The DCFR, anyone?

Do you know what DCFR stands for? If you do, you are in the minority among those in legal practice. The DCFR is a topic that has been fiercely debated for many years among private law academics. It has generated hundreds of articles and comments, yet most practitioners are unaware of its existence.

While you may be thinking that there is nothing unusual in academics taking an interest in something practitioners know, or indeed care, very little about, the DCFR is different. It is different because judges know about it and refer to it.

The DCFR was recently referred to in an opinion by Lord Malcolm (Phil Wills v Strategic Procurement (UK) Ltd [2013] CSOH 26). As such, practitioners, particularly those involved in litigation, should know about it. This article aims to make you aware of the DCFR, where it may lead in the future and, importantly, how it is currently being used.

Model rules

In full, the DCFR is the Draft Common Frame of Reference (Principles, Definitions and Model Rules of European Private Law). As the title suggests, the DCFR contains principles which underpin the model rules; definitions of terms used in the model rules; and model rules on a number of areas of private law.

The European Parliament and Commission were concerned that divergent national contract laws within the member states were having a detrimental impact on cross-border trade in the internal market, given high transaction costs for traders wishing to sell in another member state and a lack of consumer confidence in purchasing products from another member state. Furthermore, the development of European contract law had been piecemeal. Specific issues, mainly relating to consumer protection, had been looked at individually, which had resulted in inconsistencies, gaps and overlaps in the resultant EU legislation.

The Commission sought a common frame of reference which could be used in trying to resolve these issues. The result was the DCFR. The DCFR is an academic text which can be used as a basis by the European institutions to produce a common frame of reference in future.

Produced by a network of academics, the DCFR model rules are based on extensive comparative research, involving contributors from all EU member states at the time the DCFR was drafted, together with existing EU legislation on private law and relevant international instruments such as the UN Convention on Contracts for the International Sale of Goods. The model rules aim to identify best solutions. An interim outline edition was published in February 2008, with a revised outline edition in March 2009 (available at http://ec.europa.eu/justice/policies/civil/docs/dcfr_outline_edition_en.pdf). A full edition in six volumes (containing comments and comparative notes) was published in October 2009 (available at http://ec.europa.eu/justice/contract/files/european-private-law_en.pdf).

The DCFR is split into 10 “books” covering various aspects of private law, including contracts and other juridical acts (Book II); obligations and corresponding rights (Book III), rules in relation to specific contracts such as sales, lease of goods, contracts for services, commercial agency, franchise and distributorship, loans, and personal security (Book IV); non-contractual liability arising out of damage caused to another (delict) (Book VI); unjustified enrichment (Book VII); aspects relating to the law of moveables (Books VIII and IX); and trusts (Book X).

Where will it lead?

As noted above, the DCFR is an academic text, and by containing model rules on several areas of private law its coverage goes beyond contract law, which was the main concern of the European Commission and Parliament. Decisions on whether and how to use the DCFR are political decisions.

To date, the Commission has focused on cross-border sales. This has resulted in the proposed Common European Sales Law (CESL). Those drafting the CESL drew significantly on the DCFR. The CESL sets out rules that could be used to govern cross-border distance contracts for the sale of goods, supply of digital content and related services. We should know shortly whether there is political support for the CESL becoming an optional instrument that will sit alongside national laws, and which parties can choose to govern their contracts in cross-border situations instead of the applicable national law.

While the DCFR has been described as the embryo of a European Civil Code, there are currently no proposals for such a Code. Whether there will be the political will in the future to move forward with further harmonising measures in contract law remains to be seen. As well as a basis for an optional instrument, it was envisaged that the DCFR could be used as a toolbox for legislators – a source to be consulted when drafting new EU legislation in the field of private law or amending existing provisions. Neither the DCFR nor an instrument based on its provisions has as yet been adopted as an official toolbox of the Commission or of any other European institution.

How is the DCFR currently being used?

It has been said that whatever the future holds for the DCFR, it will be a source of law. It is available to deepen knowledge of European private law and will be a source of inspiration and reference for European and national legislators, as well as the European Court of Justice and national courts when tasked with resolving a novel or difficult question in the fields of private law covered by the DCFR.

