December 08, 2011

Good grief!

I too shared the surprise of the author when reading about acts contra bonos mores as interpreted by the BGH in the “Inaccurate audit” case. Just like the author I felt it was too broadly interpreted and stretches the law too far.

Negligence is typically not a state of mind one would perceive as going against good morals and custom. It is a state of utter carelessness, but not one that contravenes what society believes to be ethically valuable. The BGH circumvented this issue by judging the defendant acted willfully. But the facts of the case paint a totally different image. He seemed not to care at all either in the performance of his duties or in the consequences they would have. But labeling it contra bonos mores seems to me quite a leap. Surely such acts are reprehensible but not so far as to call them “acts against the good morals.”

There are two risks, in my humble opinion, in using boni mores to impose tortious liability in such a broad manner.

First, it can be perceived as outcome-based justice. The court wanted to find him liable and extended an area of the law that was relatively loosely defined to do so. One could understand this as judicial activism.

Second, I believe it does harm to the notion of boni mores. It effectively blurs the line of what is against good morals and values and what is not. This seemingly all-inclusive category has in a way become a filler for an otherwise partially ineffective tort law. Arguably one could say the same thing about the tort of negligence in English law. But the difference lies in the fact the tort of negligence was incremental progress of already existing law; it was new but not radically new. The application of boni mores in this specific case, on the other hand, constitutes an unsound expansion of a morally charged doctrine.

November 30, 2011

Tort and contract

Interestingly enough I was expecting reading on the tort systems of France, Germany and England to have distinct objectives. As the reading revealed to me, the goals are quite similar and can even be considered common to all legal orders: compensation, deterrence and loss-spreading.

However, as I suspected and as the text proved, the weighting given to each of these is differs from country to country. Thus, French tort law is a lot more paternalistic and focuses much more on preventing the occurrence of socially undesirable behavior. By contrast, German law has a more rights-based speech, a trait well-engrained in the German legal culture.

Seemingly the fact French law does not recognize either a neighbor principle or a fixed list of protected legal interests. At first hand it would appear as being extremely broad and highly susceptible to the English “floodgates” argument. Without having specific knowledge of any precise cases or classes of torts (such as defamation or trespass to the person), I suspect French law answers the “floodgates” concern with a stricter interpretation of the other requirements for a successful tort action. Hence notions such as damage or causation can be interpreted in ways that would limit the number of claimants.

Distinct to this general regime of tortious liability, in French law, is the tort of defamation. Defamation in French law is mostly governed by provisions of criminal law. The civil liability however is dealt with in the law concerning defamation rather than the general principle of liability. Again, without having looked into it too deeply, I believe it stems from a desire to provide a better balance between freedom of speech and protection of one’s honor and reputation. I think a comparison of all three legal systems and their approach to defamation would give a solid insight in how they conduct the right-interest balancing act.

Good faith

It is an often repeated mantra that English law knows no doctrine of good faith. Since drafts of proposed European private law contain provisions regarding good faith or use good faith as an instrument, is its absence in English law detrimental to the possible success of these drafts?

I think the doctrine of good faith does not exist in English law on a purely semantic level. The law is shy to impose an obligation on contracting parties to operate in good faith, maybe because they fear it would be an additional burden on them. In addition to being reasonable, parties would have to negotiate in good faith, a general requirement whose scope they would be unsure of. The uncertainty argument has been used by the court in Walford v Miles. The case itself limits itself to pre-contractual situations: an agreement to use best endeavours to agree on the terms of the contract is equated to an agreement to negotiate, which courts are reluctant to enforce because it is uncertain.

But as Walford v Miles shows, this does not exclude the ‘best endeavours’ principle from applying to the performance of a contract. In that sense, it is similar to Article 1134 of the French Code Civil. In the former case it is subject to an express or implied, often by courts giving due regard to the circumstances of the contract, agreement to perform using ‘best endeavours’. In the latter case it is a State-imposed duty. Furthermore, regulation 5 of the Unfair Terms in Consumer Contracts Regulations, although only limited to B2C transactions, makes explicit reference to good faith and offers aids to interpretation in Schedule 2. Subsequent cases have shown courts are not hesitant or reluctant to effectively interpret this provision.

No overview of good faith in English law would be complete without reference to Equity. As a legal tool it is very much anchored around unconscionability, fairness and justice. Much like the notion of continental good faith.

I think, beyond the idea that strict adherence to a no-good faith policy is purely a belief, there is an economic argument. Businesses with little or poor legal advice will jump at the occasion to do business in a country which, at first hand, does not recognize a duty to negotiate in good faith, because it is a system that is portraying itself as placing paramount importance on freedom of contract.

