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Commercial Contracts and Corporate Social Responsibility Values: A European Perspective and an Attempt of a Normative Approach

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The Future of the Commercial Contract in Scholarship and Law Reform

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Abstract

The topic of corporate social responsibility (CSR) has been captioned under many names and forms while emphasizing the role of business in society. According to CSR proponents, corporations should create value for their shareholders in a way that it also creates value for society. The CSR notion has become present in commercial as well as contractual relationships. Yet, its legal normative rationale continues to be challenged. This chapter analyses the position of contract from a modern contract law theory reflecting on the evolution of contract law theory and the understanding of contract as a social concept. CSR in this chapter is represented by a set of values and thus it is analysed to what extent values have been an element of contracts. Ultimately, this chapter analyses the position of European legal frameworks, the CESL, the PECL and the DCFR. The chapter carries out an inquiry into the state of the European common contract law frameworks and their embracement and inclusion of values. The chapter through normative determination aims to show that the modern contract law theory supports inclusion of CSR values into the contracts. The same trend is visible in the European contract law frameworks.

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Notes

  1. 1.

    Friedman (1963).

  2. 2.

    Henderson (2001).

  3. 3.

    Lambooy (2014).

  4. 4.

    E.g. Universal Declaration of Human Rights, UN Global Compact, UN Guiding Principles on Business and Human Rights, OECD Guidelines for Multinational Enterprises, European Convention on Human Rights, EU Charter of Fundamental Rights, United Nations Convention against Corruption, ILO Conventions combines with the ILO MNE Declaration or Aarhus Convention.

  5. 5.

    E.g. Foreign Corrupt Practices Act of 1977, 15 U.S.C. ch. 2b §78a et seq.; Sarbanes-Oxley Act 2002, Modern Slavery Act of 26 March 2015 or UK Bribery Act of 8 April 2010.

  6. 6.

    Available online at: <https://www.unglobalcompact.org/>.

  7. 7.

    The ten principles are derived from the Universal Declaration of Human Rights, the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the United Nations Convention against Corruption.

  8. 8.

    See Sect. 4.

  9. 9.

    Gilmore (1974), pp. 1–14; Feinman (1983), p. 834.

  10. 10.

    Charles Fried advocated a theory, where the binding force of contract is based on the moral obligation to keep promises, which in turn is based on the Kantian concept of autonomy.

  11. 11.

    See generally Fried (2015).

  12. 12.

    On the perspective of the economists see also Katz (2014), p. 176.

  13. 13.

    Penner (1996).

  14. 14.

    Murphy (2014).

  15. 15.

    Webb (2014).

  16. 16.

    Webb (2014), p. 135.

  17. 17.

    Osborne (1931).

  18. 18.

    Ibid. p. 436.

  19. 19.

    Ibid pp. 443–444.

  20. 20.

    According to Smith, we could divide the contract theories into several, including promissory theories, reliance or transfer theories. Smith further, based on the normative question, stipulates utilitarian theories, rights-based theories. For more on general contract law theories see Smith (2004).

  21. 21.

    See e.g. Gilmore (1974), p. 6; Friedman (1965), pp. 20–24; Beatson and Friedman (1997), p. 7.

  22. 22.

    Cohen (1933), p. 558 or Williston (1921).

  23. 23.

    For more details on equitable contractual principles, see Sherwin (1991).

  24. 24.

    Powell (1790), p. 229.

  25. 25.

    Beatson and Friedman (1997), p. 10.

  26. 26.

    Pollock (1896), pp. 26–27.

  27. 27.

    Fuller based his theory on three interests, expectation, reliance and restitution. See Fuller and Perdue (1936).

  28. 28.

    Fried (2015).

  29. 29.

    As examples, serve the Restatement (Second) of Contracts in the United States or Implied or Unfair terms in the United Kingdom.

  30. 30.

    Beatson and Friedman (1997), p. 13; Horwitz (1974), p. 945.

  31. 31.

    Verplanck (1825); in his essay Verplanck asserts diverse difficulties and contradictions to be found in existing legal contractual doctrines of “the question of the nature and degrees of equality required in contracts of mutual interest”.

  32. 32.

    Gordley (1993), ch. 8.

  33. 33.

    See generally Zimmermann (1996), pp. 508–558.

  34. 34.

    Farnsworth (2006), p. 907.

  35. 35.

    Zimmermann (2005), p. 5.

  36. 36.

    Grundmann (2005), p. 194; In general see Schulte-Nölke (2009).

  37. 37.

    Basedow (2008), p. 903.

  38. 38.

    Jacques Ghestin (1994), para 134 et seq.

  39. 39.

    Waddams (2013).

  40. 40.

    Section 5 and below.

  41. 41.

    In eighteenth century, beliefs about contract law emphasized the relations between the individual and the community. People were determined by social hierarchy and the reciprocal ties of social obligation among members of community-defined standards of behavior. Feinman (1983).

  42. 42.

    Schutter (2008).

  43. 43.

    European Commission, Promoting a European Framework for Corporate Social Responsibility: Green Paper (COM) 2001 366 final.

  44. 44.

