Copyright (c) 2006 Tulane University Tulane Law Review December, 2006 81 Tul L Rev 565 LENGTH: 5669 words BOOK REVIEW: German Contract Law in the International Arena: A Review of The German Law of Contract: A Comparative Treatise By Sir Basil Markesinis, Hannes Unberath and Angus Johnston Hart Publishing, 2d ed 2006 979 pp NAME: Reviewed by Ulrich Magnus* BIO: * Professor, Faculty of Law, University of Hamburg; Chair for Civil Law, Private International Law, and Comparative Law; Judge, Court of Appeal of Hamburg; Executive Vice-Director, European Centre for Tort and Insurance Law, Vienna; Germany's National Correspondent, UNCITRAL; Co-speaker, International Max-Planck-Research School for Maritime Affairs, Hamburg; Member, German Council for Private International Law, European Group on Tort Law and European Acquis Group SUMMARY: This is another masterpiece of comparative law initiated and written by Sir Basil Markesinis and his co-authors Hannes Unberath and Angus Johnston and further enriched by contributions of Kurt Lipstein, Tony Weir, Raymond Youngs, Irene Snook, and Carola Pfau, who delivered the translations of German court decisions and of the relevant provisions of the German Civil Code Here it is essential to take into account all the legal instruments that can be used to resolve the problem identified, irrespective of their dogmatic or systematic classification in the respective legal system; only their function in solving the investigated problem is decisive Culpa in contrahendo provides contractual remedies, generally damages, where in fact no contract exists and actually only tort sanctions would lie And even today it remains the general, though somewhat stretched, underlying idea of liability for culpa in contrahendo that a special relationship between the parties must exist that comes close to a formal contractual bond and that allows a party to rely on that relationship like it would rely on a contract In German tort law, the recoverability of pure economic loss is too restricted, and the vicarious liability for conduct of others is too limited In addition to culpa in contrahendo and consideration, there are further legal concepts of contract law where German and common law differ rather sharply theoretically, but tend to converge when the practical results are compared Markesinis and his co-authors also indicate that the German solution has some merits TEXT: [*565] This is another masterpiece of comparative law initiated and written by Sir Basil Markesinis and his co-authors Hannes Unberath and Angus Johnston and further enriched by contributions of Kurt Lipstein, Tony Weir, Raymond Youngs, Irene Snook, and Carola Pfau, who delivered the translations of German court decisions and of the relevant provisions of the German Civil Code n1 These translations considerably add to the practical value of the book The German Law of Contract is a second masterpiece because it is the counterpart and necessary addition to Markesinis and Unberath's, The German Law of Torts: A Comparative Treatise, the fourth edition of which appeared in 2002 n2 Both volumes - all in all more than 2000 pages - form a comprehensive comparative treatise on what European continental, and especially German, lawyers call the law of obligations The now published second edition of The German Law of Contract has been almost entirely rewritten, mainly due to the fact that the German law of contract underwent major changes in 2002 n3 [*566] But why a masterpiece? This judgment needs some explanation First, there is the method to the book Since Ernst Rabel, it has become the habit of comparatists to follow a functional approach to comparative law n4 Very broadly described, this means the following procedure: one has to start from a social problem - for instance, that a person erred when expressing his or her intention n5 In the first step, one must identify as clearly as possible the factual background and reasons for such mistake or error and then identify the legal problem of whether and when, if at all, this person should be bound by such a mistaken declaration n6 The next step is the description of the legal solution to the problem in different legal systems n7 Here it is essential to take into account all the legal instruments that can be used to resolve the problem identified, irrespective of their dogmatic or systematic classification in the respective legal system; only their function in solving the investigated problem is decisive n8 The final step is the comparison of the various solutions in the different legal systems n9 The whole exercise aims at better knowledge of possible solutions to a social problem, perhaps even to find the "best" legal solution, and at least to