ACEROS PARA RESORTES

The Principles of European Contract Law (PECL) are framed in the context of the European harmonization of law.⁷² Thus, the first aim of these Principles is to serve as the model for a future European Code of Contracts.⁷³ Complementary aims – until the Code is adopted – are to facilitate the interpretation and to fill the gaps in European harmonized and unified legislation in order to avoid the reference to particular national laws. Another no less-important objective is, as with the UNIDROIT Principles, to be a guideline for national legislators who consider changing the contract law of their countries (in areas in which the EU will not legislate).⁷⁴ Naturally, the Principles attempt to enclose those general principles and practices that form the lex mercatoria and to be available to arbitrators in a clear and ready-made form.

71 The case is available (in Italian) at:

<http://www.unilex.info/case.cfm?pid=2&do=case&id=1301&step=FullText>

accessed 10 June 2011

72 They developed as the product of the work of a group of lawyers who in 1980 formed the Commission on European Contract Law (Lando-Commission) for the countries of the EEC. In 1989 the European Parliament passed a Resolution requesting a start to be made on the preparatory work on drawing up a European Code of Private Law.

73 The importance of the European Code as a stronger instrument in comparison with the

‘creeping harmonization’ of law made by erudite people is highlighted by Ole Lando in his

‘Principles of European Contract Law: An Alternative to or a Precursor of European Legislation’ (1992) 40 Am.J.Comp.L. 573.

74 Lando (n 73) 577 states: ‘In some EEC countries a revision of the law of obligations is being considered in connection with the making of a new civil code. The need to provide

“European rules” would seem to be obvious for national legislators who are making rules which are intended to be durable and applied in a future when the European economic and political union will be much closer than now’.

Further on the issue whether PECL are a duplication of the PICC, the drafters of these instruments have argued in favour of their uniqueness⁷⁵ but also admitted their duplication.⁷⁶ In arbitral practice the PICC have been considered from the moment of their release,⁷⁷ whereas on a number of occasions PECL have been dismissed in favour of the PICC.⁷⁸

The main features of good faith in this set of Principles and also a critical approach follow.

4.3.1 GOOD FAITH IS ONE OF THE MAIN PHILOSOPHIES The Principles enshrine as the main guiding philosophies: freedom of contract and good faith and fair dealing.

The core norm is reflected in article 1:201 ‘Good Faith and Fair Dealing’:

(1) Each party must act in accordance with good faith and fair dealing;

(2) The parties may not exclude or limit this duty.

The following aspects should be considered for the imposition of number (2) of article 1:201.

75 O Lando, ‘Principles of European Contract Law and UNIDROIT Principles: Moving from Harmonisation to Unification?’ (2003) 8 Unif.L.Rev. 123.

76 Cf. M Bonell and R Peleggi, ‘UNIDROIT Principles of International Commercial Contracts and Principles of European Contract Law: A Synoptical Table’ (2004) 9 Unif.L.Rev. 315.

77 As of June 2007 the total number of arbitral awards and court decisions referring in one way or another to the UNIDROIT Principles reported in the UNILEX database

<http://www.unilex.info> was 146. However, in actual fact at least the number of arbitral awards referring to the UNIDROIT Principles is likely to be much greater since most awards on account of their confidential nature remain unknown. Source of the numeral datum: M J Bonell, ‘Do We Need a Global Commercial Code?’ CISG Database, Pace Institute of International Commercial Law:

<http://www.jus.uio.no/pace/do_we_need_a_global_commercial_code_michael.joachim_bone ll/portrait.letter.pdf> accessed 2 June 2011.

78 See ICC award n. 12111 of 6 January 2003 which stated that PECL constitute an academic research, at this stage not largely well-known to the international business community, thus

‘Claimant's claim for application of the PECL is therefore rejected’. The arbitrator applied PICC instead. Available at:

<http://www.unilex.info/case.cfm?pid=2&do=case&id=956&step=FullText> accessed 10 June 2011.

Firstly, the official comment declares that this article represents the

‘philosophy’ sustaining the net of other norms.⁷⁹ Since good faith acts as the foundation of PECL, its mandatory character is clear.

Secondly, the purpose of the Principles is to serve as a model for a future European Code of Contracts, which shall be mandatory upon the parties. In this sense, number (2) appears completely justified.

The comment on article 1:102 contains an interesting assuagement to this mandatory rule: ‘What is good faith will, however, to some extent depend upon what was agreed upon by the parties in their contracts’. One is easily reminded of Section 1-302 of the UCC where standards of good faith can be fixed by the parties. This is a great tool in the parties’ hands. The following illustration may help to appreciate its importance:

A small stocking distributor in Chile contracts with a tights’

manufacturer in Italy, for the distribution of the Italian firm’s product in Chile. It is agreed that to comply with consumer protection rules the label with the specifications of care of the product should be in the Spanish language. The breach of this clause would make it impossible to distribute the product lawfully in Chile; therefore, the overlooking of this element by the Italian producer may entitle, by the parties’

agreement, the distributor to refuse performance, namely to reject delivery on the basis of lack of cooperation.⁸⁰ By the parties’ stipulation the care instructions in a language other than Spanish amounts to a non-performance. Otherwise, this would not be considered a fundamental non-performance by the PECL.⁸¹

79 Literally the comment reads: ‘This article sets forth a basic principle running through the Principles’.

80 Article 1:301 (4) of the PECL ‘non-performance’ denotes any failure to perform an obligation under the contract, whether or not excused, and includes delayed performance, defective performance and failure to cooperate in order to give full effect to the contract.

