The Voice of the Community in Private Law Discourse

The Voice of the Communityin Private Law Discourse

Hugh Collins*

Abstract: Formalist private lawyers, with their view of law as an autonomous sphereand their emphasis upon allocative rules, tend to approach the issue of theharmonisation of private law in Europe with the following question: are the substantiverights and remedies of private individual actors sufficiently similar within each of theMember States to allow for the unification of autonomous private legal systems. Herethe issue is essentially one of terminology. While sceptical voices maintain that formalprivate law is also a more complex matter of interrelated procedures and practices,many formalists conclude that whilst the terms of rights and remedies may differslightly throughout Europe, there is sufficient substantive convergence to allow forharmonisation. However, lawyers of a sociological persuasion who see private law asbeing contingent upon society – a process reflexively and recursively facilitatingeconomic activities and responding to social change – consider harmonisation to bedependent upon the harmonisation of market practices themselves. This paper, one ofthe most subtle of sociological contributions, tackles this issue with an innovative eyeto the increasing blurring of the distinction between public and private concerns. Thevoice of Europe is the voice of a political collective and theoretically, under the oncesacrosanct paradigm of the public/private divide, should not be heard within the‘individualistic’ sphere of private law. However, just as national private law judges aregenerally responding to social concerns and are seeking to integrate collective voiceswithin a once ‘atomised’ realm, so too are they taking note of the political voice ofEurope: attempting to respond to the desire for integration and harmonisation withintheir jurisprudence.

I Introduction

The call to harmonise private law in Europe poses many interesting problems.1 Atfirst, it raises the question of whether indeed harmonisation of the legal rules ofcontract, tort, and property law is necessary for the successful completion of a singlemarket free from obstructions to trade and competition.2 Assuming that at least some

European Law Journal, Vol. 3, No. 4, December 1997, pp. 407–421© Blackwell Publishers Ltd. 1997, 108 Cowley Road, Oxford OX4 1JF, UK and 350 Main Street, Malden, MA 02148, USA

* Professor of Law, London School of Economics, particular thanks to Gunther Teubner for many helpfuldiscussions.

1 Resolution of the European Parliament on Action to Bring into Line the Private Law of the MemberStates, OJ EC 1989 C158/400 (26 May 1989); Resolution of the European Parliament on the Harmonis-ation of Certain Sectors of the Private law of the Member States, OJ EC 1994 C205/518 (6 May 1994).

2 Kahn-Freund, ‘Common Law and Civil Law – Imaginary and Real Obstacles to Assimilation,’ in M.Cappelletti (ed), New Perspectives for a Common Law of Europe (European University Institute 1978),137, 141; A.S. Hartkamp et al (eds), Towards a European Civil Code (Ars Aequi Libri 1994); Lando,‘Principles of European Contract Law,’ (1992) 56 RabelsZ 261.

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degree of approximation of legal rules is required, then the next issue becomes whetherthe objective should comprise uniform rules of private law or merely a more sophistic-ated approach to the conflict of laws under which the requirements of marketintegration become the dominant consideration in a substantive approach to choice oflaw rules.3 Then, if we assume further that a measure of uniformity in the rules ofprivate law is required by the single market, the question becomes how uniformity canbe achieved given the diversity and distinctive character of the national private lawsystems. This last question provokes further reflections about the character of privatelaw systems in general, and how to understand the quality of diversity between them.These last issues, though theoretical and abstract, identify, I suggest, the real beef inthe heated discussions taking place about the future of European private law. Theprotagonists employ different understandings of the nature of private law systems,which then provide the starting-points for elaborate arguments for and against thepossibility of harmonisation of private law.

II Rival Conceptions of Private Law

To show how important different understandings of the nature of private law systemsare to the development of this debate, we can commence with a caricature of twoextreme positions. The first might be described as a legal formalist conception ofprivate law, and the latter a sociological interpretation of private law processes. Theseare extreme positions, which perhaps no-one holds in their entirety, so they representparadigms which help us to explore the issues schematically and analytically.

A Legal Formalism

In the first, the legal formalist conception, each national legal system is conceived asan integrated set of principles, concepts, and rules which allocate rights and remediesbetween private individual actors. Private law serves the purpose of vindicating thoserights by providing effective legal remedies. The rights are held by individuals or legalpersons. Legal disputes are concerned with the determination of what rights are heldby the litigants, whether these rights conflict, and if so, how the rights can bereconciled whilst preserving the integrity or coherence of the private law system. Fromthis starting-point, the ambition of harmonising European private law becomes thetask of unifying the substantive rights and remedies of private individual actors. Theachievement of a level playing field requires the flattening of any differences in theallocation of private law rights to European citizens. The same set of events shouldtrigger an identical allocation of private law rights wherever the events take place inEurope. For example, the consumer purchaser of an unsafe product should have anidentical remedy against the manufacturer of the product wherever the product wasmade or the product purchased.