get some stimulating insights and suggestions for one's own law n10 Markesinis has refined and modified this traditional method For the traditional functional approach can be criticised for the fact that it is unrealistic to compare all existing legal systems Therefore, that approach is necessarily eclectic and any choice among the various legal systems is more or less arbitrary Moreover, the insights of traditional comparative law have in most cases no real consequence for practical purposes This is partly because they often remain on a rather high level of abstraction, and partly because national courts and practitioners not take notice of them anyway Markesinis's reaction to this critique is threefold: first, he concentrates mainly on the comparison of two legal systems - the German and the common law system - with the latter focusing on the English common law but including other common law jurisdictions (such as the United States [*567] and Canada), though he eventually mentions specific traits of other legal systems (such as French law); second, he conducts his studies with such depth, precision, and reliability that they can easily be used for practical purposes; and third, the most important feature for any reception, he clothes the foreign law in the dressing of the home system of the reader, or rather, presents the foreign law in such a way that the common law readers can look at it through the lens of their home country n11 German contract law is presented in the way of a common law textbook of contract law n12 Markesinis's aim is not only to gain comparative knowledge and insights as such - as l'art pour l'art - but to make both these aspects accessible and fruitful for the daily work of lawyers, in order to achieve an exchange-in-fact of the rewarding ideas that have been developed in different legal cultures n13 And in particular, it is his interest to make German law and legal thinking understandable and workable to common law lawyers n14 In my view, this book of Markesinis and his co-authors achieves this aim to the fullest extent For a true understanding and possible reception of foreign ideas, Markesinis's method might not be the only way, but it is certainly one of the best, if not the best, way And success supports Markesinis's methodological approach For example, English courts, including the House of Lords, cited, used, and were influenced by The German Law of Torts on various occasions n15 And The German Law of Contract makes its deserved way as a first class authority on contract law not only in the United Kingdom, but all throughout the common law world But The German Law of Contract, as well as The German Law of Torts, is also a masterwork for a second reason Both books combine the German dogmatic and abstract approach to structure with a common law approach They present the law and legal rules along with the pragmatic case-oriented method of the common law, with its tendency to concentrate on discussion of the particular problem of the specific case German lawyers easily find the general codal rules they are familiar with and from which the solutions of concrete cases must be inferred On the other hand, common law lawyers find all the well-known problematic contract cases which are discussed in the common [*568] law world (Markesinis discusses them as far as possible side-by-side with their German counterparts), from which the common law lawyers draw general propositions only rather cautiously n16 Thus, legal certainty through general rules, but also justice to the specific case at hand, is represented by the characteristic methods of the two legal systems In fact, Markesinis merges both approaches, taking the best from, and making the best of, these two different worlds To some extent, this might be a model for the ongoing process of Europeanization of private law Or, in the words of Markesinis: "It is to be hoped that making the reasoning of the German Civil Code accessible beyond the limitations imposed by its language, will contribute to the mutual borrowing between civil and common law which will lead to an organic convergence where this is desirable and needed." n17 A last, but by no means the least, reason for my high esteem of The German Law of Contract is its quality not only in regard to scientific reliability, but also in regard to actuality and elegance of formulation It was hard work for Markesinis, Unberath, and Johnston to adapt the book to the reformed law of obligations of the German Civil Code Since the book's first edition in 1997, the German legislature has dramatically changed the German Schuldrecht (law of obligations) n18 Under the influence of European developments, in particular the European Community