Modernisation and harmonisation of contract law: objectives,

methods and scope*

Arthur S. Hartkamp/The Hague**

1) Since the previous Unidroit Conference, 15 years ago,1

the success of international unification of contract law as
far as Conventions are concerned has been limited. Only two
new Conventions (the UNIDROIT Leasing Convention and the
UNIDROIT Factoring Convention) have seen the light of day and
have entered into force, but only between a restricted number
of states.2 Of the ‘less ambitious international instruments’,
advocated during that Conference by a number of speakers,3 the
phenomenon of the model law has not started to flourish
either. The only new type of flexible instruments that has
really been successful are the so called ‘Principles of
contract law’, of which two sets have been elaborated, one by
UNIDROIT and one by the European Commission on Contract Law.4
The interest created by the Principles approach has been so
lively that the relation between 'binding' uniform law en
'soft' law is currently at the center of scholarly reflection
and analysis.5 At this festive occasion UNIDROIT may be
wholeheartedly congratulated on this splendid initiative.

*
Paper to be delivered at the Congress to Celebrate the 75th Anniversary of
the Founding of the International Institute for the Unification of Private
Law, Rome, 27-28 September 2002, on “Worldwide Harmonisation of Private Law
and Regional Economic Integration.”
**
Procureur-Général at the Supreme Court of the Netherlands; Professor of
Private Law, University of Amsterdam; Member, Governing Council UNIDROIT
1
International uniform law in practice, 1987 (UNIDROIT/Oceana Publications
1988).
2
See www.unidroit.org. The Leasing Convention has entered into force for
nine states, the Factoring Convention for six.
3
See e.g. L. Sevón (p. 134-136), K. Grönfors (p. 398), J. Putzeys (p. 446-
447), J. Ramberg (526) and M. Evans’ closing address (p. 557).
4
Principles of International Commercial Contracts, UNIDROIT, Rome 1994;
Lando/Beale (eds.), Principles of European Contact Law, Parts I and II,
Kluwer Law International 2000.
5
International Uniform Law Conventions, Lex Mercatoria and Unidroit
Principles, Uniform Law Review 2000, at p. 3.
 2

What are the reasons for the interest and success which
the Principles have clearly attracted? In my opinion these
reasons are basically the following: on the one hand
international unification of contract law is not really
necessary, but on the other hand there is a widely shared
perception that more harmonisation of law is useful and that
in the light of practical difficulties experienced in the past
new ways have to be explored in order to achieve that result.
I would briefly explain my views on these points and I intend
to touch both on the European and the international situation.

2) It is often maintained that international unification

of contract law is necessary in order to facilitate
international trade and to encourage competition on a free
market and so to enhance economic prosperity. The main problem
with this assumption is that it seems to be rebutted by the
world’s largest single national market, the United States of
America, with its fifty odd separate private law
jurisdictions. And even in Europe it is very difficult to
prove that a unified contract law would substantially enhance
trade between the Member-States. There is certainly a case for
a unified contract law in Europe and personally I am in favour
of that idea but rather for political and cultural than for
sheer economic reasons. I shall come back to this point later.
At any rate, clearly this point is relevant for the European
Union only, not for international unification at large.
In my view, the assumption that unification of contract
law is necessary for economic reasons attaches too much weight
to the legal aspect of trade in general and the importance of
a unified legal background in particular. Of course, there are
the expenses of legal advice,6 but those are non-recurring

6
See Stephen Swann, A European Civil Code: Legal and Political
Foundations, in Alpa/Buccico (Eds.), La riforma dei codici in Europa e il
progetto di codice civile Europeo, p. 7 ff. at p. 39; Gerhard Wagner, The
 3