With this starting-point of the legal formalist conception of private law, the debateabout harmonisation of European private law pursues the following agenda. The firstpoint of controversy concerns whether the allocation of rights to individuals differs

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3 Koch, ‘Private International Law: A “Soft” Alternative to the Harmonisation of Private Law?,’ (1995) 3European Review of Private Law 329; Joerges, ‘The europeanisation of private law as a rationalisationprocess and as a contest of legal disciplines – an analysis of the directive on unfair terms in consumercontracts,’ (1995) 3 European Review of Private Law 175.

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much in practice between the different national legal systems. Here the comparativelawyers lock horns over whether there is uniformity in results or significant divergencein practice. Everyone agrees that the differences are not so great as may appear at firstsight, but that does not necessarily mean that the differences are trivial. It may be true,for instance, that where French law discovers fault in the failure to discloseinformation during contractual negotiations, English law may discover a misrepre-sentation by a negligent omission to give a full statement of the facts, but this may notalways be the case, and then the different outcomes may be plausibly described eitheras trivial divergences in borderline instances or sharp contrasts between basic legalprinciples.

The argument then centres on a debate about whether the incontrovertible fact thatthe legal systems express the (more or less similar) rights in different principles andconcepts presents an obstacle to harmonisation. Of course, this difference does presenta hurdle to be overcome, but the craftsmen of projects on a code of European lawbelieve that the terminology overlaps substantially so that it will not be difficult toagree upon a common statement of principles. In opposition to this up-beat view ofthe prospects for uniformity, the sceptics point out that the concepts of each legalsystem interlock with each other and obtain their meaning within their context andjuxtaposition in each national private law system.4 In the law of tort, for instance, eachlegal system may accept a general fault standard of liability, but the meaning of theconcept of fault depends crucially on such matters as the burden of proof, theinferences that may drawn from evidence, and the defences available. It seems to followthat unless a complete package of interrelated concepts and principles are adopted,the uniformity to be achieved by a common agreed statement of the fault principle willonly be superficial and practical divergence will not be averted. In short, private lawsystems are subtle, complex systems, whose precise implications depend upon anintegrated doctrinal system. Without incorporating the details of a system into thegeneral concepts, its real normative force will be omitted. The obstacle which thesceptic observes is that any agreement on general principles will lack the rich textureof existing private law systems, and therefore fail to achieve uniformity in practice.

Finally, the legal formalist debate turns its attention to the European Directiveswhich have so far impinged on private law. These limited interventions, principally inthe field of consumer protection, establish common uniform principles which must beimplemented by national private law systems. Here the legal formalist is particularlyconcerned that the implementation should not create doctrinal incoherence or‘disintegration’ for the national private law system by inserting a new rule expressed inalien concepts without it being integrated into the existing doctrinal fabric.5 Thechallenge may either engender an imaginative reconstruction of legal doctrine or anattempt to tame the new principles by equating them with existing national legaldoctrine. We can detect both these moves, for example, in connection with the ‘goodfaith’ standard in the Directive on Unfair Terms in Consumer Contracts.6 In those

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4 Brander/Ulmer, ‘The Community Directive on Unfair Terms in Consumer Contracts: Some criticalremarks on the proposal Submitted by the EEC Commission,’ (1991) 28 CMLRev. 647; de Moor,‘Common and Civil Law Conceptions of Contract and European Law of Contract: the Case of theDirective on Unfair Terms in Consumer Contracts,’ (1995) 3 European Review of Private Law 257.

5 Wilhelmsson, ‘Legal Integration as Disintegration of National Law,’ in ibidem (ed), Twelve Essays onConsumer Law and Policy (Helsinki UP 1996) 74.

6 Directive 93/15, 5 April 1993, OJ L 95/29, 21 April 1993.

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legal systems such as the common law which lack such a good faith concept, the legalformalist response is either to call for a reconfiguration of contract law doctrinearound the new concept or to insist that the principle can best be understood asreplicating the existing standards of national law such as reasonableness.

B The Sociological Conception of Private Law

Another conception of private law which has a sociological orientation provokes adifferent set of attitudes and debates towards the prospect of harmonisation of privatelaw. This contrasting image of private law commences with the insight that this part ofthe legal system provides a process for the peaceful resolution of disputes betweencitizens engaged in a variety of economic and social actions. The process examines theconflicts of interest between individuals and groups, and then resolves them byattempting to understand the nature of the interests at stake and the consequences ofany particular legal ruling. The legal process is both reflexive and recursive. It isreflexive in the sense that the law seeks to support transactions, associations, and othereconomic activity by understanding the functions and needs of such activities andthen producing regulation which facilitates and channels those activities.7 It isrecursive in that the legal regulation responds to alterations in social practice, andsocial practice in turn responds to developments in legal regulation. Out of this pictureof private law emerges a conception which emphasises process rather than theapplication of entitlements, the dynamic evolution of legal doctrine rather than itsfixity, and its close interaction with social practice rather than its autonomousdoctrinal logic.

