Contract law in Europe

Contract law and the European single market

The European Union (EU) single market is designed to allow businesses to trade throughout the EU on an equal footing.

The EU has introduced measures to get rid of obstacles to free trade in the single market - including clauses in contracts which may restrict free trade. Various EU directives have dealt with areas such as e-commerce and the insurance and banking sectors, and this in turn has affected contract law in member states. However, the EU does not have the right to regulate the contract law of individual countries, so each country still has its own legal contract provisions.

The two parties to a transaction can decide between themselves where the contract is to be signed - and, therefore, which jurisdiction applies. UK businesses should ensure they get professional legal advice before signing a contract in another EU member state.

The Principles of European Contract Law

To make it easier for businesses in member states with different contract laws to trade together, the EU has introduced the Principles of European Contract Law. These are a set of 'model' rules for business contracts, based on fairness and simplicity and designed to provide solutions for issues where national laws do not offer an answer.

The Principles are available in each of the EU's languages and businesses can agree that some - or all - of these clauses can be written into a contract. Those clauses then take precedence over the contract law of the country where the contract is signed.