expenses and will as I suspect normally not bear too heavily

on the exporter. The economic transactions themselves are
mostly settled without legal problems and if legal problems
emerge they are often solved by the contractual law that the
parties have created as between themselves either by
negotiations or by general conditions rendered applicable to
their relationship. If a dispute is inevitable parties
normally go to international arbitration and may - according
to well nigh universal principles of private international law
and international arbitration law - choose any applicable law
they prefer, including non-national rules and principles of
international commercial law (‘lex mercatoria’).
Of course, this freedom of the parties is, to a certain
extent, limited by restrictions posed by mandatory law to the
freedom of contract and the autonomy of the parties. owever,
these restrictions are inevitable. They are not only
indispensable with a view to contractual relationships between
enterprises and consumers but also to contracts between
enterprises, since there is always the conflict between small
and big firms, between specialists and non-specialists,
between enterprises that are settled in the market and
newcomers.7 It is interesting to see that there is not much
difference in this respect between the two sets of principles,
notwithstanding the fact that the Unidroit Principles are
addressed to international commercial contracts and the
European Principles to all contracts (without the restrictions
'international' and 'commercial'). However, although
protective rules are not absent I think that in both sets of
Principles too little attention is paid to this type of rules
and that they should be supplemented in this respect in order
to enhance their acceptability both in international trade and
as a model for national and international legislation.

Economy of Harmonisation: the case of Contract Law, ERA-Forum 2-2002, p. 77

ff. at p. 83 ff.
7
Ulrich Drobnig, Uniform Law Review 1998, p. 385 ff.
 4

Unification of contract law is not only unnecessary from

an economic point of view, but it is also, perhaps for the
same reason, very difficult to attain. The law of sale as
enshrined in the Vienna Sales Convention is almost entirely
suppletive (non-mandatory) law but even so it took about half
a century to come into being. The creation of a uniform
contract law in its entirety (general part and specific
contracts) would take much more time and efforts due to the
difficulties inherent in codifying such a complex part of the
law. I wonder if these efforts would not be better spent on a
number of selected topics such as the law of security on
movables and claims or accounts receivable which is of such a
great importance to the smooth functioning of financing
processes supporting international trade.8 All the more so,
since that part of the law is of a mandatory character and not
subject to party autonomy. For this reason it must be
wellcomed that both UNIDROIT and UNCITRAL9 recently have spent
so much of their resources on that part of the law.

3) However, as I have said there is a widely shared

perception that more unification or harmonisation of law
allbeit not economically necessary is useful and, also, that
the differences between the various western legal systems are
often exaggerated. By systematic scholarly work it is possible
to reveal the common ground of these legal systems and, where
they differ, to reach reasonable compromises. It is for this
reason that the work on the Principles of contract law is so
eminently useful. The Principles, by the sheer fact of their
existence, prove that the various systems of contract law in
Europe (and beyond) are not so different from each other that
a unified contract law from a substantive point of view is
impossible to reach. Only, it must be very carefully prepared

8
See Michael Bridge, The Future of English Private Transactional Law,
Current Legal Problems 2001, p. PM
9
United Nations Commission on International Trade Law.
 5

by scholarly work which in its turn will be stimulated by

educational activities in our law schools.10 In this
development the Principles have two advantages over other
comparative legal work: they are elaborated by international
teams of scholars (in the case of the UNIDROIT Principles:
backed by a prestigious international organisation) and the
results are given in the form of legal provisions.11
In the long run, this will not fail to add weight to the
voices of those who advocate the preparation of a European
Civil Code or at any rate a European Code of Contract Law. As
I said, personally I would favour such a Code which would
underpin the gradual process of cultural and political
unification of Europe. I do not share the apprehensions of
those who fear that a European Code would endanger the
cultural richness of the European member-states. For one
thing, private (commercial) law is not a value in itself, it
serves the economical and cultural values of society and if
society requires different law the old law must go. For
another, a unified European contract law would be a new