Within this sociological paradigm, the debates about the prospects for a uniformEuropean private law have a different focus and dynamic. The most pressing questionis perhaps whether the nature of the legal process represented by private law differsfundamentally between national legal systems. For example, is the process representedby the codified civil law systems radically different from the process represented by thejudge-made common law?8 If such a radical difference exists, then uniformity willrequire the abandonment of all but one type of process.

Of almost equal concern, however, is the threat posed by uniformity to the reflexiveand recursive quality of private law systems. Each of these systems has evolved withinits particular regional context, observing market and social practices, understandingthem, and regulating them. The legal rules and the operation of the market become soclosely entwined during this evolutionary process that we cannot alter the legalregulation for the sake of harmonisation without threatening the operations of themarket itself. Unless market practices all converge, then harmonisation appears to be amistaken ambition, for it threatens the very prosperity which it seeks to enhance.Similarly, with regard to social practices and associations, their cultural specificity isreflected in distinctive private law regimes, so that harmonisation of law presents thedanger of damaging local culture and tradition.9 The threat to the reflexive quality ofprivate law posed by harmonisation eventually will weaken the private law system



7 Teubner, ‘Substantive and Reflexive Elements in Modern law,’ (1983) 17 Law and Society Review 239.8 Legrand, ‘Against a European Civil Code,’ (1997) 60 MLR 44.9 Collins, ‘European Private law and the Cultural Identity of States,’ (1995) 3 European Review of Private

Law 353.

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itself, for as a result of this ‘rationalisation process’10 private law will be precludedfrom engaging in a sensitive understanding of the meaning and purpose of the socialactivities which it seeks to regulate.

C The Problems of Harmonisation

By describing these different approaches to the issue of harmonisation of Europeanprivate law, I hope that I have shown that both perspectives generate importantinsights into the problems which need to be addressed. The divergent starting-pointsbased on different conceptions of private law create separate pathways for the debatesand perhaps provoke some misunderstanding of the arguments. The pathways are notentirely distinct in practice, of course, because many authors acknowledge the strengthof both conceptions of private law.

These preliminary remarks serve the purpose, however, of setting the scene for thecontribution of this paper to these debates. I will focus more on the sociologicalconception of private law, for I am interested in examining the question of thepotential openness of the process of private law adjudication to the objective ofharmonisation of European private law. The nature of this question can be explainedby an analogy with private international law.

In private international law, a court is confronted with a choice of law issue. It hasto determine which private law system should govern a particular aspect of a dispute.The problem confronting private international law as a potential instrument for theharmonisation of private law is that the traditional process has been one gearedtowards making selections between national substantive law systems. The process hasnot hitherto permitted the introduction of considerations of market integration andharmonisation of laws. As Joerges has observed,

‘The dilemma of private international law continues to be its helplessness when applied to therelationship between European and national substantive law. The identification of minimumstandards that would promote integration policy, the consideration of European concepts inthe application of national law, the consideration of integration policy concerns in domestic lawand its coordination with supranational regulatory claims, are all matters that cannot be dealtwith by choice-of-law rules, given that they remain committed to the traditional ideal ofharmony among decisions.’

In short, the requirements of harmonisation have not been awarded a place in theprocess of private international law adjudication.

Can the same observation be made about the process of private law adjudication?Do considerations of harmonisation play any role in this process? Does the EuropeanCommunity have a voice in this process, or is the process confined to a considerationof the national private law system and an understanding of the local market practicesand private associations? These questions perhaps make little sense within theintellectual framework of the legal formalist paradigm of private law. To explain theirmeaning and to develop some tentative conclusions, the argument proceeds in twosteps. The next section expands upon the sociological idea of the process of private lawadjudication with special attention to the idea of different groups having a voice in theprocess. The concluding section then considers evidence to support the hypothesis thatthe European Community is developing a voice in private law adjudication.



10 Joerges, ‘The Europeanisation of Private Law as Rationalisation Process and as a Contest of LegalDisciplines – An Analysis of the Directive on Unfair terms in Consumer Contracts,’ loc cit n 3.

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III Voice in Private Law Discourse

A Traditional Absences from Private Law Discourse

In the legal formalist conception of private law, the rules of contract, tort, andproperty govern the relations between holders of rights. These rights protect theinterests of individuals or legal persons invested with juridical personality. Theseprotected interests comprise personal integrity and material economic interests.The legal rights granted to protect these interests are rarely absolute, for rights canconflict, so the legal doctrines of private law forge a reconciliation or comprise ofrights. Once this compromise has been drawn, then private law protects the superiorright by requiring compensation from anyone who damages the interest it represents.The measure of the compensation is defined as the defendant’s loss, which isthe value placed on the diminution of the value of the interest by the breach of theright.

