"METHODOLOGY OF UNIFORM CONTRACT LAW: THE UNIDROIT PRINCIPLES IN INTERNATIONAL LEGAL DOCTRINE AND PRACTICE" by Maren Heidemann, LL M Thesis submitted to the University of Nottingham for the degree of Doctor of Philosophy, June 2005 2 Abstract Despite ever growing international trade and dispute settlement, a consistent international methodology of uniform private law has yet to be formed. This is needed in order to encourage the use of existing uniform transnational law rules specifically designed for application to international commercial contracts. This study examines uniform contract law in legal methodology and considers the barriers which exist toward it in modern nation states. It explores ways in which these barriers can be overcome and considers whether it is thereby possible to create a specific methodology of international contract law. Through exploring these three areas, this thesis intends to distinguish and analyse the main obstacles to the application of uniform contract law. The study is therefore organized into three sections, each exploring one of those methodological obstacles and providing solutions for overcoming them. Part One discusses the barriers erected by traditional theories of contract law. Part Two addresses the attitude taken by national lawyers when applying uniform law and enquires how this attitude is formed. This section also asks why this attitude provides an obstacle to the success of uniform law and considers ways in which it could be changed. Part Three, the third and final section considers the treatment of uniform contract law in the context of conflict of laws. This section also asks how seemingly opposite positions in the modern and traditional theory of private international law can be reconciled and considers the ways in which uniform contract law can be applied within a domestic law context as lex contractus. 3 The author argues that the points of resistance identified can be tackled by developing an autonomous methodology of interpretation of transnational contract principles; and, by treating model sets of transnational contract principles as a form of lex specialis. Overall, the thesis seeks to demonstrate that the potential of the UPICC has not yet been fully recognised, and that barriers to such recognition are not insurmountable. 4 Acknowledgements Firstly I would like to thank the University of Nottingham and my supervisor Prof Dr Mads Andenas, in his capacity as Director of The British Institute of International and Comparative Law (BIICL), in London, for their support which made this thesis possible. I am grateful in particular to the following people without whom the thesis would not have occurred and who enriched the course of this research: At the University of Nottingham: Prof Michael Bridge, Prof D J Harris and Mr Patrick Twomey for helping to lay the foundations of this work. Prof Paul Torremans as internal supervisor for coordinating various international views on the subject and advising on style. Prof Robert McCorquodale and Mrs Sandra Mienczakowski for allowing the project to continue under external supervision. Prof Sue Arrowsmith and Ms Maureen Welch for mastering all sorts of ensuing administrative problems. At the BIICL: Prof Dr Mads Andenas for essential supervision sessions and heading the uniquely fruitful environment for research at the BIICL. Miss Liane Hoogland for managing a busy schedule. Mr Michael Anderson for previously organising and chairing many inspiring meetings and receptions. Prof Jonathan Rickford for providing fascinating talks and discussions. Elsewhere: Prof Dr Gunther Teubner, University of Frankfurt, for highly appreciated 4a encouraging comments on drafts. Dr Astrid Grieger, Schwäbisch Gmünd, for many critical discussions on methodology and continuous encouragement. Mrs Intan Murnira Ramli, LL M and Mr Sufian Jusoh, LL M, Kuala Lumpur/ Canterbury, for fruitful conversations about English Law and international practice, for proof reading, strong moral support and sharing research on style. Mr Kamran Arif, Peshawar, for firm moral support and knowledgeable input. Dr Michael Barlow and Mrs Alison Barlow, MSc, Nottingham, for many years of friendship and sharing views about anything from astro-physics to the presentation of a thesis. Nottingham, October 2005 5 Table of Contents Abstract 2 Acknowledgements 4 Table of Contents 5 List of Abbreviations 13 Bibliography List of Cases List of German Cases INTRODUCTION 37 1. Modern developments 37 2. Research questions and structure of the thesis 38 3. The subject matter: Transnational uniform contract law 40 PART ONE: General aspects of uniform private law: Jurisprudential categories and purpose 44 