Europe-wide rules covering online sales came a step closer as the European Parliament backed plans for a new contract law on Wednesday.
The proposed European Contract Law would set standard rules for buying and selling across borders in the 27 E.U. member states and is particularly relevant for online sales. Currently only 8 percent of European consumers buy online from another member state. While language is arguably a barrier, the European Justice Commissioner Viviane Reding believes that a lack of clarity on contracts also plays a huge part.
"You often get the following message on the website of the company: 'Sorry, the product you have requested cannot be purchased by you as you are a non-resident.' While we cannot and should not ever touch Europe's linguistic diversity, the diversity of national contract law system is not an insurmountable obstacle. Laws can converge. Bridges can be built between different contract law systems. Common principles of contract law can be identified," she said.
The Commissioner added that the new law would give Europe's 500 million consumers more opportunities to shop across borders while cutting transaction costs for small businesses. It could save a small online business wishing to trade in Europe an estimated €9,000 (US$13,500) in legal and translation fees per country -- or more than €230,000 if they wanted to take their business E.U.-wide, according to the Commission.
Contracts formalize an agreement between parties and can cover a broad range of issues, including the sale of goods and associated services such as repairs and maintenance. Europe currently has more than 27 different legal systems for contractual transactions.
The European Court of Justice recently ruled that a website operating in the language of another E.U. member state can be deemed to be directing its products and services to consumers in this other state, meaning that business must comply, not only with the laws of its own country, but also that of the other member state. A common contract law would circumnavigate this difficulty.
The proposed European Contract Law is an optional instrument which consumers and websites can opt in or out of, possibly by means of a "blue button" that would make it clear to the consumer, with language such as, "If you click here, then you contract under European Contract Law, not your national law."
The European Parliament approved the draft European Contract Law by overwhelming majority with 521 in favor and 145 against.