorum” to be used in the sense of a body of law33.
Have elements of a juridical system of trade law developed from a practice of granting homogenous privileges to merchants by kings, dukes and bishops? Have other such elements emerged through a constant use in contracts through which they established themselves as custom34? For each of these two possible sources of trade law one example will be given. The merchants striving for privileges from the medieval rulers must have had distinct expectations, ideas and hopes as regards their content. Amongst other things, they referred to the legal position of other groups of merchants. For example, the Christian merchants asked the Emperor Louis the Pious, grandson of Charlemagne, to grant them the same privileges as their Jewish competitors. Thus, the status previously obtained only by Jewish merchants may have established itself as a standard expected by all groups of merchants35. The second example leads us to Northern Italy. As early as the tenth and eleventh centuries, notaries in Genoa and Pisa drew up certain contracts in company law, namely the commenda contracts, in a fully standardized form.36 Those formulas had most likely proved their practical merit; at the same time all participants must have become acquainted with them and have learned to conduct business using these standardized contracts. It is crucial in this context, though, that there is not the slightest hint that a privilege had to be granted in a certain way or that a contract had to be drafted with those standard formulas. This would have been a precondition for a fixed body of law. What was common were not the sets of rules but the interests and claims of the merchants, such as speedy trials, a more rational law of evidence, freedom of trade, a similar treatment of all groups of merchants, an established and reliable practice as regards the drawing up of contracts. There may have existed a widespread consensus that these patterns were useful, but there is no proof of a common conviction that they were legally binding.
We could finish our reflections at this point with the conclusion that we have detected yet another example of a superficial use of history, motivated by an attempt to back a certain line of argument in favour of one side in a current juridical discussion, but not supported by evidence from historical sources. But this discovery does not bear any fruits for the discussion about the future of international trade law. The question whether an old Lex mercatoria existed 350 or 700 years ago can do little to influence the outcome of a dispute about the theoretical basis and practical value of a 21st century law of merchants as a separate body of law which is not linked to any domestic law.37 But to finish here solely for the reason that the historical arguments prove to be of little value in this modern debate, would mean to allow today’s law to dictate the topics and limits of historical research. If indeed legal historians would restrict themselves to questions which are of direct use for contemporary jurisprudence, they would loose sight of the most interesting and significant spheres of those legal ideas which the merchants themselves contributed to before modern times. To overcome the dogma of a widespread and uniform Lex mercatoria is like breaking free from a chain. The perspective then broadens; the loss of a clear pattern is counterbalanced by a gain of colourful details that have been suppressed before. Phenomena can now be observed which, due to their strangeness, complexity and lack of contours, may puzzle a jurist who is simply searching for the dogmatic roots of a system of law.
(3) When examining further the medieval law of merchants and trade, one would have to go deeper into the different aspects of life and law that were influenced by these merchants, such as the law of shipping and of transport, of fairs and of transfer of payments, of trade guilds and societies. As became apparent when examining the English Lex mercatoria, procedural law would play an important role in commercial courts. All these questions would merit to be examined on a comparative basis. Great care should be taken in establishing a method of comparison38 as the uncritical application of the Lex mercatoria doctrine has often led to uncertain assumptions of uniformity, frequently made by exaggerating similarities and diminishing differences39. In this new approach, fundamental differences between the European regions would have to be taken into account. One would have to distinguish clearly between influences based on relations on the one hand and similar but independent developments on the other. Such comparative studies could then become the nucleus of the search for a medieval Lex mercatoria. However, until today, only few detailed works that fulfil these requirements have been published. To cover the entire subject would be too much work for one person alone. It should serve as a warning that Levin Goldschmidt made three such attempts, all of which remained unfinished. It will therefore be necessary to limit individual research to particular sectors of the law, concentrating on those essential themes and on the chief legal institutes, of which the availability of sources and the work already done raises hopes for a fruitful comparison.