10
See e.g. Helmut Coing, European Common Law: Historical Foundations, in
Cappelletti (ed.), New Perspectives for a Common Law of Europe, 1978, pp.
31-44, at p. 44; R. Sacco, Droit commun de l'Europe, et Composantes du
Droit, in Cappelletti (1978), p. 95 ff., at p. 108; Hein Kötz,
Gemeineuropäisches Zivilrecht, Festschrift Zweigert 1981, pp. 481-500;
Ost/Van Hoecke, RW 1989-1990, pp. 1001-1002; Helmut Coing, Europäisierung
der Rechtswissenschaft, NJW 1990, pp. 937-941; Axel Flessner,
Rechtsvereinheitlichung durch Rechtswissenschaft und Juristenausbildung,
RabelsZ 56 (1992), pp. 243-260; Hein Kötz, A Common Private Law for Europe:
Perspectives for the Reform of European Legal Education, in De Witte/Forder
(1992), pp. 31-41; Basil S. Markesinis, Why a code is not the best way to
advance the cause of European legal unity, ERPL 1997, p. 519 ff.; Melvin A.
Eisenberg, The Unification of Law, in Mauro Bussani/Ugo Mattei (eds.),
Making European Law. Essays on the ‘common Core’ Project (2000), p. 15 e.v.
11
The phenomenon that legal texts drawn up in the form of draft articles
have a greater persuasive force and tend to exert a stronger influence on
courts and arbitrators than a discussion of legal principles in a text
book, however clear that may be, can also be observed on a national scale.
I refer to the gradual law reform by the Dutch Supreme Court between 1965
and 1992 effected through the so called "anticipatory interpretation", viz.
the interpretation of the existing texts of the old Civil Code on the basis
of the drafts for the new Code. This was first noted by G.J. Scholten,
Anticiperende interpretatie: een nieuwe interpretatiemethode?, WPNR 5031
(1969), p. 111.
 6

cultural asset of enormous value. “There is cultural value in

having Europeans live under the same laws.”12 And finally, a
Code would of necessity only contain a relatively small part
of the law, even of private law, so there will always remain
room for national law and legal ideosyncrasies.

4) It goes without saying that preparing a European Civil

Code will be a task of immense magnitude. Not everything
should be done at the same time and before any work starts
some very important policy decisions have to be made. These
decisions pertain to questions of content such as: How
comprehensive should a Code be? Should it be restricted to
private law or should it also contain elements of public law?
Should it only contain default rules (suppletive rules) or
also rules of a mandatory and protective character? [As
Professor Schmitthoff has observed: “In the domestic sphere of
civil and commercial contracts there exists, in fact, a
growing tendency to impose mandatory restrictions on the
freedom of the parties to contract as they like. These
restrictions are required by social and economic conditions of
modern life. They serve, e.g.,] (rules aiming at) the
protection of the consumer or the prevention of the abuse of
dominant economic power or the maintenance of fair competetive
conditions in the free market economies.”13 What is really
important and which subjects may wait for some time?
National experience indicates that drafting a
comprehensive code is a time consuming exercise for several
reasons, mainly the technical-legal complexity of the subject
matter and the influence of lobby groups. On an international

12
Ole Lando, in Gavin Barrett/Ludovic Bernardeau (eds.), Towards a European
Civil Code. Reflections on the Codification of Civil Law in Europe (2002),
p. 40 ff at p. 43. See also Alan Watson, Legal Transplants and European
Private Law, in Jan Smits (ed.), The Contribution of Mixed Legal Systems to
European Private Law (2001), p. 15 e.v.
13
Clive M. Schmitthoff, Nature and Evolution of the Transnational Law of
Commercial Transactions, in N. Horn/C. Schmitthoff (eds.), The
 7

scale these problems probably will be as complex as on a

national scale. This suggests that on a European level it
would be wise to split up problems by either starting with the
technically difficult part (say: the general part of contract
law) or with the part most susceptible to lobby influence
(mandatory law, mostly but not exclusively consumer law). In
my opinion the latter approach would be preferable.14 It would
be a logical consequence of the present state of affairs,
where there are already so many directives on consumer law.
Moreover, as I said already, differences in mandatory law are
a more important obstacle to international trade than
difference of default rules.15 And finally, default rules may
be taken care of by the parties themselves in their contracts
and by instruments of soft law such as the Principles, to
which I shall now pay more attention.

5) In the absence of a full scale codification of contract

law, which in my view is not strictly necessary and hardly
attainable and which even in Europe will certainly take a long
time to be brought about, the role of the Principles may
become a important one. Their different functions are
mentioned in the Preamble (Unidroit Principles) or the first
Article (European principles) and they are well known by now.
I mention them very briefly and will then highlight one on
them.