    Commission of the European Communities, “Communication from the Commission Concerning Corporate Social Responsibility: A Business Contribution to Sustainable Development” COM (2002) 347 final.

  45. 45.

    See e.g. Maastricht Treaty of 1992, Treaty of Amsterdam of 1997, Fannon (2003) and Búrca (2015) chapter 11.

  46. 46.

    Communication of the Commission “Implementing the Partnership for Growth and Jobs: Making Europe a Pole of Excellence on CSR”, 136 Final of 22 March 2006.

  47. 47.

    Commission’s vice president and commissioner for enterprise and industry, Gunter Verheugen states that “A controversial discussion has been finished at its heart: does CSR require a legal framework or should it be purely voluntary? We’re not going to create any new bureaucracy but we will rather pursue a partnership approach.” He further stated “There will be no monitoring, no benchmarking, no naming and shaming, no reporting requirements. It is completely voluntary. We will never have a regulatory framework for CSR because it is a philosophy, a concept”. Cited in Amao (2011), p. 65.

  48. 48.

    Ibid.

  49. 49.

    Communication from the Commission on a Renewed EU Strategy 2011–14 for Corporate Social Responsibility COM (2011) 681 final.

  50. 50.

    Ibid.

  51. 51.

    Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non- financial and diversity information by certain large undertakings and groups.

  52. 52.

    Article 29a of the Directive 2014/95/EU.

  53. 53.

    Article 19a of the Directive 2014/95/EU.

  54. 54.

    Staudenmayer (2002).

  55. 55.

    Riesenhuber (2005), p. 308.

  56. 56.

    Röttinger (2006), p. 816.

  57. 57.

    Lando (1998), p. 810.

  58. 58.

    Resolution on Action to Bring into Line the Private Law of the Member States, Eur. Parl. Res., 1989 O.J. (C158) 400; Resolution on the Harmonization of Certain Sectors of Private Law of the Member States, Eur. Parl. Res., 1994 O.K. (C205) 518. The preamble of the 1989 Resolution stated that “unification can be carried out in branches of private law which are highly important for the development of a Single Market, such as contract law…”

  59. 59.

    Lando (1998), p. 811.

  60. 60.

    Section 39, available online at: <http://www.europarl.europa.eu/summits/tam_en.htm>.

  61. 61.

    Commentary of the UK Parliament on the Draft Common Frame of Reference, available online at: <https://www.publications.parliament.uk/pa/ld200809/ldselect/ldeucom/95/9505.htm>.

  62. 62.

    Communication from the Commission to the European Parliament and the Council—A more coherent European contract law—An action plan, 12 February 2003, COM (2003) 68 final.

  63. 63.

    Communication on European Contract Law, 11 October 2004, COM (2004) 651 final.

  64. 64.

    See e.g. Alpa (2004); Weatherill (2004); Riesenhuber (2005); Lurger (2005) or Stefan Vogenauer (2006).

  65. 65.

    PECL, Introduction, p. xxi.

  66. 66.

    Ibid.

  67. 67.

    PECL, Article 1:101 (1). CESL was influenced by existing harmonization approaches, namely the Uniform Commercial Code (UCC) and the UNIDROIT Principles, where the UCC represents the unitary law for different US states and the UNIDROIT Principles were an attempt to provide for a worldwide uniformity in contract law. See Hesselink (2001).

  68. 68.

    PECL, p. xxiii. Also an explicit reference is stated to the European Parliament Resolutions calling for the preparation of a European Code of Private Law, see above fn. 55.

  69. 69.

    PECL, Articles 1:102, 1:201 and 1:202.

  70. 70.

    PECL, Article 4:109 (1).

  71. 71.

    PECL, Article 4:109 (2) and (3).

  72. 72.

    Hesselink (2001), p. 10.

  73. 73.

    Kennedy (1997).

  74. 74.

    PECL, Article 1:106 (1).

  75. 75.

    Also Article 4:110 on Unfair Terms not Individually Negotiated provides legal remedies for contractual imbalance in the parties’ rights and obligations. The value of this provision is nowadays found in the consumer law.

  76. 76.

    European Commission, Communication from the Commission to the European Parliament and the Council: A More Coherent European Contract Law: An Action Plan (2003) OJ C63/1. Before the action plan, the EU Commission published a Communication on European Contract Law that is perceived as the first stone for CFR, available online at: <http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52001DC0398&from=EN>/. In 2002 an academic Acquis Group was established.

  77. 77.

    DCFR, Introduction, sec. 1.

  78. 78.

    Study Group on a European Civil Code and Research Group on the Existing EC Private LAW (Acquis Group), Draft Common Frame of Reference: Principles, Definitions and Model Rules of European Private Law (Munich, Sellier European Law Publishers, 2009).

  79. 79.

    European Commission (2003, 2004).

  80. 80.

    European Commission (2003), p. 16.

  81. 81.

    DCFR, Introduction, sec. 8, see also Hesselink (2009), pp. 919, 923.

  82. 82.

    DCFR, Introduction, sec. 11.

  83. 83.

    Compare DCFR, Introduction, sec. 9, 10 and 11.

  84. 84.