Procedural law in mercantile cases is the most ancient and most important of these subjects. As has been mentioned above, the oldest evidence for the use of the term Lex mercatoria pointed to this context, but the most ancient privileges for merchants regarding court procedure date even back to the Carolingian era. A merchant’s legal position and his position before the courts are hardly to be separated in terms of the medieval notion of law. Within a population predominantly consisting of peasants and knights, the merchant is a stranger – not only metaphorically because of his different way of life, but also literally, since he had to seek justice and defend his rights before foreign courts, especially in the earlier, orally organized phases of trade history40. In this field, the law of evidence played the most important role. What kinds of privileges the merchants desired depended significantly on the civil procedure of the courts in the area in which the merchants were conducting their trade. Within the rigid common law system of actions based on fixed writs, their main goal was to extend their options as plaintiffs to submit evidence, in particular for claims for money debts under the writs of debt and covenant. On the continent, we see merchants who mainly strive to be allowed to defend an action by their oath without having to resort to other parties to confirm that oath.
An important topic in substantive law concerns the history of trade companies. Willy Silberschmidt, a pupil of Levin Goldschmidt, devoted a monograph to this topic in the early twentieth century41. This remained the only attempt to apply Goldschmidt’s universal approach to a distinct topic, and to verify this approach through time and space, starting with Germanic sources and ending in contemporary Malaysia. He chose the Italian commenda contract whereby one partner of a joint venture travels over sea and trades the common goods while the other stays at home and is involved only as an investor. Silberschmidt generalized both the outline of the contracts and the definition of commenda and, not surprisingly, “rediscovered” these in all the regions he examined. When one takes a closer look, certain doubts arise whether Silberschmidt has not just oversimplified the matter42. As subsequent research has established what, hopefully, can be described as a reasonably firm foothold on the Hanseatic trade ventures, a renewed comparative study with also extends to the Mediterranean types of trade companies would probably make a promising field of research.
Similar results are to be expected regarding many fields of maritime law, e.g. the legal treatment of jettison. Is it not obviously a classic example of unchanging law that the group on board of a ship, forged together by a common danger of life, also become a group which bears joint liability in case of peril, if the goods belonging to one member are sacrificed for the sake of the others? But who exactly is part of that community? Is it limited to the merchants or does it extend to the skipper? And what about the ship owner? Does he have to reimburse part of the value of the goods which were sacrificed, on the ground that his ship was saved in the process? Can he, conversely, claim part of his damage from the merchants whose goods were saved when the mast was cut down to save the ship in heavy weather? The various maritime laws in Europe provided very different answers to these questions43; again, one encounters that there at least two different ways to solve such conflicts of interests.
The same applies more or less to the opening example from the law of freight. Lord Mansfield’s comparative study was not entirely correct, at least not as concerns the law of Lübeck. It was not the principle of dividing the freight to correspond to fraction of the journey that was covered (“Teilfracht” – proportional freight) which was applied in Lübeck, but rather the simple principle of halving the freight ( “Halbfracht” – half freight). In August 1488, almost 300 years before Lord Mansfield’s judgement, the council of Lübeck decided the case of skipper Poppe Claussen against the two merchants Hans van Ryme and Hans Leyfferd. The skipper had sued the two defendants for his freightage. His journey from Kampen44 in the Netherlands to the Hanseatic Kontor in Bergen had gone well, but on his way back, Claussen’s ship burned through no fault of his own. Half of the goods could be saved, and for the lost goods the merchants were not obliged to pay any freightage – as the case of Luke v. Lyde. But, as opposed to Lord Mansfield, the council of Lübeck did not relate to the fraction of the journey which had been covered when the accident took place. Instead, the council decided on the basis of a more rigid principle: “(For that reason) the merchant is obliged to pay half45 of the freightage.”46 It cannot be ruled out that this is an earlier stage of the development of the law of freightage. Perhaps there existed a general tendency to abandon the more rigid, but also more usable principle of half freight in favour of the more flexible and in a way fairer principle of proportional freight47. But Lord Mansfield’s “one and the same law” that according to him existed in all countries and at all times in an identical form, did not even exist in the field of the maritime law of freight, which is a central field of the alleged “Lex mercatoria”. A body of international rules of law as postulated by Harold Berman can be detected only by choosing to focus on overly general issues. When taking a closer look at the institutes of commercial law, one will in most cases discover at least two competing legal concepts and solutions. If the search for the medieval roots of the term Lex mercatoria led to quite clear results, the search for the laws shaping the merchants and their trade still lies before us. Its outcome is open.