Directive 1999/44/EC on consumer sales, the hotly debated German Schuldrechtsreform of January 2002 revised most of the general part of the Code on the law of obligations, on sales law, on the law on contracts for work, and on the law of limitation n19 A further reform of August 2002 changed considerable parts of the German law of damages n20 The book now fully reflects all of this, and takes into account developments through [*569] the end of 2004 n21 It goes without saying that the book is current not as only concerns the German law - but also in regard to the common law But the book not only sets out the law as it is today; it also has a strong historic component and shows how developments came about and what their roots are n22 For a real understanding, but also for teaching purposes, this is extremely valuable and almost indispensable For instance, the discussion of the doctrine of culpa in contrahendo (fault in contracting) starts with Rudolf von Jhering n23 Jhering indeed was the first (in an 1861 article) to establish, firmly and systematically, the idea of extending contractual liability to the precontractual phase n24 Culpa in contrahendo provides contractual remedies, generally damages, where in fact no contract exists and actually only tort sanctions would lie n25 It is helpful for an understanding of the subsequent development of precontractual liability in Germany that Jhering's main concern was the situation of void contracts n26 For this contractlike situation, he recommended that the parties should be liable as if a valid contract existed n27 And even today it remains the general, though somewhat stretched, underlying idea of liability for culpa in contrahendo that a special relationship between the parties must exist that comes close to a formal contractual bond and that allows a party to rely on that relationship like it would rely on a contract n28 However, the doctrine was not inserted into the original German Civil Code of 1900 n29 For more than 100 years, it made its way outside the Code in court decisions n30 Only the German Schuldrechtsreform of 2002 has brought the doctrine of culpa in contrahendo into the civil code Unfortunately, however, it only mentions the doctrine, but does [*570] not define it n31 The courts have applied, and continue to apply, the doctrine in a number of rather different situations, and Markesinis and his co-authors are certainly right to stress that today culpa in contrahendo "fulfils a whole range of different and diverging purposes." n32 In particular, the doctrine has become the most effective instrument to circumvent the shortcomings of German tort law In German tort law, the recoverability of pure economic loss is too restricted, and the vicarious liability for conduct of others is too limited Culpa in contrahendo helps in both cases; it brings formally noncontractual situations under the roof of contract law, where pure economic loss is generally recoverable, and where the master or principal is liable without possible excuse for damaging conduct of servants or agents n33 Because of the different functions of culpa in contrahendo in German law, it is no wonder that the authors deal with this legal phenomenon under various headings: partly under "Formation of Contract," and partly under the headings of "Setting the Contract Aside" and "Other Forms of "Misrepresentation'" (let alone that Markesinis and Unberath in The German Law of Torts also deal with the law aspects of culpa in contrahendo) n34 A valuable aspect of both books is that they clearly point out the functional English counterparts of the German doctrine of culpa in contrahendo n35 They show that the common law does not avail itself of, and does not trust a general concept of, precontractual liability, but nevertheless knows of particular case situations where such liability is yet accepted n36 And the authors show equally that the German approach of a general concept of precontractual liability gains life only through court decisions that apply and restrict the doctrine to certain typical case situations n37 Culpa in contrahendo is therefore a good example and evidence of Markesinis's thesis that common law and civil law converge organically where desirable and needed n38 And if one asks whether the German approach of general concepts or the [*571] English case-oriented approach is preferable, then the answer is clearly that a combination of both is desirable: a general guideline with a nonexhaustive list of examples Also, the book gives an example of an innovative combination in another respect It combines the advantages of what is normally divided into separate books, namely, textbooks and casebooks The German Law of Contract combines