Lord Mance made this point in an article which appeared shortly after the full edition of the DCFR was published, in which he argued that the DCFR should initially be used for that very purpose (see “The Common Frame of Reference”, Zeitschrift für Europäisches Privatrecht, 2010, 457-462). In Lord Mance’s view it is only following a period of scrutiny by the legal community, its users and the public, as well as lawmakers and courts, that it will be clear how far the DCFR represents a useful framework or where modifications might be necessary. We can see the DCFR being used in this way in Scotland.

Those involved in shaping the law in Scotland are making use of the DCFR. The Scottish Law Commission has used it as a yardstick against which to measure Scots law in its recent publications on contract law (see the Discussion Papers on Formation (DP 154) and Interpretation (DP 147) of Contracts; and the Report on Execution in Counterpart (Report no 231)). Furthermore the SLC has referred to the DCFR in its work on trusts (see DPs 142 and 148) and moveables (see DP 151 and Report no 228). As such the DCFR is having a significant impact on the approach to law reform in Scotland.

Both the Supreme Court and Court of Session libraries hold copies of the DCFR. The DCFR was referred to by Lord Malcolm in Phil Wills (above). The case raised a question regarding the law of error, described by Lord Malcolm as “one of the most uncertain areas of our private law” (para 1).

The facts were that proceedings in Scotland had come to an end. The parties had entered into a joint minute seeking absolvitor and decree was granted by the sheriff. Proceedings between the same parties had been raised in England. In the English action the defendant entered a plea of res judicata on the basis that decree of absolvitor had already been granted in Scotland. A motion to strike out the English action had been made, which was stayed pending the outcome of the reduction proceedings before the Court of Session. The pursuer claimed the defender’s solicitor knew (a) that his solicitor was in error about the fact that decree of absolvitor in the Scottish action would prevent his claim from being prosecuted in London; and (b) that the defender’s agent knew the pursuer intended to pursue the claim in London. The issue before the court was therefore whether the defender’s agent’s knowledge of an uninduced error on the part of the pursuer’s agent could justify reduction of the sheriff’s decree and the joint minute.

Lord Malcolm was referred to a number of Scottish authorities including Steuart’s Trustees v Hart (1875) 3R 192, in which a contract for sale and disposition were reduced because the defender was aware of, and had taken advantage of, the pursuers’ uninduced error regarding the feuduty affecting the land sold, with the result that the defender had purchased it at a significant undervalue. Lord Malcolm held that Steuart’s Trustees remained good law and had not been overruled by Stewart v Kennedy (1890) 17R (HL) 25. In the course of his opinion, Lord Malcolm referred to English authorities and to article II-7.201 of the DCFR, which sets out when a contract may be avoided for mistake. From the opinion it does not appear that Lord Malcolm was referred to the DCFR by either party but instead, having formulated a view based on the Scottish authorities, his Lordship looked at the position south of the border and the relevant provisions of the DCFR to evaluate the decision he had reached.

Be aware of relevant DCFR provisions

It is suggested that if you are involved in a case concerning a novel, difficult or controversial area, you should know what the DCFR model rules say on the point. The judge hearing the case may very well consult the DCFR. The model rules may not be determinative – given the strong civilian influence some of the model rules seem alien to Scots lawyers with our hybrid legal system and strong common law influence in contract law. However, if the point you are making accords with the DCFR, it would surely do no harm to know that you are in line with what is regarded as the best solution to the issue. If your argument is not in line with the DCFR, it would be better to know, and know why, in case that very question is put to you. Certain of the model rules have been subjected to criticism and there may be good reason for arguing that particular model rules do not represent the position in Scots law.

At the very least, the DCFR may provide some food for thought, in particular the full version containing comments and comparative notes (the writer suggests identifying the relevant rules in the outline edition and then consulting the relevant sections of the full edition for notes). Appellate courts often consider comparative material when being asked to rule on novel or complex issues. The DCFR provides an enormous amount of detailed comparative analysis, and is available to consult without charge, if only you knew about it. Well, now you do.