All entries for Sunday 28 March 2010

March 28, 2010

Assessment V – Critics of the Doctrine of Gentleman Agreements

Refering to the ICP-presentation about the English concept of Gentleman Agreements, these are agreements that are no contracts. Often because they are not precise and clear enough. Sometimes they seem to be performed without any words spoken by the actors. According to the presentation, there is no written document.

In my point of view (conform to the French and German legal system) the fact that there is an agreement means that there IS a contract. The written form or any other criterium of behaviour of the parties is not required for the existence of a contract. It seems obvious to me that there is a contract determining precisely the obligations of the parties, otherwise they wouldn`t act in the way the other party expects him or her to perform.

In my opinion the problem is not that the agreements are not clear enough and that there`s no written evidence for the contract, but that in most of the cases the object of the agreement is of such a nature that a state does not want it to be executed. This might be the case for daily life promises between familiar persons, where a state doesn`t want to intervene due to the privity of the affair and/or because of the triviality of the content of the contract. The rest of the so-called gentleman agreements are not wished to be qualified as executory contracts on behalf of the illegality of their object. Taking the example of a contract about dealing smuggled diamonds against arms, I wouldn`t say that there is no contract because the acting parties behave in a dubious manner that isn`t clear for an objective observing third person. I would say the simple reason why there is no valid contract is that the agreement is about an illegal deal, hence an affair that a state doesn`t want to be executory but prohibited if possible. The same is true for agreements between huge supermarket chains fixing identical prices for products. This is not a non-contract because its hidden. It is rather a contract that is void because it infringes laws prohibiting price-fixing.

I prefer identifying things as what they are as far as possible, therefore I dismiss the concept of gentleman agreements as far as it denies the contractual character to agreements that are clearly contracts fulfilling requirements as the essential elements offer and acceptance and a very French certain object but also, refering to the Common Law, consideration/ quid pro quo. Their only failure consisting in being in its essence against the law or more directly spoken against the volition of the state.

My approach is consequently applied positivism. As problems that so-called failed-states with unjust norms, suppression and violence against humans, may present are not solved by denying their character of a state, deals with immoral content do not vanish by refusing naming them contracts. The existence of law and legal structures should be determined in a scientifical, moral-neutral way.

Assessment IV – Good Faith/ Culpa in Contrahendo

(Led by the suggested questions about the subject of Good Faith...)

1. Why might the judgment of the ECJ Tacconi v Wagner (C-334/00) have only limited impact for the purposes of substantive law?

The question raised by the Corte Suprema di Cassazione in the reference for a preliminary ruling of the ECJ is about the classification of an action for pre-contractual liability under the regime of Brussels I. In Tacconi v Wagner the application of either art. 5.1 or 5.3 of Brussels I determines the competent jurisdiction, either the courts for the place where the harmful event occurred or the courts for the place of performance of the obligation in question. This means that either the Italian court, that happens to be the court of the domicile of the claimant, or the German court, here also the court of the domicile of the defendant, is competent to judge in the subject matter.

For the purposes of the main proceedings, the answer to the above mentionned legal question should not be decisive for the outcome of the substantive conflict between the parties (unless the judges would apply the applicable law in a discriminative way, for example in favor of the party of their nationality) because it only determines the competent jurisdiction, but not the applicable law on the original litigation concerning the obligation to deliver the moulding plant.

2. In contrast, the reference to Rome II might be conclusive for the outcome of the conflict between Tacconi and Wagner, because Rome II determines the law applicable to non-contractual relationships. (Whereas Rome I does not play a role in Tacconi because it applies to contractual relationships). And the solution to legal problems depends on the applied law rather than on the competent jurisdiction! Article 4.1 of Rome II says that the law applicable to a non-contractual obligation arising out of a tort/delict (and the action for pre-contractual liability in Tacconi has to be qualified as such according to the preliminary ruling of the ECJ) shall be the law of the country in which the damage occurs. The applicable law would be the Italian one. But even Rome II might have a limited impact on the case, because of the similarities of Italian and German law in the area of pre-contractual liability:

"In Italian law Article 1337 of the Codice Civile contains a specific provision governing pre-contractual liability. Parties must act in good faith during negotiations over and the formation of a contract. A party who breaks off negotiations without just cause, having created an expectation that a contract will be entered into, is liable for the negative contractual interest. Fault is not required.

In German law a party who culpably breaks off negotiations without just cause or on irrelevant grounds, having created an expectation on the part of another party that a contract will certainly be entered into, is liable for the negative contractual interest. Usually the liability is based on the doctrine of culpa in contrahendo: a party who suddenly breaks of negotiations is liable for the culpable non-fulfilment of the obligation to take account of the other party's interests. Therefore, in German law almost the same criterion applies as in Italy, except that the requirement relating to fault has a role to play" (see paragraphs 59 and 60 of the Opinion of Advocate General Geelhoed in the litigation).

In contrast to the Common Law there is a doctrine of Good Faith in Civil Law systems, namely in Italian and German law that show many similarities as both derive from Roman law.

Interestingly Rome II also contains para. 30 of its preamble saying that culpa in contrahendo is to be treated as an autonomous concept and should not necessarily be interpreted within the meaning of international law.

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