both It consists of three parts The first part is a full textbook setting out the law of contract on more than 500 pages n39 The second part (a further 300 pages) is a casebook which collects and presents (in the order of the textbook part) the relevant German court decisions in English translation n40 The third part (almost 100 pages) contains the English translation of the relevant provisions of the German Civil Code n41 The advantages of this combination are evident The reader not only has the benefit of reading the systematic and lucid presentation of German contract law, but the book also provides easy access to the "roots": the court decisions and their original reasoning, as well as to the codal provisions themselves There is no question that the textbook part of The German Law of Contract is the most interesting The authors had to struggle with a particular difficulty of German contract law: the German Civil Code does not provide a specific book or part which contains all provisions concerning contract law n42 On the contrary, the Second Book of the Code, the Schuldrecht, deals in its general part with contractual and extra-contractual obligations and treats them as parts of an overarching law of obligations n43 Only the special part of the Code's Schuldrecht contains a limited number of specific provisions for certain specific contracts as well as for torts, unjust enrichment, and negotiorum gestio, while the general rules on obligations are deemed to apply to all these legal concepts as far as the specific provisions not provide otherwise n44 This approach of formulating general rules both for contracts, torts, and other extra-contractual obligations is at least partly responsible for the high level of abstraction of many provisions, which is regarded as a typical feature of the German Code Furthermore, decisive parts of contract law - on the formation of contracts, on [*572] limitation - are not found in the Code's Schuldrecht, n45 but in the First Book of the Code, the famous General Part of the Code n46 The General Part provides general rules fitting for all kinds of legal acts (Rechtsgeschafte) and has no equivalent in other codifications n47 German legal literature and study materials generally follow the division and order of the Code Therefore, most textbooks deal with the law of obligations treating contract law only as a subspecies of an obligation, while German works concentrating on contract law alone are really rare n48 Legal education also follows this approach Universities normally not offer courses on contract law as such but on the general and the special part of the law of obligations This contrasts sharply with the common law tradition, where contract law forms a separate subject matter both at the university level and in legal literature It is a great merit of The German Law of Contract to have distilled and condensed the relevant rules of German contract law, thereby deciphering it for common law lawyers' eyes Common law lawyers will find all familiar aspects of what they expect from a book dealing with contract law The book even deals with common law institutions unknown to German law A good example is the doctrine of consideration, which has no sibling in German law n49 Like Zweigert and Kotz in their Introduction to Comparative Law, n50 Markesinis and his coauthors discuss this doctrine within their comparative analysis of evidence of the seriousness of the intention to be legally bound n51 And although no institution of German law equals the doctrine of consideration in the slightest way, nonetheless, strict form requirements, which German law prescribes in certain situations (especially for merely promised gifts, for certain one-sided promises, for the sale of land, etc.), fulfil to some extent the same function that the doctrine of consideration serves under common law n52 Namely, these form requirements have the effect that a legal obligation is only established where a party has given a further sign of willingness to be bound, rather than merely demonstrating consent to the other party's obligation n53 Again, the [*573] authors correctly observe that though the general concept and theoretical approach of both German and common law with respect to the binding force of a mere declaration of intention "could not be more different[,] at the level of application the results converge." n54 In addition to culpa in contrahendo and consideration, there are further legal concepts of contract law where German and common law differ rather sharply theoretically, but tend to converge when the practical results are compared n55 One such field is the doctrine of privity of contract n56 Originally the common law was very reluctant, if