Transnational Law of International Commercial Transactions (Kluwer 1982),

p. 19 ff. at p. 20.
14
See in the same vein Martijn Hesselink, The structure of the new European
private law, in Hondius/Joustra (eds.), Netherlands Reports to the
Sixteenth International Congress of Comparative Law (Brisbane 2002),
Intersentia 2002, p. 7 ff. My preference is based on practical
considerations and does not prejudice the choice that has to be made
eventually on the co-existence of general contract law and consumer law in
one contract code. See Thomas Wilhelmsson, International lex mercatoria and
local consumer law - an impossible combination (paper presented at this
conference).
15
This point is also made by the EC-Commission: see Communication on
European Contract Law (2001/C 255/01), nr. 28.
 8

(i). Since codification of private law, be it on a

European or an international scale, is and for a long time
will remain to be fragmentary, it is important to dispose of a
general set of principles from which inspiration may be
derived by national and international courts to interpret the
provisions of the existing uniform law, to fill the gaps which
it presents and to offer a background, however informal, for
new law to be created. The need for such general principles is
particularly manifest within the European Union.
(ii). Principles may serve as a model law that could
inspire legislators who strive for law reform. In this
respect, not only legislators in developing countries or in
countries in transition may find them relevant, but also
states trying to modernize existing legislation and seeking
inspiration from common international standards as they have
recently emerged. It is clear that the 1964 Hague Uniform Laws
and CISG have exerted such an influence on states with a
codified system. Principles may assume a comparable function
in areas not covered by CISG.
(iii). Principles (and their accompanying comments) may
serve to enlighten parties negotiating a contract in order to
identify the problems to be resolved in their contract and,
possibly, to find suitable rules to settle them. Parties may
even decide to incorporate the Principles in part or as a
whole in their contract. In this respect, the Principles could
have the same function as for example the various legal guides
drafted by UNCITRAL.
(iv) Parties to an international contract could chose
Principles of Contract Law as the law applicable to their
contract.
(v). The Principles will certainly have an important
scholarly and educational value. Moreover, on the European
scene the Principles will make it more attractive to introduce
in law schools new curricula teaching European law side by
 9

side with the national laws of their respective countries of

residence. In the long run, this seems to be a most promising
way to attain a new European ius commune.
(vi) In the European Principles there is another and
perhaps even main purpose: “to be applied as general rules of
contract law in the European Union”.16 Of course, at that point
they will loose their present characteristic feature of being
'soft law'.

6) Turning now to function (iv) (choice of law), an

interesting question is whether parties to an international
contract may choose the Principles as the rules applicable to
their contract without combining this choice of law with an
arbitration agreement. At first sight, this question looks
rather theoretical, because normally the choice of the
Principles will be combined with an clause submitting a
(future) dispute to arbitration. It is well established that
arbitrators need not be bound by a particular domestic law. As
it is explained in the comments to the UNIDROIT Principles (p.
10) arbitrators may not only be authorised by the parties to
act as amiable compositeurs or ex aequo et bono, but there is
also a growing tendency to permit them to choose "rules of
law" other than national laws on which the arbitrators may
base their decisions.17

16
Article 1:101 para. 1.
17
See Art. 28 of the 1985 UNCITRAL Model Law on International Commercial
Arbitration, Art. 42 of the 1965 Convention on the Settlement of Investment
Disputes between States and Nationals of other States (ICSID Convention),
Art. 1496 of the French Code de Proc. Civ. (enacted in 1981) and Art. 1054
of the Dutch Code of Civil Procedure (enacted in 1986). Even in the
absence of an express reference arbitrators authorised to apply such
notions like the general rules of law, equity or the lex mercatoria, may
resort to the Principles to find suitable solutions to the dispute at hand.
See e.g. Ole Lando, The Lex Mercatoria in International Commercial
Arbitration, 34 ICLQ 1985, pp. 752-768; Y. Derains, L'ordre public et le
droit applicable au fond du litige dans l'arbitrage international, Revue de
l'Arbitrage 1986, pp. 375-413; Andreas Spickhoff, Internationales Han-
delsrecht vor Schiedsgerichten und staatlichen Gerichten, RabelsZ 56 (1992),
pp. 116-141. For some examples of decisions of national courts upholding such
an approach by the arbitrators, see Michael Joachim Bonell, Das UNIDROIT-
 10