    DCFR, Introduction, sec. 15.

  85. 85.

    Ibid, sec. 16.

  86. 86.

    Ibid, sec. 11.

  87. 87.

    DCFR, Article I-1:102(2).

  88. 88.

    DCFR, pp. 134–135.

  89. 89.

    DCFR, Introduction, sec. 18.

  90. 90.

    The word solidarity in this context has to be distinguished from the solidary liability.

  91. 91.

    See Mak (2009), p. 517.

  92. 92.

    Ibid, pp. 517–520.

  93. 93.

    See Mak (2008), p. 562.

  94. 94.

    See Tajti (2014).

  95. 95.

    Green Paper form the Commission on policy options for progress towards a European Contract Law for consumers and business, COM (2010) 348 final.

  96. 96.

    Proposal for a Regulation of the European Parliament and of the Council on a Common European Sales Law (“Proposal”), COM (2011) 635 final, 4, which states the following: “The overall objective of the proposal is to improve the establishment and the functioning of the internal market by facilitating the expansion of cross-border trade for business and cross-border purchases for consumers. This objective can be achieved by making available a self-standing uniform set of contract law rules including provisions to protect consumers, the Common European Sales Law, which is to be considered as a second contract law regime within the national law of each Member State.”

  97. 97.

    Proposal for a Regulation of the European Parliament and of the Council on a Common European Sales Law, COM (2011) 635 final.

  98. 98.

    See Eric Clive, ‘Proposal for a Common European Sales Law withdrawn’, European Private Law News, posted on January 7, 2015, available online at: <http://www.epln.law.ed.ac.uk/2015/01/07/proposal-for-a-common-european-sales-law-withdrawn/>.

  99. 99.

    See Carla Salazar, ‘Opinion to the reaction of UK government and legal groups to the withdrawal of the Common European Sales Law (CESL), available online at: <http://blogs.escript.law.ed.ac.uk/contractlaweurope16/2016/10/12/opinion-to-the-reaction-of-uk-government-and-legal-groups-to-the-withdrawal-of-the-common-european-sales-law-cesl/>; See also the Impact Assessment of the UK Ministry of Justice, available online at: <https://consult.justice.gov.uk/digital-communications/common-european-sales-law/results/cesl-impact-assessment.pdf>. For arguments in favor of the CESL, see Hans-Wolfgang Micklitz (2013), pp. 23–27. For arguments in favor of the CESL, see Hans-Wolfgang Micklitz (2013), pp. 23–27.

  100. 100.

    E.g. Horst Eidenmüller (2012).

  101. 101.

    CESL, Article 3.

  102. 102.

    E.g. The consumer has to be provided with specific information on the application of the CESL before the agreement, see CESL, Annex II. Article 10 also stipulates penalties for breach of the information obligation; Consumers have to be aware of the complex set of charges and costs, see CESL, Article 14; CESL also included specific provision governing the off-premises contracts and distance contracts, which obliges the seller to provide additional information as well as acquire a confirmation of the consumer’s consent and other requirements. Moreover, also the burden of proof in regard to the information provided is shifted and is bore by the seller, see CESL, Article 26.

  103. 103.

    CESL, Articles 1–3.

  104. 104.

    Cafaggi (2013), pp. 318–319. Similar provision is present in the Consumer Sales Directive, 1999/44/EC, O.J. 1999, L 158/60 in Art. 6(1) and in the Time-Sharing Directive 2008/122/EC, O.J. 2009, L33/10 in Article 5(2).

  105. 105.

    Busch (2016), p. 35.

  106. 106.

    See Wielsch (2014), p. 384, ‘principles underlying ‘the CESL therefore requires a broader understanding that reaches beyond principles expressly stated in the Articles 1–3 CESL. For restrictive interpretation, see Yehuda Adar (2013), p. 32.

  107. 107.

    For many decades the EU law has been supplemented by fundamental rights developed judicially by the CJEU in a case law that draws on the constitutional tradition common to the Member States as well as international legal tools for the protection of human rights, namely the European Convention on Human Rights. The regard for the human rights in the EU has been also codified in all of the Treaties since the Treaties of Maastricht. Currently, the Treaty on European Union, in Article 2 reaffirms the central role of fundamental rights among the values the EU is founded on.

  108. 108.

    Lando (2000), p. 361.

  109. 109.

    Ibid. p. 831.

  110. 110.

    Rodotà (2006), p. 118.

  111. 111.

    Feinman (1983), p. 837.

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  1. Center for Enterprise Liability, Faculty of Law, University of Copenhagen, Copenhagen, Denmark

    Alexandra Horváthová

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  1. Institute of Advanced Legal Studies, School of Advanced Studies, University of London, London, UK

    Maren Heidemann

  2. Law School, University of Exeter, Exeter, UK

    Joseph Lee

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Horváthová, A. (2018). Commercial Contracts and Corporate Social Responsibility Values: A European Perspective and an Attempt of a Normative Approach. In: Heidemann, M., Lee, J. (eds) The Future of the Commercial Contract in Scholarship and Law Reform. Springer, Cham. https://doi.org/10.1007/978-3-319-95969-6_11

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