81 Cf. articles: 8:103 Fundamental Non-Performance; and 7:110 Property not Accepted of the PECL. In a German case, the Swiss defendant argued that goods were delivered by the German plaintiff with instructions booklets in German but not in other languages spoken in Switzerland. As regards this allegation, the court found that the appliances (object of the contract) had not been produced specifically for the Swiss market. Therefore, the delivery of instruction booklets in French and Italian had to be stipulated. Germany 9 May 2000 District Court of Darmstadt

<http://cisgw3.law.pace.edu/cases/000509g1.html> accessed 23 July 2011.

The content of good faith may diverge widely according to the economic sector and to the particular circumstances of the contract; therefore, it is important for the parties to have an alternative to establish with clarity the idea of good faith embraced in their agreement. In addition, this is an excellent guidance for judges and arbitrators.

4.3.2 GOOD FAITH IS AN INSTRUMENT IN THE INTERPRETATION AND INTEGRATION

In its role of essential principle, good faith is offered as an instrument for interpretation.⁸² Article 1:106 states:

(1) These Principles should be interpreted and developed in accordance with their purposes. In particular, regard should be had to the need to promote good faith and fair dealing, certainty in contractual relationships and uniformity of application.

To use good faith as an element of interpretation of the PECL it is important to understand the meaning of good faith. The official comment states that ‘good faith’ means honesty and fairness in mind, whereas ‘fair dealing’ means the observance of fairness in fact, which is an objective test.

There are other provisions that stress good faith’s role in the interpretation and integration of the contract in PECL. Among them is article 5:102 ‘Relevant Circumstances’. In paragraph g) this article states that good faith and fair dealing are to be taken into account in the interpretation of the contract.

In the task of integration of the contract the arbitrator is guided by article 6:102 Implied Terms: ‘In addition to the express terms, a contract may contain implied terms which stem from: (c) good faith and fair dealing’.

The arbitrator’s task of integration of the contract governed by the lex mercatoria is one of incredible delicacy, because the lex mercatoria is based

82 Here, the role of good faith is the same as in the scheme used by Roman jurists in the formulary process, where good faith acted ‘adiuvandi, supplendi or corrigenda gratia’. The citation is from Pap. D 1,1,7,1. See F Wieacker, El Principio General de la Buena Fe (Editorial Civitas, Madrid 1982) (Original title: Zur rechtstheoretischen Präzisierung des §242 BGB) 50.

on the opinio iuris atque necessitatis, that is, the persuasion in the community of traders about the necessity of the rule. Therefore, the arbitrator in integrating the contract applies good faith in order to make effective the will of the parties, the requirements of justice and what is generally accepted as binding by traders.

Further to the power of arbitrators shaping good faith within the lex mercatoria, a reference must be made to the harsh posture of Critical Legal Studies’ authors (CLS). Here, this radical thesis challenged the very existence of legal rules, at least when they were thought of as capable of constraining and channelling individual behaviour. This was an early and undeveloped form of the instrumentalist view of rules, i.e., the employment of the rule as a tool to produce the desired effect. According to this position, it was not the rule that exercised power but the judge who exercised power and who used the rule both to help him do it and to hide the fact of his power. This criticism is based on the denying of the rule of law as such. This school of thought postulates that to the existence of the rule of law compatible with essential liberties of humankind there must be complete separation between morals, politics and the rule of law; but, in fact, there is no such separation. However, this criticism loses its strength in the lex mercatoria, since it is made by rules not imposed but created and accepted by the same traders; (another point made by CLS’s authors is the distorted idea of legitimacy of law only if is made by government, not people). Therefore, the arbitrator has no reason to hide anything, since the power exercised by this expert is derived from the same receivers of the award.⁸³

83 See A Altman, Critical Legal Studies. A Liberal Critique (Princeton University Press, Princeton 1990) 149 ff; and J Pérez Lledó, El Movimiento Critical Legal Studies (Tecnos, Madrid 1996).

4.3.3 GOOD FAITH IS LINKED TO REASONABLENESS

Good faith is linked with reasonableness all through the Principles, for example in articles 1:302, 5:101 (3), 2:202 (3) (c) or 8:103 (b).⁸⁴ The main rule reads as follows:

Article 1:302 Reasonableness

Under these Principles reasonableness is to be judged by what persons acting in good faith and in the same situation as the parties would consider to be reasonable. In particular, in assessing what is reasonable the nature and purpose of the contract, the circumstances of the case, and the usages and practices of the trades or professions involved should be taken into account.

