IBA-IFA

13th Annual Seminar on

INTERNATIONAL FRANCHISING INTENSIFIES

15 May 1996

WASHINGTON D.C. USA


Some Basic Differences between the Common Law and the Civil Law Approach
by Aldo Frignani

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THE CIVIL LAW APPROACH

by Prof. Aldo Frignani


OUTLINE

Civil law conduct of litigation


The survey which follows will be based mainly on Italian law with references to French and German law, and not to all the other civil law countries which ought to be taken into account in a complete comparative analysis.


I. DIFFERENCES IN LEGAL DRAFTING

Comparative law researchers have shown that the differences in contract style in civl law and common law traditions are mainly due to the different hierarchy and interplay in the sources of law(or formants).

1) The civil law drafting technique as influenced by civil and commercial codes.

In the common law countries the drafting style of contracts is influenced by the drafting style of statutes: the legislators, bound to defend themselves against the tendency of the Courts to strict literal interpretation of statutory rules, developed a practice to issue very accurate and detailed provisions, in which the s.c. Tatbestand is fragmented in a series of specific hypothesis, which can hardly be considered as “general and abstract”. As a consequence, contracts are very detailed as well, because the parties try to take into account any possible occurrence that may happen in the future, and to lay down an adequate contractual discipline.

On the contrary, in the civil law countries, the rules contained in the codes are usually” general and abstract”, as they state, first of all, the general principles governing a given subject, which are designed to prevail over a contrary will of the parties, and then add some specific rules, which are to be applied in those cases where nothing has been stated by the parties for that particular hypothesis. As a consequence, contracts are usually very brief and concise: the parties do specify only the essential terms of the contract they are entering into, and rely on statutory rules for the remaining discipline.

One should not forget that also the interplay between the roles plaid respectively by legislators,courts and the needs of the business community is of importance in explaining the differences in legal drafting of contracts, but this analysis falls out the scope of this presentation.

1.1.Rules on contracts in general

Rules on contracts in general are contained in all European Civil Codes: first of all they give a definition of contract, usually as an “agreement”, or as an “exchange of promises ” between parties. Then, the effects of the contract are usually taken into account: they may consist in creating obligations cast upon the parties, as well as transferring real property rights, on movable or immovable things, or both, and so on.

Some possible aspects of the “life” of contracts find a general discipline as well: rules concerning formation, interpretation, assignment, nullity, voidability, dissolution, and so on, are usually included in the Civil Codes. Of course, none of these rules can be opted out by the parties: as a consequence, contracts do not need to provide anything on these matters, except in those cases in which a contractual provision, departing from the general rule, is allowed by specific statutory provisions.

1.2.Rules applicable to specific contracts

In the civil law countries, an important distinction should be drawn between contracts having a statutory discipline (or “type-contracts”), in the Civil Code or in special laws, and those which do not. The reasons for this distinction are mainly historical: legislators issued a specific discipline for those contracts which were more diffused at the time codes were laid down, believing , at the same time, that application by analogy of those rules would meet the need for discipline of the “new” contracts which the parties may create, or that, if these rules were to show themselves as insufficient, special laws could have been enacted concerning single contracts.

A threshold is, anyway, usually cast upon the parties which are to enter a contract that is not regulated by specific rules: such contracts can be enforced only if “directed to the realization of interest worthy of protection according to the legal order” (art. 1322 of the Italian Civil Code).

The franchise contract, as we will better see later, does not usually have a statutory discipline in the civil law countries.

1.3.Rules replacing the silence of the parties (non-mandatory rules)

The rules governing specific contracts can be divided in “non-mandatory” and “mandatory”.

The function of “non-mandatory” rules is to replace the silence of the parties on given matters concerning a contract: consequently, they can be opted out by contractual clauses provided for by the parties at their free will. The reason for the enactment of those rules was that the legislators intended to grant the parties a “legal type” of contract, which they could easily enforce in front of a Court, thus fastening up the drafting of contracts, since the parties did not have to get worried with any single aspect of their agreement. Thus, non-mandatory rules are often very pervasive, as they leave to the parties the only duty of determining the “essential terms” of the contract (see, e.g. the very detailed discipline which in civil law countries is usually provided for the contract for sale of movables). As it can easily be seen, the civil law approach radically differs, on this point, from the common law one.