* Revised version of a paper previously published in German (Zeitschrift der Savigny-Stiftung für Rechtsgeschichte, Germanistische Abteilung, Vol. 118, 2001, p. 168-184) and French (Pierre Monnet and Otto Gerhard Oexle (eds), Stadt und Recht im Mittelalter / La ville et le droit au Moyen Âge, 2003, 117-132). Translated with the help of Bernd Kannowski, Edda Frankot and Gerhard Dannemann. I am very grateful to all three for this invaluable support. However, I alone bear the responsibility for all flaws in language and content.

1 Luke v. Lyde (1759) 2 Burr 882. It is obvious that the privateer’s reward was based on an established action, since Counsel for plaintiff argued that the privateer should have received a reward of only one third of the value because he had had the cargo in his possession for less than 96 hours. It is unclear why this argument was not taken up by either the other party or the court.

2 Kent Lerch ‘Murray, Sir William, Lord Mansfield’, in: Michael Stolleis (ed) Juristen. Ein biographisches Lexikon. Von der Antike bis zum 20. Jh., (1995), 448 f. (2nd ed. 2001), including references to recent literature on Lord Mansfield. See in particular James Oldham The Mansfield Manuscripts and the Growth of English Law in the Eighteenth Century (1993).

3 Luke v Lyde (n. 1), 888.

4 Götz Landwehr ‘Prinzipien der Risikotragung beim Seefrachtvertrag’, in: Gerhard Köbler and Hermann Nehlsen (eds) Wirkungen europäischer Rechtskultur. Festschrift für Karl Kroeschell zum 70. Geburtstag (1997), 595-615 (598 f.), traces this older principle (half of the freightage for saved goods no matter where the accident took place) back to old Icelandic law. Today’s German commercial law, § 630 Handelsgesetzbuch (HGB, Commercial Code), enacts the principle of “Distanzfracht – distance freightage”. According to this, the charterer also has to pay a fraction of the freightage for the saved cargo. However, this is calculated not only in regard of the fraction of the journey covered but also in regard of the proportion of the costs and perils the carrier took upon him up to the point of the accident, § 631 HGB.

5 Heinrich Marx Die juristische Methode der Rechtsfindung aus der Natur der Sache bei den Göttinger Germanisten Johann Stephan Pütter und Justus Friedrich Runde (1967), 27 f.; Karl Kroeschell Deutsche Rechtsgeschichte 3 (seit 1650) (3rd ed. 1989), 65-67, 109, 116; Klaus Luig ‘Schäfchen zählen – mit gesundem Menschenverstand’, in: Köbler and Nehlsen (n. 4), 687-693.

6 2 Burr 890 f.

7 2 Burr887; cited also by CHS Fifoot ‘Lord Mansfield’, (1936, reprint 1977), 87f. Among the cited authorities for the concept of a universal law of commerce is Gerard Malynes Lex mercatoria or the Ancient Law-Merchant (1622), which therefore will be discussed below. Lord Mansfield also based other decisionson the “Lex mercatoria” as e.g. in the insurance case Pelly v. Royal Exchange Assurance, Burr. 1, 341. This notion of a universal character of trade law gained considerable influence and was among others reflected in Levin Goldschmidt Universalgeschichte des Handelsrechts (3rd ed 1891). On Goldschmidt see Lothar Weyhe Levin Goldschmidt, Ein Gelehrtenleben in Deutschland; Grundfragen des Handelsrechts und der Zivilrechtswissenschaft in der zweiten Hälfte des 19. Jahrhunderts (1996). On Goldschmidt’s universal approach see the two recent articles by Karl Otto Scherner ‘Lex mercatoria – Realität, Geschichtsbild oder Vision?’, in: Zeitschrift der Savigny-Stiftung für Rechtsgeschichte, Germanistische Abteilung 118 (2001), 148-167, and: ‘Goldschmidts Universum’, in: Mario Ascheri et al. (eds), “Ins Wasser geworfen und Ozeane durchquert”. Festschrift für Knut Wolfgang Nörr (2003), 859-892.