not hostile, to extend the effects of a contract to third parties who were not direct contracting parties n57 In contrast, the German Civil Code of 1900 had already introduced general provisions for contracts with third-party beneficiaries n58 Moreover, rather early in the last century, the courts developed the instrument of ""contracts with protective effects towards third parties'" (""Vertrage mit Schutzwirkung fur Dritte'") n59 In the leading case, a family member of a lessee suffered damage caused by the negligently defective state of the leased or rented property n60 Again, in order to overcome the already mentioned shortcomings of German tort law, these victims were allowed to rely on the contract - in addition to tort law, which would often not help - and to claim damages in contract; persons close to the contract party were thus brought under the ""protective umbrella'" of this party's contract n61 This doctrine was extended considerably to further situations as Markesinis and his co-authors meticulously show n62 If one asks (as the authors do) why Germany has not yet changed its evidently deficient tort law, but instead has preferred to extend or even overstretch its contract law, n63 the difficult answer is possibly the following First, a reform of German tort law was unsuccessfully attempted several times, but thus far lobby groups, parliamentary hurdles, major differences among legal writers and jurisprudential [*574] doctrines have been insurmountable hindrances n64 Second, and more substantially, if it has to be decided whether tort or contract is the better basis for cases such as the one mentioned, the first question is whether and when (if at all) the third party should be entitled to compensation On this question, the contractual relationship between the creditor and the debtor (lessor/lessee, rentor/rentee) has a certain bearing Whether the creditor has brought third persons onto the contractual scene, and whether the debtor was, or could have been, aware of their presence and interests, necessarily plays a role in determining the debtor's standard of care Even if the debtor's liability would be based on tort, the contractual relationship would and should influence the level of duties towards the third party This party could rely on the contractual standard if that were higher than the general standard of tort law That being so, it might be preferable to allow a claim based immediately on contract Possible exclusion clauses would affect the contract claim only, but generally not a tort claim The tort claim would still be permitted under German law, although with the mentioned limitations Markesinis and his co-authors also indicate that the German solution has some merits n65 Since the United Kingdom has rather recently (1999) passed the Contracts (Rights of Third Parties) Act, which slightly extends the beneficial effects of contracts to third parties, but which by no means abolishes the general privity principle, differences between common law and German law still remain with respect to privity of contract n66 But it can be hoped that Markesinis's remarks on the topic will further undermine the old common law position and pave the way for greater convergence in this field Even for German readers, it would be worthwhile and tempting to discuss almost every topic addressed in The German Law of Contract because the book is not only inspiring for common law lawyers, but for civil law lawyers as well And what is more, in Germany the book could be, and already sometimes is, used by judges and practitioners to find reasonable advice when deciding their cases Moreover, it makes an invaluable contribution to the discussions on the emerging European private law It shows the solutions at which two [*575] influential legal systems, and especially their courts, have arrived in difficult cases It also demonstrates the arguments on which they have relied I am not aware of a German book on English contract law that reaches the same high scientific level as The German Law of Contract and fulfils at the same time all requirements that the needs of practical application request The book must be strongly recommended to everyone interested in, and concerned with, contract law as well as comparative law Legal Topics: For related research and practice materials, see the following legal topics: Contracts LawDebtor & Creditor RelationsEducation LawInstructionGeneral OverviewGovernmentsCourtsCommon Law FOOTNOTES: n1 See Sir Basil Markesinis, Hannes Unberath & Angus Johnston, The German Law of Contract: A Comparative Treatise, at x-xi, xix-xxii (2d ed 2006) n2 See Basil S Markesinis & Hannes Unberath, The German Law of Torts: A Comparative Treatise (4th