The Principle of Reasonableness in EU Directives on Contract Law

The Principle of Reasonableness in EU Directives on Contract Law Name Institutional Affiliation The Principle of Reasonableness in EU Directives on Contract Law Introduction Over the years, the European Union (EU) has made efforts to make its internal market effective by removing barriers and making the existing rules simple to facilitate convenient access to various markets by all its members. To this end, the EU has achieved significant progress in the harmonization of laws such as the equality law (Salewudin & Richard, 2015). However, attempts to harmonize contract law and other privacy laws have been slow and more sporadic because of complexities. Concerning contract law, the EU has adopted the approach of EU Directives whereby member countries are required to achieve minimum legal standards in terms of their mandatory laws (Haas, 1998). Both the supporters and opponents of the EU Directives have attempted to explain the reasonableness or the unreasonableness of the efforts to harmonize the European contract law. In this paper, the respective arguments are discussed to highlight the reasoning behind each perspective and the way forward for the EU. When the EU Directives on European Contract Law are considered, two questions should be examined. The first question is whether having different contract laws among the member states is an obstacle to efficient cross-border trade. The second question is whether harmonization of the EU contract law is an effective remedy to the cross-border trade problems. The answers to the aforementioned questions form the basis of the reasonableness of the EU Directives on Contract Law. The first important argument among the supporters of the harmonization is that different contract laws for each member state are a source of high costs when conducting cross-border trade (Pomar, 2008). Moreover, two or more parties from different countries within the EU would need to research and understand the national law of each trading partner before entering into a contract (Zhou, 2019). Even if the three parties chose one national contract law as the basis for their transactions, the other parties would need to familiarize themselves by studying the foreign law to avoid liabilities (Chirico & Larouche, 2010, p. 26). This process is costly in terms of the learning and negotiations involved. The costs inherent in different contract laws for each state also make cross-border trade less lucrative because profit margins are reduced. Further, consumers’ interests are affected as they do not enjoy varieties and friendly prices (DiMatteo et al., 2013, p. 509). According to Zhou (2019), almost €1 billion are incurred every year as the costs of cross-border transactions in an environment of unharmonized contract law. The equivalent value lost from the foregone trade was estimated to be €100 billion per year (European Commission, 2011). Therefore, the argument is that the EU Directive to harmonize the contract law will eliminate these huge transaction costs and promote savings, encourage more cross-border trade, and uphold consumer interests (Jagodzinska, 2014). For example, DiMatteo et al (2013, p. 510) assert that a one percentage point achievement in the value of the increased cross-border trade would be equiva...