8 The new website, founded and maintained by Prof. Dr. Klaus-Peter Berger, University of Cologne, adopts this name in its introducing remarks: “The new Lex mercatoria is online! The Transnational Law Database (TLDB) makes the new Lex mercatoria workable for every-day legal practice. It provides the hitherto missing link between the theory of transnational commercial law and international legal practice.”

9 Berthold Goldman ‘Frontières du droit et lex mercatoria’, in: Archives de philosophie du droit 1964, 177-192; Clive M. Schmitthoff ‘International Business Law. A New Law Merchant’, in: 2 Current Law and Social Problems (1961), 129-142. The flood of literature on this subject is enormous and still rising. A comprehensive bibliography can be found on the website mentioned in n. 8. A recent overview in print is offered by Klaus Peter Berger ‘Einheitliche Rechtsstrukturen durch außergesetzliche Rechtsvereinheitlichung’, in: Juristen-Zeitung 1999, 369-377, who rightfully draws a connection to a parallel problem, i.e. the utilization of the Ius commune, which shaped most continental legal systems up to around 1800 and beyond, for the shaping of the future European civil law or possibly even an European codification. Typical, however, is Berger’s use of history. He polishes his introduction with a few “historical reminiscences” which are hardly more than a decoration and to which he does not return in his further arguments. Intense discussion of the theoretical implications of the Lex mercatoria debate can be found in two articles by Hans-Joachim Mertens, ‘Lex Mercatoria: A Self-applying System Beyond National Law?’, in: Gunther Teubner (ed) Global Law Without a State (1997), 31-44, and ‘Nichtlegislatorische Rechtsvereinheitlichung durch transnationales Wirtschaftsrecht und Rechtsbegriffe’, in: Rabels Zeitschrift für ausländisches und internationales Privatrecht 56 (1992), 215-233.

10 For references to Christian von Bar and other critics of the modern Lex-mercatoria doctrine see Ursula Stein Lex mercatoria. Realität und Theorie (1995), 5-8. The question is still discussed today with a vigour which makes it look as one of the “last issues of state doctrine” – (“letzte Fragen des Staatsgefühls”), as already mocked by Hans Großmann-Doerth ‘Der Jurist und das autonome Recht des Welthandels’, in: Juristische Wochenschrift 1929, 3447-3451.

11 The website mentioned above (n. 8) tries to lift these clouds by collecting citations of such standards in trade treaties, articles and court rulings from all over the world and bringing them into a systematic order – this process of arranging of course being much more than a mere sorting of material in an obvious order. International Trade Law certainly would gain consistency if its scholars would effectively agree upon an order into which their principles should be classified.

12 Rather typical Bruce Benson ‘Customary law as a social contract: International commercial law’, in: 3 Constitutional Political Economy (1992), 2: “International law is still largely independent of nationalized legal systems, retaining many of the basic (though modernized) institutional characteristics of the medieval Law Merchant.” Alas, no examples for such a remarkable continuity are given. Benson is cited after Oliver Volckart and Antje Mangels ‘Are the roots of the Modern Lex Mercatoria Really Medieval?’, in: 65 Southern Economic Journal (1999), 427-450. This useful article adds to our legal perspective from an economic viewpoint and makes the extensive economic literature on this topic accessible.

13 Berger (n. 9) lists much of the literature on the subject; but see also the important volume by Pio Caroni and Gerhard Dilcher (eds) Norm und Tradition (1998).

14 Thus citing the title of the renowned and influential article by Theodor Mayer-Maly, ‘Die Wiederkehr von Rechtsfiguren’, in: Juristen-Zeitung 1971, 1-3.

15 Klaus Luig ‘Was kann die Rechtsgeschichte der Rechtsvergleichung bieten?’, in: Zeitschrift für Europäisches Privatrecht 1999, 521-530, shows the ambiguity of the historical argument by using the textbook by Hein Kötz Europäisches Vertragsrecht, vol. 1 ( 1996) (also available in English translation by Tony Weir as European Contract Law, Vol. 1 (1998)) as example. Kötz uses historical evidence only to explain, illustrate or strengthen his points, and never to refute arguments derived from other forms of reasoning.

