A key distinction in international transactions has been whether a contract is governed by the law of a civil-law jurisdiction or the law of a common-law jurisdiction. For purposes of contracts, the structural distinctions between civil law and common law have diminished in significance, but use of common-law terminology in contracts governed by the law of a civil-law jurisdiction remains a source of confusion. After considering the historical difference between civil-law and common-law contracting, this article suggests how to avoid that confusion.
Civil Law and Common Law
Civil law is primarily derived from Roman law. In civil-law jurisdictions, codified principles serve as the primary source of law. By contrast, common law is based on medieval English law. In common-law jurisdictions, judicial decisions serve as the primary source of law.
The primary English-speaking jurisdictions—the United States, the United Kingdom, the English-speaking parts of Canada, and Australia—are common-law jurisdictions. Civil-law jurisdictions can be divided into the Romanistic (including Italy, France, and Spain), the Germanic (including Germany, Austria, Switzerland, and Taiwan), and the Nordic (Denmark, Finland, Norway, and Sweden).
Shorter or Longer Contracts
The conventional wisdom is that contracts drafted in common-law jurisdictions are longer than those drafted in civil-law jurisdictions because civil-law drafters are able to rely on codified default rules.
For example, section 121, paragraph 1 of the German civil code defines the word unverzüglich to mean “without culpable delay.” When that word occurs in contracts, it is generally understood to express its statutory meaning, subject to caselaw relating to how it is to be interpreted—it need not be defined in a contract.
And although common-law contracts often spell out what constitutes an event of default for purposes of the transaction and what the resulting consequences are, that’s addressed in the German civil code. Generally, the parties to a contract may deviate from such default rules in their contract.
But this distinction between common-law and civil-law contracts is blurring—English-language drafters used to common-law drafting apply a more exhaustive approach even for purposes of contracts governed by the law of a civil-law jurisdiction. And civil-law drafters exposed to common-law drafting are prone to replicating it. Nevertheless, it would always be prudent to make clear how contract provisions relate to the codified default rules. For example, if the words “without culpable delay” are used in the contract, an explicit reference to section 121, paragraph 1 of the German Commercial Code should be included to indicate that these words are used to convey that meaning.
Whether Interpretation Is Limited to the Wording of the Contract
It’s also the conventional wisdom that common-law judges, in reliance on the parol evidence rule, are likely to interpret a contract based solely on the contract text, whereas civil-law judges also take into account subjective considerations like the parties’ presumed intent, even if that requires departing from the wording of the contract.
For example, in a famous German court case from 1916, the parties intended to conclude a sale contract for whale meat. But their contract referred to håkjerringkjøtt, the Norwegian word for the much cheaper meat of the Greenland shark. The court had no difficulty finding that the contract was for whale meat.
But this distinction is less clear-cut than it seems. For example, courts and commentators in the United States have swung back and forth between an approach that relies exclusively on the text and one that takes context into account. And the parol evidence rule is subject to exceptions.
Law and Equity
Traditionally, common law distinguished between law and equity. Even though in the United States the distinction has been eliminated in federal and most state courts, courts retain many of the differences between legal and equitable principles. In particular, courts have continued—with exceptions—to grant specific performance only when money damages are inadequate. By contrast, the distinction between law and equity doesn’t exist under civil law. The statutory default remedy for breach of contract under civil law is to have the defaulting party perform. For example, if a seller delivers nonconforming goods, by law the buyer’s initial remedy is delivery of conforming goods.
So in a civil-law contract it would still be unnecessary to refer to equitable remedies. In fact, it might be counterproductive: because the word equity, in translation, can be equated with fairness, a judge might take use of the word equity as an invitation to instead apply general considerations of fairness.
Contracts for international transactions are usually drafted in English even if no party to the transaction is based in a jurisdiction where English is an official language. And the overwhelming majority of standard contracts promulgated by trade groups for international transactions (for example, the FIDIC standard forms) are in English.
Because the primary English-speaking jurisdictions are also common-law jurisdictions, it’s commonplace for English-language contracts governed by the law of a civil-law jurisdiction to incorporate, by a process of cross-contamination, common-law terminology. Some of that terminology is confusing for those with a civil-law background. That risks causing greater annoyance and uncertainty than the broader differences between civil law and common law.
The standard advice is not to use problematic common-law terminology. That’s our advice, too, but with a difference—the problematic common-law terminology is problematic for common-law drafting as well, so you should eliminate it from all your drafting.
We consider below some examples of this problematic terminology.