The European Commission has delivered a feasibility study on a future initiative on European contract law made by an expert group. The study covers the most relevant practical issues in a contractual relationship, such as legal rights for faulty goods and rules on which contract terms may be unfair.

The Commission convened the expert group in April 2010, in order to explore ways to improve contract law in the EU, with the main objective of exploring ways to improve contract law in the EU. European contract law is made up of legal practitioners, former judges and academics from across the European Union.

Contracts are essential for running businesses and concluding purchases by consumers. They formalise an agreement between parties and can cover a broad range of matters, including the sale of goods and associated services such as repairs and maintenance. Within the EU, the current fragmentation of contract laws contributes to higher costs, increased legal uncertainty for businesses and lower consumer confidence in the Single Market. Transaction costs (like adapting contractual terms and commercial policies to up to 27 legal systems) and the legal uncertainty involved in dealing with foreign contract laws make it particularly hard for SMEs, which make up 99% of EU businesses, to expand within the Single Market.

Under today's legal situation, businesses and consumers in the Single Market have to deal with different national contract laws for cross-border transactions. This is markedly different from the situation in the USA where a trader can sell products across the 50 states on the basis of one set of rules, despite different laws from New York to California.

The Commission is currently tackling bottlenecks in the Single Market to drive the economic recovery forward within the Europe 2020 strategy. This includes making progress towards a European contract law. Following the publication on European contract law, interested parties can send their feedback on the individual articles drafted by the expert group until 1 July 2011. The Commission will take into account this input, as well as the results of a public consultation concluded in January 2011. As a next step, the Commission will have to determine if and to what extent the expert group’s text can serve as a starting point for a political follow-up initiative on European contract law.