This system of private law rests upon a particular understanding of thecomposition of modern social systems. It is atomistic or individualistic. The analysiscommences with the unit of the individual and the interests of that individual whichdeserve protection. Collectivities are absent from the private law analysis except inso far as groups have formed themselves into a legal person which can then possessan interests requiring protection. For example, categories such as ‘the localcommunity’ or ‘consumers’ are not just a third parties that lack a legal interestwhich can be protected, but they cannot comprise a juridical person at all.This denial of presence to collectivities excludes them from the legal discourse ofprivate law. They are non-existent entities, so there can be no question of weighingup their interests in the doctrinal determination of which rights or interests shouldprevail.

As well as being atomistic, the private law discourse recognises only certain types ofinterests as the foundation for legal rights. It recognises a wide range of materialinterests ranging from the protection of property rights to the protection ofexpectations in the fulfilment of contractual agreements. It also has an expansive viewof the interests in personal integrity which extend personal injury to the protection ofreputation and privacy. But there are limits to these recognised interests. They do notinclude, for instance, the protection of an interest in being able to participate indecisions of others which may have adverse effects. Nor do these interests include theright to be informed about the truth of another’s intentions or business position. Nordo these interests include the right that another’s decisions about how to dispose oftheir property should be reached after a fair procedure which considers all theinterests at stake. Such interests in the procedures by which decisions are made may beprotected in public law, where the operations of government come under inspection,but private law excludes such interests from its analysis. This exclusion of proceduralinterests goes to the heart of the conceptualisation of private law, for it is defined asthe rules governing private interests, which by implication are not to be subject toinspection and challenge unless in their exercise they violate the private interests ofanother.

This description of private law discourse perhaps omits one significant qualific-ation. In weighing conflicts between rights the courts do make appeals to onedescription of a collective interest, which may be described as ‘the public interest’,‘public policy’, or moral principles. In German and Italian private law these appealscan also rest upon fundamental constitutional rights which are used to shape private



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law doctrines.11 These references to the public interest or civil rights function to lendsupport to one claim of private right over another. But they do hint that the privatelaw process is more open to the interests of groups or collectivities than might appearat first sight. Nevertheless, it remains true that in the discourses of private law theprocess is generally marked by two absences. The first is the absence of the attributionof rights to groups or collectivities which themselves lack a legal personality. Thesecond is the absence of a right to participate in the decisions of others which do notinvolve interference with one’s own property rights.

B The Public/Private Distinction

These two absences from private law go to the heart of the liberal separation of stateand civil society. They are what makes private law private. The genius of the liberalscheme was to devolve decisions about how markets operated to citizens without stateinterference. Citizens could make their decisions on the basis of their propertyentitlements, which the law would protect. Their decision to use, consume, or alienatetheir property rights was a private matter unless it involved the infringement of theproperty rights belonging to others. This scheme of devolved decision-making thenunleashed the acquisitive energies of private citizens to maximise their own andsociety’s wealth.

The insertion into this scheme of rights granting collectivities the right toparticipate in the decision-making process would have shattered the public/privatedistinction. The right to conduct your business as you choose would have beeneliminated and replaced with a duty to consult all affected parties before makingbusiness decisions. The property rights would have been disaggregated, separatingincome from use, so that their use would have become a collective right determined byparticipation in the decisions, whilst the income derived from ownership would havebelonged to the individual property holder. Instead of a liberal society, we would havehad a communitarian society.

At times, of course, the liberal state deviated from this straight path. As well as theappeals to the public interest which we have already noted, the beast known asregulation sometimes stepped in to control private decisions for the sake of publicgoods. The beast prevented the centrifugal forces of market competition fromundermining the endeavours of the state to ensure the delivery of public goods such aswater, power, transport, and communications. But the beast was always confined, notpermitted to rampage all over the beauty of private devolved markets. It was alwaysexceptional, excluded from the reasoning of private law. It was public law, framed interms of criminal sanctions and implemented by administrative agencies. It made noformal alteration to the nature, content, or distribution of private law rights.

C The Broadening Discourse of Private Law

Others have commented on the collapse of the public/private distinction in con-temporary society. Reports of its demise seem to me exaggerated. Its rhetoric



11 For example (Germany) BGHZ desb Bundesgerichtshofs in Zivilsachen, Bd 59 S 30 (interference to thebusiness of delivery of newspapers by demonstrators not protected by the rights of assembly and freedomof expression under the Basic Law; (Italy) Corte di Appello di Roma of 16 October 1989, Il diritto diautore, 1990, 98–107 (Germi’s “Serafino”) (a breach of human rights to show artistic films on televisionwith commercial breaks); this general theme is discussed in Graber/Teubner, ‘Art and Money:Constitutional Rights in the Private Sphere?,’ (1998) 18 Oxford J. of Legal Studies (forthcoming).