16 Harold Berman ‘Law and revolution: The formation of the western legal tradition’ (1983).

17 Karl Kroeschell ‘Universales und partikulares Recht in der europäischen Rechtsgeschichte’, in: Karl Kroeschell and Albrecht Cordes (eds) Vom nationalen zum transnationalen Recht. Symposium der Rechtswissenschaftlichen Fakultäten der Albert-Ludwigs-Universität Freiburg i.Brsg. und der Städtischen Universität Osaka (1995) 265-278.

18 HG Richardson and GO Sayles (eds) Fleta, 4 vols., 1955-1984.

19 The complete citation reads: “In paritate […] iuris prius admittatur defensor quam pars actrix in probacione. […] Et quod dicitur de secta ad vocem probandam dici poterit de secta producta ad tallias probandas, contra quas sine secta prolatas simplici sacramento negans erit credendum. Secus tamen erit in civitatibus et nundinis et inter mercatores, quibus ex gratia principis conceditur ob favorem mercatorum, quod parti affirmative secundum legem mercatoriam erit probacio concedenda, et ipsis conceditur tallias dedictas probare per testes et per patriam”, Fleta (n. 18), vol. 2, 1955, 211 f. The greatest disadvantage to the legal position of the merchants were the rigid conditions which the common law laid down for actions for debts for which no formal charter could be produced.

20 A first example of this dispute between church and merchants can be found in the early report of the monk Alpert of Metz to his principal, the famous bishop Burkhart of Worms (1018), in which he described the customs of the merchants of Tiel, the Carolingian trading post on the lower Rhine; Albrecht Cordes Spätmittelalterlicher Gesellschaftshandel im Hanseraum (1998), 55-70. It would merit further reflection whether it is indeed a question of two contrary solutions for one and the same problem, or whether the problems, i.e. the procedural situations, differ. At any rate, it is worth stating that even for this crucial issue in civil procedure, it is by no means evident that a similar doctrine had developed all over Europe under the rule of the “Lex mercatoria”.

21 There are three editions of this source: Francis B. Bickley (ed) The Little Red Book of Bristol (1900), reviewed by L. Toulmin Smith, in: 17 The English Historical Review (1902), 353-357; Daniel R. Coquillette Incipit Lex Mercatoria, que, quando, ubi, inter quos et de quibus sit. El Tratado de Lex Mercatoria en el Little Red Book de Brístol (ca.1280 AD), in: Carlos Petit (ed) Del ius mercatorum al derecho mercantil (1997) 143-205; Mary Elizabeth Basile et al. (eds) Lex mercatoria and Legal Pluralism. A Late Thirteenth-Century Treatise and its afterlife (1998), reviewed by Christopher McNall, in: 20 The Journal of Legal History (1999), 135-137.

22 Coquillette (n. 21), 215f.

23Lex mercati differt a communi lege regni tribus modis…”; ibid., Cap. 2, 208. The same intention, i.e. to satisfy the merchants’ need for swift court procedure, appears a few decades earlier in the treatise ‘De legibus et consuetudinibus Regni Angliae’, traditionally attributed to Henricus de Bracton and dated into the first third of the 13th c. Although there appears to be no mention of “Lex mercatoria”, legal rules which reflect particular interests of merchants play a certain role in Bracton’s treatise, which is conveniently accessible through the Internet edition of the Harward Law School, (9th Dec. 2003). The roughly twenty mentions of merchants deserve further examination.

24 Of equal interest is a later follower of Malynes, Wydham Beawes Lex mercatoria rediviva, or the Merchant’s directory, being a compleat guide to all men in business (3rd ed London 1771).

25 Their reasoning is described and explained thoroughly by Basile et al. (n. 21), 125-154, esp. 132f and 139f.

26 Through the work of Levin Goldschmidt (on this connection see n. 7), this thesis continues to influence today’s debate about the modern Lex mercatoria – without ever having been tested thoroughly. The state of research on the medieval commercial societies may serve as an example: on the one hand there are comparative studies which do not prove the dogma of universal trade law but take it for granted and use it as a starting point. On the other hand, we have local or regional studies which are not aimed to lead to results on a larger scale. Typically, one pillar of the comparison is know well, the other one much less. On this problem and the very convincing exception of John Pryor’s studies on Mediterranean trade companies in the Jewish, Muslim Byzantine and catholic societies see Cordes (n. 20), 10-51.