As far as state courts are concerned the first possibility

(to act ex aequo et bono) does not exist and about the second
possibility serious doubts may be raised, for instance in the
light of the EEC-Convention on the law applicable to
contractual obligations (1980), which clearly is based on the
concept of the application of national legals systems.
However, it must be noted that Article 3 of the Convention
does not explicitly restrict the choice of law to national
laws. In my view18 it is by no means certain that the
Convention would preclude the choice of the Principles as the
law applicable to the contract. At the time the Convention was
drafted sets of rules such as the Principles did not yet
exist. It would be unsatisfactory if the Convention would
hamper new developments, such as the one under discussion. As
Juenger has remarked “If the drafters [of the 1980 Rome
Convention] should have succeeded in imposing such a
nonsensical restraint – for no other reason than to safeguard
doctrinal purity – they would have rendered a disservice to
the European Union.”19.
Be this as it may as far as the present state of affairs
is concerned, it is of the utmost importance that national and

Projekt für die Ausarbeitung von Regeln für internationale Handelsverträge,

RabelsZ 56 (1992) p. 287 Fn. 55 and more generally M.J.Bonell (ed.), The
UNIDROIT Principles in Practice. Caselaw and Bibliography on the Principles
of Commercial Contracts, Transnational Publishers Inc. (2002).
18
See Arthur Hartkamp, The Use of the UNIDROIT Principles of International
Commercial Contracts by National and Supranational Courts, in UNIDROIT
Principles for International Commercial Contracts: A New Lex Mercatoria?,
ICC/Dossier of the Institute of International Business Law and Practice
1995, p. 253-262. See (on this problem and more in general about the
Principles and private international law) Katharina Boele-Woelki, Principles
and Private International Law, ULR 1996, p. 652 ff. and Johannes Wichard, Die
Anwendung der UNIDROIT-Prinzipien für internationale Handelsverträge durch
Schiedsgerichte und staatliche Gerichte, RabelsZ 1996, pp. 269-302.
19
Friedrich K. Juenger, The lex mercatoria and private international law,
Uniform Law Review 2000, p. 171 ff. at p. 183. - It is submitted that
according to Dutch private international law such a choice of law would not
be considered to be excluded a priori. The Dutch Supreme Court (HR 26 May
1989, NJ 1992, 105) has already accepted the choice of an international
convention (CMR) as the applicable law to a contract.
 11

international instruments be adapted in order to make clear

that parties to an international contract are permitted to
choose a given set of Principles of Contract Law as the law
applicable to their contract even in litigations before state
courts. Where parties are allowed to shape their own
contractual relationships, they should also be permitted to
create their own regime of settlement of disputes. Of course,
parties may have valid reasons for preferring arbitration to
litigation in a state court; one reason often heard is the
wish to keep the proceedings confidential. But there may also
be valid reasons to prefer litigation in a state court and I
think that national and international legislators would do
wise to remove all unnecessary barriers to that effect.20

7) On the other hand, the drafters of Principles should do

everything in their power to justify such a choice of law by
the parties and to remove to the extent possible the risk that
the application of the Principles would be impeded by national
ordre public or scope rules.21 This means that it would be
advisable to supplement the Principles by such rules that put
the Principles as much as possible on a level with national
legal systems. This applies both to the coverage of rules that
can be found in the contract parts of civil codes of the
continental type and to rules of a protective and mandatory
character. “Modern contract law is a contradictory mixture of
autonomous and social elements.”22 In my opinion, this insight
still has been insufficiently expressed in the Principles. It

20
Comp. Bonell, The need and possibilities of a codified European contract
law, ERPL 1997, p. 505 ff at p. 516; Communication on European Contract
Law. Joint Response of the Commission on European Contract Law and the
Study Group on a European Civil Code, ERPL 2002, p. 183 e.v., nr. 64.
21
Even if conflicts will not always be avoidable. To mention one example:
it has been suggested that a French court may consider that it is contrary
to public policy to allow a party having committed a deliberate breach to
resort to foreseeability in order to limit its liability. See Denis Tallon,
Damages, Exemption clauses and Penalties, AJCL 1992, p. 675 e.v. at p. 679.
 12

is true that they contain some rules to that effect,23 but the
UNIDROIT Principles e.g. do not contain a general rule
permitting to strike out any contract term or at least any
term contained in standard terms on account of its substantive
unfairness. For the reasons mentioned in nr. 2, I think that
such a rule should be applicable to all contracts, not only
consumer contracts.24