INTRODUCTION 44 CHAPTER ONE: Diversity in the law 47 I.1. Sovereignty of states and the role of private law 47 I.1.1. Assertion of sovereignty in international trade 51 I.1.2. Assertion of sovereignty towards the private individual 52 I.1.3. Unity of law and state: The state as the sole source of law? 53 I.1.3.1. Territorial matters and the paradox of contract law 54 I.1.3.2. Sovereignty and legitimacy of private law 58 I.1.3.3. Legitimacy of a-national commercial law 65 I.1.4. Conclusion 70 I.2. Distinctiveness of substantive contract law of distinct sovereign states 71 I.2.1. Application of foreign law 72 I.2.1.1. Forum and territory 72 I.2.1.2. Legal theory 74 I.2.2. Reception of foreign law 80 I.2.3. Conclusion 82 I.3. Party autonomy: How autonomous is the individual? 82 6 I.3.1. Choice of law 83 I.3.1.1. Common law 83 I.3.1.2. The Rome Convention 84 I.3.2. Limits of choice of law: Doctrines of evasion and the role of mandatory rules 86 I.3.3. Conclusion 90 I.4. Conclusion 91 CHAPTER TWO: Unity through uniform private law 94 II.1. Why uniformity? 96 II.1.1. Globalisation 96 II.1.2. The costs of difference 98 II.1.3. Inverse conclusion: Indicators of acceptance 100 II.1.4. Conclusion 101 II.2. What uniformity ? 101 II.2.1. Uniformity of results: The desire for certainty and predictability 103 II.2.2. Uniformity of sources 105 II.2.2.1. Uniformity through codification on the domestic level 106 II.2.2.1.1. The value of codifications in civil law and common law traditions 107 II.2.2.1.2. Example: The BGB 112 II.2.2.2. Uniformity on the international level: Examples of uniform law sources 116 II.2.2.2.1. Textual understanding 118 II.2.2.2.2. Drafting technique 120 II.2.3. Uniformity of application and interpretation methods 124 II.2.4. Conclusion 126 II.3. Conclusion 127 CONCLUSION 128 PART TWO: Methods of integrating application of uniform private law in domestic legal systems 130 INTRODUCTION 130 CHAPTER THREE: Performance of Payment Obligations in the UPICC 132 III.1. Starting point: Article 7.2.1. UPICC and scholarly 7 critique 132 III.1.1.Articles 7.2.1. and 7.2.2. UPICC 133 III.1.2. Scholarly critique 134 III.2. Towards a methodology of transnational contract law: Doctrinal foundations revisited 136 III.2.1. Autonomous method of applying Art. 7.2.1 UPICC 137 III.2.2. Conclusion and structure of autonomous methodological approach 139 III.3. Scope of the payment rule in Art. 7.2.1. UPICC 140 III.3.1. The legal nature of the right to performance in Art. 7.2.1 UPICC 140 III.3.2. The wording of Art.7.2.1.: Unqualified right to performance? Debt or damages? 145 III.3.3. Termination and non-performance under Art.7.3.1, 7.3.3 UPICC 147 III.4. Conclusion 149 CHAPTER FOUR: Exemplary application of the UPICC in the context of English law 152 IV.1. The compatibility of the UPICC with English law 152 IV.1.1. Requiring performance and payment obligations in international contract law 155 IV.1.2. The law relating to specific performance of payment obligations in common law jurisdictions 158 IV.1.3. Common origins of specific performance in European jurisdictions 161 IV.1.3.1. Roman law and the reception through the Bolognese glossators 162 IV.1.3.2. Specific performance in the form of astreinte in French law 164 IV.2. Scope of employer's rights and limitations to payment claims under construction contracts under English law 168 IV.2.1. Standard terms and practice of contract drafting of international construction and building contracts under English law 169 IV.2.2. Speculative aspects of international contract practice and contractual performance 171 8 IV.2.3. Cancellation rights, breach of contract and anticipatory repudiation in English law 175 IV.2.4. The aggrieved party' s options on anticipatory breach under English law 177 IV.2.5. Compelling performance and enforceability of the contract by action for the price 178 IV.3 Conclusion 184 CHAPTER FIVE: Exemplary application of the UPICC in the context of German law 187 V.1. Payment obligations in building contracts under German law 189 V.1.1. Standard terms: do they offer a better solution than the UPICC? 196 V.1.2. The right of cancellation and the modified payment obligation in §649 BGB 198 V.1.3. The modified payment obligation as a disguised damages rule 202 V.1.4. Law reform projects 205 V.2. Compatibility of the solution provided by the UPICC with German law and models of law reform 214 V.2.1. The contractor's right to terminate 215 V.2.2. The employer's right to terminate 216 V.2.3. The rules on termination in the UPICC as a suitable substitute for cancellation 217 V.3. Specific performance in German law: The civil law position and the idea of codification in an international context 219 V.3.1.