Contract law is the foundation of modern commerce, governing the relationships between businesses and individuals as they enter into agreements to exchange goods and services.
In Europe, the principle of freedom of contract is rooted in the law of contract. However, this freedom is limited to some extent by certain mandatory rules and statutory provisions that are intended to protect the weaker party or to ensure that certain interests are protected. Such rules and regulations keep on evolving over the years to cater towards changing needs.
There have been several significant changes to contract law in Europe in recent years, such as:
- The introduction of the General Data Protection Regulation (GDPR) in 2018, regulates the handling of personal data and strengthens the rights of individuals and about their data. Now, it has become almost mandatory to specify the data collection and handling procedure in almost any kind of contractual relationship.
- The implementation of the Consumer Sales and Guarantees Directive in 2011, harmonises consumer protection laws across the EU and strengthens the rights of consumers regarding goods and services.
- The EU Directive on Unfair Contract Terms, which was implemented in 1994, limits the liability of businesses and strengthens the rights of consumers about standard contract terms.
- The EU Regulation on the law applicable to non-contractual obligations Rome II, which came into force in 2007, governs the choice of law in non-contractual disputes across the EU. It provides a framework for determining the law applicable to non-contractual obligations in cross-border disputes.
- The adoption of the EU Directive on Late Payment in Commercial Transactions in 2011, aims to combat late payment in commercial transactions and strengthen the rights of businesses.
The changes in contract law in Europe, such as the GDPR and the Consumer Sales and Guarantees Directive, have especially had a major positive impact on consumers’ rights and protection. They have helped to ensure that consumers are better informed, have more control over their data, and are better protected when purchasing goods and services.
However, these changes have also had some negative side effects, mainly for businesses:
- Compliance costs: Companies have had to incur significant costs to ensure compliance with these new regulations, particularly about the GDPR stringent provisions.
- Administrative burden: Companies also have to deal with increased administrative burdens, such as reporting data breaches, obtaining explicit consent for data processing, providing information to consumers about their rights, and handling customer data rights requests.
- Legal disputes: The changes in contract law have led to an increase in legal disputes, as companies and consumers often disagree on the interpretation and application of the regulations.
- Uncertainty: The implementation of these changes has also led to uncertainty for companies, particularly about the interpretation and application of the regulations. Small Businesses are not aware of the complex regulations, and are not in a position to spend on expensive lawyers.
Such changes in contract law have brought many benefits for consumers, but they have also had some negative side effects for companies. Contract law in Europe is considered advanced due to its focus on harmonisation, consumer protection and transparency.
The EU has worked to standardise contract law across its member states, ensuring consistency and ease of operation for businesses. EU has literally been a leader in developing the privacy law jurisprudence globally. The way forward in contract law in Europe will involve continued developments in existing regulations and the introduction of new regulations to ensure that consumers and businesses are protected in the digital age. With the stringent regulations, penalties and customer awareness, Businesses no longer have the leeway to evade the regulatory aspect.