8) If this idea (choice of Principles also in state

courts) is acceptable it would be imaginable to go even one
step further in the following sense. In the discussion on the
European Civil Code it has been suggested that a Restatement
on Contract Law be given effect as the law applicable to legal
relations between parties to govern their contracts where
these raise an EU internal ‘foreign’ element and the parties
have not chosen another governing law. In relation to
contracts, this would partially supersede the inevitably
intricate regime provided for in Art. 4 of the Rome Convention
to establish the most appropriate law to govern the
transaction from among the various national systems.25

22
Thomas Wilhelmsson, Social Contract Law and European Integration
(Dartmouth 1995), p. 16.
23
See for the UNIDROIT Principles M.J.Bonell, An International Restatement
of Contract Law, 2nd ed., Transnational Publishers 1997, p. 150 ff. Mention
may be made of Articles 2.20 (surprising term in standard terms), 3.10
(gross disparity), 6.2.1 – 3 (hardship), 7.1.6 (exemption clauses) and
7.4.13 (agreed payment for non-performance).
24
Comp. art. 4:110 European Principles. The same is true for other
protective provisions, such as the power of the court to mitigate an
obligation to pay damages. Another example is Art. 6:244 of the Dutch Civil
Code. This Article affords some protection to a dealer (retailer) who uses
general provisions which are annulled or prohibited according to the
previous articles of the Code, but which are closely related to (general)
conditions which he himself has been `forced' to accept by his seller (the
seller in the previous link of the distribution chain), e.g., a wholesale
dealer or a producer. The wholesale dealer or producer is not allowed to
invoke his (general) conditions in so far as this would be unreasonable
towards the retailer because of such a connection. A comparable provision in
the law of sales is Art. 7:25. These provisions are intended to prevent the
burdens of consumer protection from falling exclusively on the shoulders of
the retail dealers instead of being divided among the various actors in the
distribution chain.
25
Communication on European Contract Law. Joint Response of the Commission
on European Contract Law and the Study Group on a European Civil Code,
ERPL 2002, p. 183 ff., nr. 91 (stage 3). In a further stage, the
applicability could perhaps be extended to contracts without a cross-border
 13

The same solution could be imagined on an international

level. Following a suggestion by Clive Schmitthof,26 the former
Secretary of Uncitral has proposed to develop a universal code
of international trade law or Global Commercial Code, that
would weld together and systematise a number of existing
instruments of international trade law.27 In such a Code there
could also be a provision permitting parties to an
international contract to choose the UNIDROIT Principles as
the law appicable to their contract or even to declare these
Principles applicable unless parties have explicitly excluded
them by chosing another applicable law or otherwise.28

9) As stated before, the interest created by the

Principles approach has been so lively that the relation
between 'binding' uniform law en 'soft' law is currently at
the center of scholarly reflection and analysis. In the light
of the facts and developments indicated above I think that it
is fair to predict that the future of harmonisation of
contract law, be it on a European or an international level
will consist of some kind of interaction between the binding
law of international conventions or directives/ordinances on

aspect. – The New Dutch Civil Code offers an example of private law being
created by a delegated commission. Art. 6:214) has created the possibility
of ‘standard terms' for specific types of contracts to be drafted by
commissions appointed by the Minister of Justice and composed in a
well-balanced manner of representatives of the trade concerned and –if
consumer transactions are concerned – of consumer organizations. After
approval by government, they apply – unlike general conditions – ipso iure.
Parties may derogate from standard terms, but the terms may prescribe a
certain formality for derogations. The provision has not yet been applied in
practice.
26
Clive M. Schmitthoff, Commercial law in a changing economic climate (2nd
ed. 1981), p. 30; Id., The Codification of the law of International Trade,
Journal of Business law 1985, p. 34-44.
27
Gerold Herrmann, The Role of Uncitral, in Fletcher/ Mistelis/Cremona
(eds.), Foudations and Perspectives of International Trade Law (2001), p.
28 ff at p. 35; Id., The Future of Trade Law Unification, Internationales
Handelsrecht (IHR) 1-2001, p. 6 ff. At p. 12.
28
Michael Joachim Bonell, Do We Need a Global Commercial Code?, Dickinson
Law Review Vol. 106, 2001, p. 87 ff. at p. 98 [also in ULR 2000, p. 469
ff.].
 14

the one hand and the new phenomenon of Principles of Contract

Law on the other hand.