Reasonableness provides the ‘yardstick’ for cases in which the strict application of a rule could amount to an unjust result.

Reasonable means what is rational, given the intended purpose of the agreement. Rational means what is appropriate in the light of the available knowledge.⁸⁵

The official comment of the PECL offers a good illustration of what is rational:

Constructor C, whose employees have fallen ill in great numbers, has asked Owner O for the time agreed for C’s completion of O’s liquor store to be extended by one month. O has refused to grant the extension. After that a licence to sell liquor which O expected to get as

84 Other norms related with reasonableness:

Article 6:101 Statements Giving Rise to Contractual Obligations: (1) A statement made by one party before or when the contract is concluded is to be treated as giving rise to a contractual obligation if that is how the other party reasonably understood it in the circumstances, taking into account:

(a) the apparent importance of the statement to the other party;

(b) whether the party was making the statement in the course of business; and (c) the relative expertise of the parties.

Article 6:104: Determination of price: Where the contract does not fix the price or the method of determining it, the parties are to be treated as having agreed on a reasonable price.

85 Cf. N Nassar, Sanctity of Contracts Revisited. A Study in the Legal Theory and Practice of Long-Term International Commercial Transactions (Martinus Nijhoff Publishers, London 1995) 239.

a routine matter is held up due to a long lasting strike among civil servants which means that O will not be able to use the building until three months after the agreed completion time. Good faith requires that O notifies C that it will not need to have the building completed on time.

Fairness suggests in this case that, as O will not suffer loss because of third party action, it should not be able to get contractual remedy for what would otherwise be a contractual breach by C, because there is no loss.

The same perspective is taken in the rule contained in article 9:505 on Reduction of Loss:

(1) The non-performing party is not liable for loss suffered by the aggrieved party to the extent that the aggrieved party could have reduced the loss by taking reasonable steps;

(2) The aggrieved party is entitled to recover any expenses reasonably incurred in attempting to reduce the loss.

This solution is expressly accepted in some national regulations, namely: §1304 ABGB (1811); §254 BGB (1900); article 44 Swiss Code of Obligations (1911); article 1227 Italian Civil Code (1942); article 6:101 Dutch Civil Code (1992); article 1479 Civil Code of Quebec (1994); and also article 7.4.8. UNIDROIT Principles. In all these cases, the rule is derived from good faith. The precedent at international level is represented by article 77 CISG.⁸⁶

4.3.4 GOOD FAITH AND COOPERATION: A NECESSARY SYNTHESIS

Article 1:202 Duty to Co-operate states: ‘Each party owes to the other a duty to co-operate in order to give full effect to the contract’.

In civil law countries cooperation is regarded as a duty derived from good faith. According to the official comment on article 1:202, in common law tradition good faith is usually an implied term that has not had much

86 The logic, as it links to mitigation, can also be seen in common law case-law. See H G Beale (ed), Chitty on Contracts Vol.1 (29^th edn Sweet & Maxwell, London 2004) 1478 ff.

application. On the contrary, it has been postulated in this thesis – based on judicial decisions – that English courts recognize in commercial contracts the purpose that good faith attempts to accomplish, identifying it with cooperation between the parties.⁸⁷ Therefore, this concept of good faith cooperation is not an exclusive idea of the civil law tradition.

In the Principles cooperation is presented as an autonomous duty.

However, the general nature of the terms used to define the duty of cooperation and the illustrations provided in the official comment on the Principles allow equating cooperation with good faith. Article 16:102 puts on the same stand good faith, fair dealing and cooperation.

Article 16:102 Interference with Conditions

1) If fulfilment of a condition is prevented by a party, contrary to duties of good faith and fair dealing or co-operation, and if fulfilment would have operated to that party's disadvantage, the condition is deemed to be fulfilled.

2) If fulfilment of a condition is brought about by a party, contrary to duties of good faith and fair dealing or co-operation, and if fulfilment operates to that party's advantage, the condition is deemed not to be fulfilled.

The following illustration of a resolutive condition being treated as having been fulfilled demonstrates that good faith is conceived as cooperation:

When farmer H’s tractor is stolen, he hires from O, another farmer, a replacement tractor. As a favour to H, the rate of hire is below the market rate. O’s obligation to make the tractor available is subject to the resolutive condition that it is to come to an end if H acquires a new tractor to replace the stolen tractor. H turns down an attractive offer of a replacement tractor made by T in order to continue benefiting from the favourable rate of hire. The condition is deemed to be fulfilled when H ought to have accepted T’s offer.⁸⁸

87 See Chapter Two, Section 2.5.2.

88 D Bush and others, Principles of European Contract Law (Part III) and Dutch Law. A Commentary II (Kluwer Law International, The Hague 2006) 267.

Good faith is the main philosophy of PECL, therefore cooperation is regarded as essential in these Principles. Hence, article 1:301 (4) states that the failure to co-operate amounts to non-performance. In addition, according to the comment on article 1:201, good faith is required during the formation, performance and enforcement of the parties’ duties under the contract.