ed 2002) n3 Markesinis, Unberath & Johnston, supra note 1, at vii, x The first edition of this book was published as B.S Markesinis, W Lorenz & G Dannemann, Markesinis: The German Law of Obligations: The Law of Contracts and Restitution: A Comparative Introduction (1997) n4 See Konrad Zweigert & Hein Kotz, Introduction to Comparative Law 33-47 (Tony Weir trans., Oxford Univ Press, 3d rev ed 1998) (1977) See generally Ernst Rabel, The Conflict of Laws: A Comparative Study (2d ed 1958) n5 See Zweigert & Kotz, supra note 4, at 33-47 n6 See id n7 See id n8 See id n9 See id n10 See id n11 See Markesinis, Unberath & Johnston, supra note 1, at 2-5, 16-19 n12 See id at x n13 See id n14 See id n15 See, e.g., White v Jones, [1995] A.C 207, 236-37, 250, 264 (H.L.) (appeal taken from Eng.); Greatorex v Greatorex, [2000] W.L.R 1970, 1984-86 (Q.B.) n16 See Markesinis, Unberath & Johnston, supra note 1, at xxiii-xxxviii, 96, 98, 204, 212 n17 Id at 15 n18 Id at vii n19 Thomas M.J Mollers, European Directives on Civil Law - Shaping a New German Civil Code, 18 Tul Eur & Civ L.F 1, 19 (2003) (discussing the implementation of the EC Directive on the sale of consumer goods in the Reformed Law of Obligations Act); see Burgerliches Gesetzbuch [BGB] [Civil Code] Jan 1, 2002, Bundesgesetzblatt [BGBl], as amended, §§ 346354 (F.R.G.); Council Directive 1999/44/EC, 1999 O.J (L 171) 12, 12-16 (EU) n20 Ulrich Magnus, The Reform of German Tort Law (In Dret, Working Paper No 127, 2003), available at http://www.indret.com n21 See Markesinis, Unberath & Johnston, supra note 1, passim n22 See, e.g., id at 92-97 (discussing the evolution of culpa in contrahendo in German law) n23 Id at 92-108 n24 Id at 92; see Friedrich Kessler & Edith Fine, Culpa in Contrahendo, Bargaining in Good Faith, and Freedom of Contract: A Comparative Study, 77 Harv L Rev 401, 401-03 (1964) n25 See Markesinis, Unberath & Johnston, supra note 1, at 92-93; Kessler & Fine, supra note 24, at 401-02 n26 See Markesinis, Unberath & Johnston, supra note 1, at 92 n27 Id at 92-93; Kessler & Fine, supra note 24, at 401 n28 See Markesinis, Unberath & Johnston, supra note 1, at 92-93; Kessler & Fine, supra note 24, at 404-05 n29 See BGB, Aug 18, 1896, Reichsgesetzblatt [RGBl]; Markesinis, Unberath & Johnston, supra note 1, at 92; Kessler & Fine, supra note 24, at 403 n30 See Markesinis, Unberath & Johnston, supra note 1, at 92; Kessler & Fine, supra note 24, at 403-04 n31 Markesinis, Unberath & Johnston, supra note 1, at 92-93; see BGB, Jan 1, 2002, BGBl, as amended, § 311, PP 2-3 n32 See Markesinis, Unberath & Johnston, supra note 1, at 93 n33 See id at 95-97 n34 See id at 91-108, 311-14; Markesinis & Unberath, supra note 2, at 560, 704, 790-91 n35 Markesinis, Unberath & Johnston, supra note 1, at 104-08; Markesinis & Unberath, supra note 2, at 704 n36 Markesinis, Unberath & Johnston, supra note 1, at 97-108; Markesinis & Unberath, supra note 2, at 704 n37 See Markesinis, Unberath & Johnston, supra note 1, at 97-99 n38 See id at 15 n39 See id at 1-540 n40 See id at 541-863 n41 See id at 865-956 n42 See BGB, Jan 1, 2002, BGBl, as amended n43 See id §§ 241-432 n44 See id n45 See id n46 See id §§ 1-241 n47 See id n48 Cf Eike Schmidt & Josef Esser, Schuldrecht (7th ed 1993) n49 See Markesinis, Unberath & Johnston, supra note 1, at 87 n50 Zweigert & Kotz, supra note 4, at 390 n51 Markesinis, Unberath & Johnston, supra note 1, at 86-91 n52 See id n53 See id n54 Id at 88 n55 See id at 181-203 n56 See id n57 See id at 182 n58 See BGB, Jan 1, 1900, RGBl, as amended, §§ 328-335 n59 See Markesinis, Unberath & Johnston, supra note 1, at 204 n60 Id at 204-05 (discussing Cavalier v Pope, [1906] A.C 428 (H.L.) (appeal taken from Eng.)) n61 Id at 205 n62 Id at 204-16 n63 See id at 215 n64 See Rebekah Rollo, Products Liability: Why the European Union Doesn't Need the Restatement (Third), 69 Brook L Rev 1073, 1080 n.45 (2004) (noting that despite the broad scope of the Code reforms, "many of the basic Delikt (tort) provisions were left untouched") n65 Id at 215-16 n66 See id at 183; see also Contracts (Rights of Third Parties) Act, 1999, c 31, §§ 1-10 ... deal with the law of obligations treating contract law only as a subspecies of an obligation, while German works concentrating on contract law alone are really rare n48 Legal education also follows... law lawyers' eyes Common law lawyers will find all familiar aspects of what they expect from a book dealing with contract law The book even deals with common law institutions unknown to German law. .. addressed in The German Law of Contract because the book is not only inspiring for common law lawyers, but for civil law lawyers as well And what is more, in Germany the book could be, and already