To answer my initial question, I do not believe the absence of a notion of good faith is detrimental to a future implementation of harmonized European private law. If the argument is that good faith is too uncertain, surely it is overcome by precise definition of its content and scope in instruments such as the PECL.

November 17, 2011

Cause considered

Unfortunately for me, this week’s reading concentrated on the fiend of French contract law: la cause. Consideration, I have no problem with. Perhaps I am bias because I have English “legal training” rather than French.

One thing however does puzzle me: why does the state have to go so deep into people’s minds? The use and interpretation of subjective cause stipulates that if I take out a loan to buy a machine gun and use it to commit a crime, the contract is void because the cause is illegal. This of course entails its own consequences in civil law but I fail to see how it is helpful from a social or a criminal law perspective.

First of all, if such a contract is judged to be void for illegal cause it means the whole case has gone to court and the law has failed in its preventive aspect. Doubtless that is one of the objectives of such a strange concept: to instill in people a certain respect for the law, to point out where the limits of their transactions are.

Secondly, cause is a very awkward tool. By way of contrast, the requirement for consideration answers the question ‘why enter into this contract?’ from an objective standpoint. Cause goes even further and asks ‘why do YOU want to form this contract?’ looking at the subjective intention and will of the party. This, I believe is going too far and is open to criticism.

It is not the role of legislation and law to go so far and attempt to mould our thoughts. Of course, law should be favoring ethical conduct but it then has to define what ethical behavior is. This, in democratic countries where people hold their own opinions, can be a nigh impossible task. Even if one agrees with the argument that the law should have such a pervasive role, why is contract law such a tool? Is criminal law, because of the punitive consequences which follow illegal behavior, not more suited to shape our morals?

November 01, 2011

The social impact of contract law

I had to take a bus last Thursday and I was 50p short. Luckily a kind gentleman was generous enough to give me the money I needed. I could not help but think (sadly enough) that English contract law as it stands actually promotes this kind of positive behavior.

English law requires consideration for a contract. This means there is no contract when one party gives something to another party without the latter incurring any obligation. This in turn means that acts of pure generosity to do not bear the stigma of legal obligation: to give something does not mean you have entered in a contract with someone else; purely and simply it means you are giving. In other legal systems, at least as far as I have understood, a contract would be formed between the giver and the receiver. Of course in the example used above it would be ludicrous for me to claim my legal rights. But the simple fact that it is possible is, for me, troubling.

This is all based on the premise that people know what the law is. The fact of the matter is, the layman is ignorant of these fine legal details, so much so that acts of generosity are not limited to England & Wales.

Another point which I thought played a social role was the determination of an offer in a supermarket. I find that the English position – an offer being made by the buyer when he presents the goods at the till and accepted by the shop after scanning the goods – is perhaps awkward from a property point of view: the buyer is offering to goods he does not own; it seems antithetic with a ‘gut feeling’ so to speak. On the other hand I feel it is a sound policy: it means a cashier can refuse to sell alcohol to a person who evidently does not need more, or a pharmacist can refuse to sell painkillers to a person who is an obvious drug abuser.

October 20, 2011

Reading Week 1 and 2

Doing the reading for these two weeks, I was reminded how much English Law caters to commercial folk. For example, the doctrine of consideration is a purely English phenomenon absent in the continental legal systems I have had the chance to study. Having started my law studies in England this gave me the impression that contracts are used as a tool to create legally binding obligations between people having commercial interests only. To me the English system seems very favorable to business by making it easy to get out of a contract without losing the goods to specific performance. But then what becomes of the ‘gentleman’s word’? Personally I feel the continental system which focuses much more on enforcing a promise provides for the establishment of a more ethical social structure: if people promise something, they cannot buy their way out of it. This generalization is crude but it, in my opinion, aptly summarizes what the lay-man would perceive as being the difference between the two systems.

On the other hand, English law has a mechanism unknown to continental system: the trust. My brief brush with this enigmatic notion has led me to understand why English contract law focuses much on the commercial. The trust fulfills certain roles, for example protecting a weaker party or assuring the financial security of future generations, much better than a contract (at least an English contract) could ever accomplish.

Finally, I would like to say a few words about the projects of creating a European Civil Code. From a purely economic point of view this would be a serious mistake. As it stands the multitude of legal systems provides for a healthy competition between Member States of the EU: all seek to find a balance between commercial viability and moral sustainability. Fusing all contract laws would rob the EU of its uniqueness in this respect.

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