1.4.Rules which cannot be opted out by the parties (mandatory rules)

“Mandatory rules”, on the other hand, cannot be opted out by the parties: in other words, they are concerned with particular aspects of a contractual “type” which, according to the legislator, cannot be the object of a different voluntary discipline, set forth by the parties if they want avoid the risk of tying the contract to the realization of interests which are “not worthy of protection” according to the legal order. Legal scholars usually explain the provisions included in mandatory rules with reference to general concepts or principles of the legal system, such as “public policy”, or gute Sitten (morals).

Worth to note, contractual terms which are in contrast with mandatory rules will be considered as void, and their nullity may be “extended” to the whole contract.

Moreover, in some cases void contractual clauses may be replaced, by operation of law, by corresponding mandatory rules. For instance, this happens in housing lease contracts. Of course, in the common law countries, the “sanctity of contract” principle would preclude the Courts from such a “replacement” of contractual clauses.

2) Essential terms of the contract as opposed to terms whose absence does not preclude an agreement to be considered a valid contract.

The civil codes usually list the essential requirements of a contract, the lack of which involve the inexistence of the contract itself.

The codes also contain the s.c. naturalia negotii, which are a natural consequence of the type of contract entered into by the parties:(for instance,compensation in the mandate):these are elements which become part of the contractual relationship even though not specificaly inserted in the contract,but hte parties may specifically opt them out. In franchising territorial exclusivity is not considered as naturale negotii.

Other contractual terms are mentioned and disciplined by the civil codes, but the absence of these terms does not preclude an agreement to be considered a valid contract . These terms are, for example, the condition and the time limit, which form the category of the s.c. accidentalia negotii. It must be said, however, that even if the parties are not bound to lay down in their contract this kind of terms, if they do they will be subject to the application of general mandatory rules concerning these terms.

3) Differences between contracts for exchange (e.g.: in a contract for sale, goods versus price), and contracts for cooperation (like a franchise agreement).

Differences between type-contracts and new contracts.

Most “contracts for exchange”(which include sale, supply, lease, and so on) have an exhaustive statutory discipline, and are also called “nominated” or ”type contracts”. On the contrary, contracts for cooperation among the parties, in a specific business, or among undertakings, in the carrying out of their respective activities, usually do not find a statutory discipline, exception made for the mandate, the employment relations, and, first of all, the company whose constitution is considered by the civil law as a contract among the partners.

Thus, contracts for exchange are usually very brief, being sufficient that the meeting of the minds covers only the “essential” terms: for example, in a contract for sale, the parties may indicate only the good to be sold and the price to be paid, being any further term provided for by the statutory discipline of that “type” contract.

Conversely when the parties enter into a “cooperation” agreement, the Courts may find difficulties in finding the applicable rules: in particular, they may choose to apply the rules concerning the mandate, or even to apply the rules concerning a contract for exchange, if in the cooperation agreement an exchange of goods and/or services versus money is provided for as well. As a consequence, it is suggested that this kind of contracts should be more detailed than usually.

Coming to the franchise contract, legal scholars unanimously consider it as a “new” contract, which lacks of statutory discipline; furthermore, it is usually considered as a contract for cooperation, thus requiring a more diffusive description of what the parties want from each other. In fact the reported case law in Continental Europe shows that very rarely Courts have been called to solve disputes the parts of franchise agreement concerning the sale or supply of goods, other beeing the obligations claimed to be in breach of.

4) Judges are more at ease in interpreting a rule of the code than the will of the parties in an obscure clause.

The use of general concepts or principles (general Klauseln, Oberbegriffe), like good faith, gute Sitten, diligenza del paterfamilias.

Civil Codes usually dictate rules concerning the interpretation of contracts. First of all the interpretation ought to reconstruct the effective intention of the parties. Art. 1362 of the Italian Civil Code, for example, states : “That which was the common intent of the parties, not limited to the literal meaning of the words, shall be sought in interpreting the contract”. The common intent of the parties has to be ascertained taking into account “the general course of their behavior”: the procedural rules adopted in the civil law courts, and particularly the rules concerning the collection of evidence, may in most of cases make it particularly difficult, for the judge, to ascertain the common intent of the parties, and then to construe an obscure clause in its “rightful” meaning.