27 Quite telling is the use of the plural “iura” mercatorum indicating that it was not a question of a single legal order but of a multitude of merchants’ rights; Heinz Mohnhaupt ‘ ‘Jura mercatorum’ durch Privilegien, Zur Entwicklung des Handelsrechts bei Johann Marquard (1610-1686)’, in: Gerhard Köbler (ed) Wege europäischer Rechtsgeschichte, Festschrift für Karl Kroeschell zum 60. Geburtstag (1987).

28 This difference between English and continental concepts of integrating trade law into the general legal system would also merit deeper reflection than can be offered here.

29 Goldschmidt (n. 7).

30 On the latter see Gerhard Dilcher ‘Kaiserrecht. Universalität und Partikularität in den Rechtsordnungen des Mittelalters’, in: Rivista internazionale di diritto comune 5 (1994), 211-245.

31 Karl Kroeschell Deutsche Rechtsgeschichte 1 (bis 1250) (11th ed 1999), 272.

32 Gerhard Dilcher ‘Marktrecht und Kaufmannsrecht im frühen Mittelalter’, in: Untersuchungen zu Handel und Verkehr der vor- und frühgeschichtlichen Zeit in Mittel- und Nordeuropa 3, 1985, 392-417; Karl Kroeschell ‚‘Bemerkungen zum ‚Kaufmannsrecht’ in den ottonisch-salischen Markturkunden’, ibid., 418-430; reprinted in: Karl Kroeschell Studien zum frühen und mittelalterlichen deutschen Recht (1995), 381-398.

33 Karl Kroeschell ‘Ius omnium mercatorum, precipue autem Coloniensium’ in: Festschrift für Berent Schwineköper (1982), 283-290; reprinted in: Kroeschell (n. 32), 335-346. On the other hand, in the Early and High Middle Ages – e.g. in the Ottonian market privileges – “Ius mercatorum” is used in the sense of a personal right granted by the emperor or a prince, Kroeschell (n. 32) ibid. As around the year 1000 even the word “lex” can have this subjective connotation, it cannot be ruled out that the continental “Ius mercatorum” and the English “Lex mercatoria” both underwent this change from right to law, from an individual claim to an objective, supra-individual legal system. But this is only an assumption, as no evidence is available for a use of “Lex mercatoria” in the sense of an individual right.

34 Kroeschell (n. 17), 273, cites examples from three different areas, i.e. the law of sale, corporate law and maritime law. In Germany, it has recently become common to prefer the term “legal custom” (Rechtsgewohnheit) to “customary law” (Gewohnheitsrecht) in this context, following Kroeschell (n. 31), 212. The term “legal custom” may indeed be preferable, as it does not evoke any inappropriate connotations to learned doctrine (such as duratio longa and opinio necessitatis). Still, the shift in terminology has hardly led to a real breakthrough. The new term does not express much more than the fact that the phenomenon had not yet been grasped fully in terms of legal theory. A collection of articles on the subject has been published recently: Albrecht Cordes and Bernd Kannowski (eds) Rechtsbegriffe im Mittelalter (2003).

35 Cordes (n. 20), 64f.

36 Max Weber, Zur Geschichte der Handelsgesellschaften im Mittelalter. Nach südeuropäischen Quellen (1889, reprint 1964); John H. Pryor Commerce, Shipping and Naval Warfare in the Medieval Mediterranean, (1987); Albrecht Cordes ‘Gewinnteilungsprinzipien im hansischen und oberitalienischen Gesellschaftshandel des Spätmittelalters’, in: Köbler and Nehlsen (n. 4), 141f.

37 Legal history also has a disappointment in store for those believing law cannot come into existence without state power. This is easily falsified by the fact that the state as historical phenomenon is much younger than law. Amongst the fields of research in medieval and early modern legal history, state-made law is rather a secondary phenomenon.

38 The methodical preconditions for such a historical comparison of law were discussed at the German Congress of Legal Historians (Deutscher Rechtshistorikertag) at Regensburg in 1998; the six presentations on this topic were published together with an introduction by the section’s president, Mathias Reimann, in: Zeitschrift für Europäisches Privatrecht 1999, 494-569.