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continues to shape our perception of issues. The principle is that ‘the polluter pays’,not that the community must decide what level of pollution it can tolerate.Nevertheless, a shift in the discourses of private law can be discovered in its interstices.I shall consider three case studies drawn from the common law which illustrate thecharacter of this shift in the private law process.

In these case studies, the externality, those without private law rights, once excludedfrom legal reasoning, make their presence felt by influencing the exercise of thediscretionary powers of the courts. The collectivity does not acquire private law rights,for it still lacks the legal personality necessary for the attribution of rights. Nor can thediscourse acknowledge the right of the collectivity to participate in the businessdecision. Instead, these non-persons and non-rights become a vital force in influencingthe discretion which the courts possess in giving effect to the private rights of genuinelegal persons.

1 The Shopping MallA supermarket chain leased substantial premises in a shopping centre for 35 years.The lease contained a covenant to keep their supermarket open during the usual hoursof business. Other smaller businesses then took leases of other premises in theshopping centre. After 16 years, the supermarket closed because it was making asubstantial loss. The landlords commenced proceedings for a court order (injunctionor specific performance) to keep the premises open as a business until an alternativesupermarket tenant could be found. There was no doubt that the landlords wereentitled to damages for breach of contract in the form of a requirement to pay rentuntil alternative tenants could be found. In those circumstances, the settled practice ofthe courts had been to refuse to grant an order to keep the business open, but to awardcompensatory damages to the landlord instead. The normal reasons given for refusalof the order of specific performance were that the requirement to keep the businessrunning was too vague for the court to police satisfactorily, and that in any case thelandlord would be fully compensated by an award of damages representing theexpected rental income. In this case, however, the order of specific performance wasgranted by the English Court of Appeal. One reason given by the court was:

‘[M]ore importantly, those involved in the other businesses, who assumed obligations undertheir leases in reliance on there being a supermarket in the shopping centre and who will beadversely affected, have no remedy against the defendants.’12

The landlords therefore obtained the remedy of an order to keep the supermarketopen for the reason that this order protected the interests of a group of businesses wholacked any private law rights to intervene. The owners of the supermarket appealedsuccessfully against this decision.13 The traditional reasons for refusing the order werecited as important, but in addition the House of Lords emphasised both that it couldnot be in the public interest to force a business to stay open whilst running at a loss,and that to alter the settled practice of the courts would disrupt the expectations ofbusinesses which had entered into similar transactions on the basis of the establishedlegal regulation. Interestingly, at the outset of its decision, the House of Lords noted



12 Roch LJ, Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1996] 3 All ER 934, 941.13 Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd (1997) (HL), as reported in New Law

Journal 845.

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that in Civil Law systems of private law the rough equivalent of specific performanceof business contracts was regarded as the primary remedy, but the court suggested(without on this occasion investigating the matter) that in practice similar pragmaticconsiderations regarding the problem of supervision of performance would restrictsuch orders in Civil Law countries.

In the story of the shopping mall, the private law process focuses on the discretionwhich lies with the court over the remedy to be awarded. The claim is brought by thelandlord, who enjoys a normal private law right under a contract. The otherbusinesses in the mall have no formal part in the litigation. They are external partiesand as a group lack any legal identity to which legal rights might be attributed. Butthey are not silenced. In the Court of Appeal their voice plays a crucial role in thedetermination of how the supermarket may choose to run its business. On its own, thelandlord is unlikely to obtain any remedy other than damages, for the landlord’s lossescan be calculated in monetary terms representing any loss of rental income. Even thepotential loss arising from other tenants defaulting on their rental payments might berecoverable in an action for damages for breach of contract as a form of consequentialloss (though the issue of causation might prove an obstacle). The court awards aninjunction against the breach of contract, however, and gives as its reason theprotection of the interests of the other tenants. The court gives these tenants a voiceeven though they have no enforceable legal right to prevent the supermarket fromclosing. In the light of what they have to say, speaking through the mouthpiece of thelandlord, the court exercises its discretion to forbid the supermarket from closing untilanother suitable tenant has been found. The court compels the supermarket to followa procedure in deciding how its property right is to be exercised, which does notpermit the supermarket to act solely in its own best financial interests, but to considerthe interests of the collective group of other tenants. It is a procedural right granted toa collectivity. In the House of Lords, however, this procedural right is expanded toinclude the whole class of business tenants who have agreed to a contractual termrequiring them to keep the business open. When their claims are considered, the courtargues that for the sake of regulatory stability and its recursive consequences thesettled practice of refusing specific relief should be preserved.

2 The Plant ClosureA giant steel works in Youngstown, Ohio, was closed in 1982 after 80 years. It causedthe loss of jobs for 3,500 employees, and perhaps another 10,000 workers in otherlocal businesses were adversely affected, which amounted to a major economiccatastrophe for the town and the local area. The management had decided not tomodernise the plants, but to continue the business elsewhere. The management alsorefused to sell the plant to the union, because a sale would then create competition forthe employer’s other plants. The union brought a suit claiming the right to be able topurchase the plant for a fair market price and to prevent the employer from destroyingthe plant. Initially the trial judge expressed sympathy for this claim.