The Courts therefore may be tempted to resort to mandatory or non-mandatory rules of the codes in order to clarify obscure clauses, given that they are more at ease in interpreting these rules than the will of the parties. Moreover, in some cases the Courts may apply those general concepts, like good faith, gute Sitten (§ 138 BGB), Treu und Glauben (§ 157 BGB), which are often used by the legislator in the general rules concerning contracts.

5. A danger to be avoided: to choose as governing law a civil law jurisdiction for a contract drafted following the common law model and viceversa.

For the above mentioned reasons, it must be avoided to choose as governing law a civil law jurisdiction for a contract drafted following the common law model: first of all because the very detailed provisions featuring this kind of contracts may, in some case , run in contrast with the general principles governing contracts in civil law countries. Secondly, some contractual clauses may be replaced by mandatory rules.

It must also be remembered that non-mandatory rules may be applied when the courts find difficulties in the interpretation of contractual terms, which are not drafted following the usual patterns. Every contract must be construed and implemented in the light of the legal model, which it has been patterned upon.

2. CIVIL LAW CONDUCT OF LITIGATION.

6) A second danger to be avoided: to elect the competent forum in a civil law jurisdiction for a contract drafted following the common rules and viceversa.

Furthermore, even worse consequences may arise when the parties elect the competent forum in a civil law jurisdiction for a contract governed by the common law rules and drafted according to this drafting technique.

First of all because the civil law judges are not accustomed to the very detailed provisions abundant in this kind of contracts, which in some cases might not conform to the idea that they have of the general principles underlying their own legal systems. Moreover, these judges pay a tribute to the statutory rules that a common law judge would never.

Last but not least, the two systems of law are based on concept and notions unknown to each other: a civil law judge could never master notions like “unconscionability”, “frustration”, “misrepresentation”(in all its variations) or ”hardship”, and viceversa a judge from a common law country would be in trouble with the French directive that obligations “doivent être exécutées de bonne foi”(art.1134), or the rules which give the judges the power to reduce a contractual penalty clause to “equità”.

Dangers may arise also because of the procedural rules usually adopted in the civil law.

7) The conduct of the trial: the judge establishes whether he needs more evidence beyond that offered by the parties; he collects the evidence.

The civil law procedural system has been sometimes defined by common law writers as “inquisitorial”, in contradistinction to the “adversarial” system of the common law. This statement has been set forth with particular reference to the proof-taking stage of the civil law trial, because, as we will see later, the judge examines the witnesses, and the parties practically have no right of cross-examination.

In the civil law countries the parties have the right to determine the object of a judicial controversy, and to choose the best ways to prove their allegations before the Court, even though nothing as a pre-trial discovery is known. The judge has the power to order further evidence beyond that offered by the parties only in some particular cases: first of all, when he thinks that a technical expertise is needed. It must be said than, that the fact that witnesses are questioned by the judge, should not be over-emphasized. Problems may arise, on the other hand, in those cases where the adjudicating panel states that the evidence collected by the examining judge, following the parties’ indications, is not sufficient in order to issue a decision. In such cases, the examining judge will have to collect further evidence: it must be said that usually this is the case when particularly difficult technical questions must be solved, and then the adjudicating panel holds that expertise is needed.

Concerning the admission of evidence, it is the examining judge who decides whether it is relevant or not, and than has the discretionary power to “admit” or to reject it. Furthermore, the judge has the power to evaluate the evidence, but certain kinds of evidence, e.g. documentary, party admissions and oaths and conclusive (or iuris et de iure) presumptions, once admitted, shall be given special weight, determined by law (the s.c. “legal proof”, or “legal evidence”).

8) The procedure is mostly written (oral discussion prevails only when seeking for interlocutory measures).

The civil procedure, in civil law countries, is mostly written. The commencement of the introductory stage of a civil action is marked by the service of a citation (writ of summons) on the defendant, who will have to lay down a written answer. In the same documents the parties have to ask the examining judge to admit the indicated evidence, which they think is relevant. During the proof-taking stage, the parties may usually exchange briefs (in some countries, the authorization of the examining judge is requested).

After the proof-taking stage, and before the remittance of the case to the adjudicating panel, the parties have to present to the examining judge, and to each other, their “final briefs”, in which they sum up their arguments and set forth their observations about the collected evidence.

In many civil law countries (like Germany and, since the reform of 1990, Italy) the civil procedure codes state that new arguments cannot be seth forth by the parties after the action has been introduced (i.e. after the citation and the answer, and a successive brief, have been exchanged) : as a consequence, the parties are compelled to make all their allegations , including those concerning evidence, in their first brief.