39 Apparently, comparative law scholars are willing to accept such a “praesumtio similitudinis”, Konrad Zweigert ‘Die “praesumtio similitudinis” als Grundsatzvermutung rechtsvergleichender Methode’, in: Mario Rotandi (ed), Buts et méthodes du droit comparé (Inchieste di diritto comparato 2), (1973), 735; Konrad Zweigert and Hein Kötz Einführung in die Rechtsvergleichung (3rd ed 1996), 39 (translated by Tony Weir as An Introduction to Comparative Law (3rd edn. 1998); Berger (n. 9) 370. For medieval legal history such an assumption is to be judged as highly problematic since it may influence the results of a comparative study. See Albrecht Cordes ‘Was erwartet die (mittelalterliche) Rechtsgeschichte von der Rechtsvergleichung und anderen vergleichend arbeitenden Disziplinen?’, in: Zeitschrift für Europäisches Privatrecht 1999, 544-552 (548 f.).

40 Claudia Seiring Fremde in der Stadt (1300-1800). Die Rechtsstellung Auswärtiger in mittelalterlichen und neuzeitlichen Quellen der deutschsprachigen Schweiz (1999) (reviewed by A Cordes, in: Zeitschrift der Savigny-Stiftung für Rechtsgeschichte, Germanistische Abteilung 117 (2000) 720-722), dedicates the extensive second chapter of her book to the merchants (15-79).

41 Willy Silberschmidt Beteiligung und Teilhaberschaft. Ein Beitrag zum Rechte der Gesellschaft (1915).

42 Cordes (n. 36), 146f.

43 These question and their solutions for the North Sea and the Baltic Sea in the Middle Ages are discussed by Götz Landwehr Die Haverei in den mittelalterlichen deutschen Seerechtsquellen (1985), in particular at 44. According to Landwehr, the older North European law did not include the skipper in the risk-bearing community. However, by the thirteenth century, the opposite principle appears to have been established, possibly under Mediterranean influence. A connection could be assumed between this change on the one hand and the tendency to replace the older principle of half freight by the more modern one of proportional freight on the other; Landwehr (n. 4), 599. The most recent account of Hanseatic maritime law is given by Antjekathrin Graßmann and Carsten Jahnke (eds) Seerecht im Hanseraum des 15. Jahrhunderts. Edition und Kommentar zum Flandrischen Copiar Nr. 9 (2003).

44 Kampen owes its crucial importance for the system of Hanseatic trade routes to its strategic location at the mouth of the IJssel river, the northernmost branch of the river Rhine, into the Zuiderzee. Here the goods were unloaded from barges and loaded onto seagoing vessels.

45 Landwehr (n. 4). The concept of the division into equal parts, which is of major importance for the legal thinking in the Hanseatic world, finds another application in this context. Other examples are the halving of gains in commercial societies, Cordes (n. 36), the duty to give half the gain of stranded goods to the lord in England, and also the name which Hanseatic pirates gave to themselves: “Likedeeler – equal dividers”.

46 Wilhelm Ebel Lübecker Ratsurteile, Vol. 1 (1955), 205, Nr. 321.

47 I am grateful to Götz Landwehr for this information, which is based on his yet unpublished work on the history of the carriage contract. See Landwehr, above (n. 4 and 43), and his article on ‘Seerecht’, in: Handwörterbuch zur deutschen Rechtsgeschichte, Vol. 4 (1990), 1596-1614.

© 2003 A Cordes. This HTML edition © 2003 University of Oxford.
The contents of this page may be downloaded and printed out in single copies for individual use only. Making multiple copies without permission is prohibited.

Haftung für die Verletzung von Verfahrensgarantien nach Art. 41 EMRK. Zur Herausbildung europäischer Haftungsmaßstäbe

Summary: Compensation for violation of procedural rights under the European Convention on Human Rights

by Gerhard Dannemann*

(2001) Oxford U Comparative L Forum 5 at | How to cite this article
(Originally published in: Rabels Zeitschrift für ausländisches und internationales Privatrecht Vol. 63 (1999), pp. 452-470)
Continue reading