‘Everything that has happened in the Mahoning Valley has been happening for many yearsbecause of steel. Schools have been built, roads have been built. Expansion that has taken placeis because of steel. And to accommodate that industry, the lives and destinies of the inhabitantsof that community were based and planned on the basis of that institution: Steel.

. . . it seems to me that a property right has arisen from this lengthy, long-establishedrelationship between the United States Steel, the steel industry as an institution, the communityin Youngstown, the people in Mahoning County and the Mahoning Valley in having given and



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devoted their lives to this industry. Perhaps not a property right to the extent that can beremedied by compelling US Steel to remain in Youngstown. But I think the law can recognisethe property right to the extent that US Steel cannot leave that Mahoning Valley and theYoungstown area in a state of waste, that it cannot completely abandon its obligation to thatcommunity, because certain vested rights have arisen out of this long relationship andinstitution.’14

But eventually the trial court and the Court of Appeals decided that no suchproperty right existed, and that the court lacked the authority to create it. Thedifficulty confronting the union was to establish a property right which conflicted withthe ownership right of United States Steel. The union did not own part of thecompany or the land on which it was situated. Nor was the company breaking anycontractual right of the union, or committing a tort (delict) against the union, sincethere was no property damage but merely pure economic loss. Private law couldestablish no suitable right to balance against the company’s right to close the plantdown. It could not discover in the relationship of economic reliance and dependencebetween the town and the plant the basis for any private law rights at all.15

In the story of the plant closing, the union’s claim brought on behalf of workers andthe local community is that it should be able to participate in the decision aboutwhether or not the plant should be closed. For the sake of bringing the claim into theconfines of private law rights, however, the union claims breach of contract or aneasement. But the court is surely correct in concluding that on the facts no contracthas been agreed, and that no easement of the kind contended by the union has everbeen acknowledged in private law. What is missing in this case compared to theshopping mall is the location of an openness in the process leading to theinterpretation of rights or remedies into which the court might insert a concern for theinterests of the collectivity. The court runs up hard against the strict aggregatedproperty right of the owners of the means of production. The court is initiallyattracted to the idea of ‘stakeholders’, that is the development of an informal propertyright for employees and the local community based upon a lengthy period of economicreliance. Yet the court withdraws its support for this idea in the final determination,for it realises that a recognition of the claims of stakeholders conflicts too deeply withthe right of businesses to make their own decisions with regard to the use of capital.The right which the union sought was not a mere qualification on the owner’s powerof disposal of capital in order to respect the property rights of another, as the languageof protection of reliance and easements suggested. The right which they sought wasthe right to participate in the determination of how the owner’s power should beexercised. The union wanted to subject this private right to public scrutiny, to render ita collective decision.

3 The House PurchaseA person intending to purchase a house approached a building society (a type of co-operative bank) for a loan. The building society charged the purchaser a fee for asurvey and valuation, which was carried out by a surveyor on the building society’sinstructions. The report was then considered both by the building society and the



14 Lambros J., quoted in United States Steelworkers v United States Steel Corp, 631 F. 2d 1264, at 1279–80(6th Cir. 1980).

15 For a critique, cf, Singer, ‘The Reliance Interest in Property,’ (1988) 40 Stanford Law Review 611.

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purchaser. The survey was performed negligently, so that major structural defects weremissed. After acquiring the house, the purchaser discovered the defects and thenclaimed compensation against the surveyor. This claim encountered two obstacles. Inthe first place, the surveyor had not performed the service under contract with thepurchaser, so there was no direct contractual claim. The purchaser had to rely upon aclaim in tort (delict) for pure economic loss (the diminution of the value of the house)on the basis that the surveyor owed the purchaser a duty of care since he ought to haverealised that the purchaser would rely upon the accuracy of his report. The secondobstacle was that the surveyor had inserted in the contract with the building society adisclaimer of responsibility against liability for negligence in the performance of thesurvey. This disclaimer would defeat the claim unless it could be held to be unfair andunreasonable contrary to the Unfair Contract Terms Act 1977. The court decided thatthe degree of reliance on the report, which was foreseeable and for a specific purposeknown to the surveyor, sufficed to establish liability in tort for negligent misstatementcausing pure economic loss. The disclaimer of liability was then held to be unfair andunreasonable, and therefore invalid, in the light of a number of considerations, ofwhich two should be mentioned here.