It must be said, however, that the procedure is mostly oral when the plaintiff is seeking for interlocutory measures: in this case the need for swiftness prevents the legislators from the application of the written procedure. Moreover, in some cases interlocutory measures may be obtained inaudita altera parte, on the presentation to the Court of a brief, provided that the judge is satisfied of the prima facie case (fumus boni iuris and periculum in mora).

9) Cross and re-cross examination are almost unknown.

In civil law systems cross examination is almost unknown. Recall, however, that the advocates may ask the judge to question the witness on a given matter: anyway, the judge has the power to decide whether to ask the proposed question or not. Furthermore, the matters on which the witness will be questioned by the judge must be previously set forth by the parties in their introductory briefs. The judge can nevertheless ask further questions beyond those proposed by the parties, if he thinks they are needed for the better understanding of the case.

10) Damages awarded are very low

Although substantive law states that all losses and prejudices suffered ought to be restored to the victim, in practice, when the evidence of the losses is unsufficient, in many civil law countries, the judge has a discretionary power on the determination of the damages which will be awarded to a party as a consequence of a breach of contract. Consequently, the amount of damages awarded may in many cases be lower than those requested and actually suffered. Thus the prejudiced party may lack of an actual interest to the judicial action, whose expenses, which will have to be paid in advance by each party, and reimbursed only if the judgement is favourable, are usually quite high.

11) Difficulties in enforcing a favourable judgement on damages. No sub-poena.

Furthermore, difficulties may be found in enforcing a favourable judgement. First af all, the enforcement of the judgement requires a new procedure to be started, and further expenses to be faced. Secondly, problems may arise with third parties, claiming to be creditors of the defendant and to have priority.

In the civil law countries nothing as a sub-poena is known: a party may not be compelled to declare under oath what his goods are. It follows that a favourable judgement may not be effectively enforced, because the other party is insolvent. When it can be suspected that the other party could sell or “hide” his goods, interlocutory measures ought to be requested, at the introductory stage of the judicial procedure, seeking the issuing by the Court of a sequestration decree, in order to insure the satisfaction of a future judgement for a sum of money.

It must be said, however, that in many cases it will not be easy to obtain a sequestration order: for this purpose, the applicant has to show, in a motion presented to the Court, that the creditor has reasonable grounds, based on objective facts, to fear that he will be unable to obtain satisfaction of the judgement in his favour, unless the sequestration is ordered.

Finally, sequestration can not be enforced if the creditor does not show and list the goods to be attached. For this reason the civil law tradition to oppose the introduction of the sub-poena statement is to be criticized and it appears some times correct to conclude that our jurisdictions favour debtors at the detriment of creditors.


III. SELECTED BIBLIOGRAPHY

1.FARNSWORTH,Contracts, II,Boston/Toronto,1990,190 ss.

2.RIESENFELD, The Impact of German Legal Ideas and Institutions on Legal Thought and Institutions in the United States, in REIMANN(editor),The Reception of Continental Ideas in the Common Law World 1820-1920, Berlin,1993,89

3.LANGBEIN,Comparative Civil Procedure and the Style of Complex Contracts, in 35 Am.J.Comp.L., 1987,381

4.YELPAALA,RUBINO-SAMMARTANO,CAMPBELL(editors),Drafting and Enforcing Contracts in Civil and Common Law Jurisdictions, Kluwer, 1990

5. A.FRIGNANI, Il contratto internazionale, Cedam, Padova,1990

6. C.PLATTO (editor), Pre-Trial and Pre-Hearing Procedures Worldwide, Graham & Trotman and IBA,London,1990

7.W.HABSCHEID, Introduzione al diritto processuale civile comparato, Maggioli, Rimini,1985

8.M.CAPPELLETTI, J.PERRILLO, Civil Procedure in Italy, Nijhoff, The Hague,1965

9.International Encyclopedia of Comparative Law, vol. XVI Civil Procedure (M.CAPPELLETTI chief editor), Tübingen, from 1980.

10.BELLANTUONO G.,Regole e incentivi nel diritto dei contratti.Un’indagine comparata, (doctoral thesis), Trento,1966.

Turin,April , 1996

(Prof. Avv. Aldo Frignani)

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