‘In the present case it is urged on behalf of the surveyor that it would have been easy for thepurchaser to have obtained his own report on the condition of the house, to which thepurchaser relies that he would then be required to pay twice for the same advice and that peoplebuying at the bottom end of the market, many of whom will be young first-time buyers, arelikely to be under considerable financial pressure without the money to go paying twice for thesame service…

What are the practical consequences of the decision on the question of reasonableness? Thismust involve the sums of money potentially at stake and the ability of the parties to bear theloss involved, which, in its turn, raises the question of insurance. There was once a time when itwas considered improper even to mention the possible existence of insurance cover in a lawsuit.But those days are long past. Everyone knows that all prudent, professional men carryinsurance, and the availability and cost of insurance must be a relevant factor when consideringwhich of two parties should be required to bear the risk of loss…The result of denying asurveyor, in the circumstances of this case, the right to exclude liability will result in distributingthe risk of his negligence among all house purchasers through an increase in his fees to coverinsurance, rather than allowing the whole of the risk to fall on the one unfortunatepurchaser.’16

An interesting feature of this decision is that the fairness and reasonableness of theexclusion clause was determined not by reference to the dealing between the buildingsociety and the surveyor, two businesses which might be expected to be able to lookafter their own interests. The crucial factor for the court is rather the interests of allfirst-time purchasers of houses, who are not party to these survey contracts, but whonevertheless depend upon their proper performance to protect their investment in ahome. These people are regarded as poor, lacking in experience, and taking asubstantial financial risk. The court regulates this market by imposing a compulsoryterm on surveyors to accept liability for negligence which harms this group ofinvestors. It alters the decision of surveyors and banks on the allocation of risks byinsisting that the interests of purchasers of homes should be considered and permittedto defeat the agreed allocation of risk. These purchasers, it is argued, would prefer topay a little more for a single competent guaranteed survey than to be forced topurchase their own survey.



16 Lord Griffith, Smith v Eric S. Bush [1990] 1 AC 831, [1989] 2 All ER 514 (HL).

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Here the interests of first-time buyers find a space for their articulation both in theestablishment of the plaintiff ’s right in tort (delict) and in the interpretation of thegeneral clause that the disclaimer in the contract should be fair and reasonable.Although first-time buyers as a collectivity are not present in court, theirrepresentative, the plaintiff, succeeds in persuading the court to analyse the issues incollective terms. The justification for permitting a cause of action against the surveyorfor pure economic loss caused by the negligent survey and the justification for holdingthe disclaimer to be unfair and unreasonable relies almost exclusively on aconsideration of the interests of the group of first-time purchasers. It is they who areinexperienced and short of cash as a group, and the precise situation of the plaintiffdoes not matter at all. The group is an externality in the contracts between banks andsurveyors, but the court brings the group into the heart of it discussion of the issues byinsisting that the banks and surveyors place the interests of the group ahead of theirown. The court achieves through private law what would normally be characterised aspublic regulation: it imposes a compulsory term in all survey contracts for first-timebuyers (and perhaps a broader category of home purchasers) which comprises anacceptance of liability for negligence in the valuation of homes. This result, argues thecourt, is the conclusion which would have been reached by the parties, that issurveyors and first-time purchasers, if they had entered into a collective agreement, forit is the most efficient way in which to reduce the costs of accidents. But even it is notthe most efficient way, and that direct contracts with surveyors would be more efficientas the minority of the court believed, it was appropriate to prevent disclaimers in thiscontext of these first-time buyers who lack bargaining power and who are short ofcash, for this is the result which they seek.

D Voice in Private Law Discourse

The three stories differ in context and legal technique. In their doctrinal categoriesthey fall into contract, property, and tort respectively. The private law process also hasa different focus in each example: the exercise of discretion in granting remedy forbreach of contract, the initial allocation of property rights, and the interpretation of ageneral statutory clause controlling the use of defences to claims in tort. To my mind,however, a common thread binds them together. A collectivity that has no formal legalpersonality in private law is given a place in the process governing the exercise ofprivate law rights. The collective voice is inserted into the discourse regarding theformulation of rights and remedies without either attributing rights to the collectivityor by granting formal legal rights which conflict with those traditionallyacknowledged by private law to protect material interests. In short, what werepreviously described as absences from private law have re-entered by the back door.The process of private law adjudication is expanded to include the voice of groupshitherto excluded.

These examples illustrate my broader contention that the private law process hasmuch looser criteria of relevance than might be believed from the insights of the legalformalist tradition. In approaching the task of dealing reflexively and recursively withdisputes arising from market practices and social associations, the process of legalreasoning tries to remain open to claims of interest from groups which lack establishedprivate rights in contention before the court.

The courts grant the collectivity a voice in the procedure leading to the determin-ation of the dispute. To be sure, there is a degree of ventriloquism involved. The



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collectivity is not present, but finds a spokesman in one of the litigants. But the courtcreates a space for counting the speech of the collectivity, not by granting it a rivalright which must be weighed, but rather by insisting that the private rights should beexercised in the light of that speech. This is more of a procedural entitlement than asubstantive one. Yet there is no entitlement recognised at all. It is merely that the courtregards it as appropriate to consider the voice of the external group when reaching itsconclusion about the exercise of the private rights.

The source of this proceduralism in private law may mirror the experience of publiclaw. The courts recognise increasingly the possibility of indeterminate and unforesee-able ramifications from their decisions about private rights. Without expanding theboundaries of the discourse of private law, they cannot reach decisions which takeaccount of these possible ramifications. Yet the courts do not wish to expand thecontent of private law rights in order to increase the participants in litigation to theextent of cancelling or undermining private market rights altogether. So the expansionof the discourse occurs not by the granting of substantive or procedural rights (as hasoccurred in public law), but more subtly by introducing these considerations, thesevoices, into the discussion of how discretion should be exercised. I do not wish toquibble with those who may insist that these are still rights, provided that we perceivethat these are rights both without remedies and without legal persons to hold them.

In a private law context, the expansion of the discourse will be directed particularlyto the incorporation of considerations regarding productive arrangements. The rightsof private law provide the enabling conditions for the establishment of productiverelations through factories, shops, professional services, and so forth. These samerights also entitle the participants to terminate productive relations, including thosewith whom they have no direct private law relations, such as between the differenttenants of the shopping mall, the franchisees of the business format franchise, theshopkeepers who sell goods to the workers at the mill. By opening the discourses ofprivate law to the voice of the collectivity, the ramifications for productive relationscan then enter into the exercise of the discretion of the courts in controlling at themargins the exercise of private law rights. Private law is required to test its propositionsagainst the participative voice of the productive system of the economy in order toachieve its reflexive and recursive ambitions.

IV The Voice of Harmonisation

If we analyse private law systems as a process of understanding and regulating socialactivities in this way, then we become aware of how the process becomes openindirectly to considerations of interest which range far more widely than the particularmaterial interests of the litigants before the court. In this final section, I want toconsider whether the value of harmonisation of European private law is also finding aniche in this discourse. Of course, the courts must consider the importance ofharmonisation when interpreting European treaties and legislation, and nationallegislation derived from Community law. The courts understand that a uniforminterpretation for European law is desirable and recognise the authority of theEuropean Court of Justice as the highest court for settling such issues. When explicitinstruments of European legislation are not involved, however, so that the issue beforethe court turns solely on national private law, the question is whether the interest inharmonisation, the voice of the European Community, forms part of the process forresolving the dispute.



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The evidence from English law is that the interest in harmonisation is beginning toenjoy a significant voice in the private law process. The principal way in which thisoccurs is that the highest appeal courts begin to engage in comparative lawinvestigations with a view to discovering a solution which not only fits into a coherentnational law system but also accords with the solutions and doctrines developed inother European jurisdictions. This investigation extends the comparative perspectivebeyond those countries which share similar doctrinal traditions to that of England,such as Australia, Canada, and the United States of America. It becomes important inthe interests of harmonisation to compare the reasoning and results of other Europeanstates such as Germany and France. The introduction of such foreign materialsrepresents a significant change in judicial practice, or at least, it revives a practicewhich had long since been abandoned.

We glimpsed a brief example of this extension of the private law process inconnection with the shopping mall case. The House of Lords commenced its decisionwith a comparison between the English rules regarding specific performance and thedoctrines and practices of Civil law systems. On this occasion, the examination wasfairly brief, though nevertheless significant. The court felt under an obligation toexplain that the result which it was proposing to reach under English law was similarto that applied in Civil law systems, despite the superficial divergence of legal doctrinesregarding remedies for breach of contract.

In several other instances, however, the legal doctrines of Civil Law systems havebeen subjected to detailed scrutiny. For example, in White v Jones,17 a leading decisionconcerning the claim of an intended beneficiary under a Will against an allegedlynegligent solicitor for failure to draw up the Will before the testator’s death, LordGoff, giving the leading majority judgment in the House of Lords, not only consideredEnglish legal doctrine and the doctrine of other common law countries, but alsocompared French, Dutch, and at considerable length German law on the issue. Thepoint of this exercise was both to demonstrate the convergence of the legal systemstowards a similar result, and to consider the possibility that some of the doctrinalconcepts drawn from German law (viz Vertrag mit Schutzwirkung fur Dritte, andDrittschadensliquidation) might prove of assistance in providing a coherentconceptual explanation within English law. These references to comparative lawperspectives seem to occur only in the highest appeal courts when the English nationalprivate law doctrine appears unclear or confused.

Occasionally the voice of the Community may be more directly heard, when theEuropean Court of Justice has endorsed a principle which has application in a privatelaw context. Just as the concept of ‘proportionality’ in administrative decisionsapproved by the ECJ is increasingly influential in English public law, so too wediscover equivalent doctrines in private law. One notable example has been thedevelopment of a defence to a claim to recover overpaid statutory charges. UnderEnglish law, it was uncertain whether a person who had paid charges to the statewhich were not in fact due could be prevented from recovering the sum of money in anaction for restitution on the ground that the charges had been passed on to the payor’scustomers. (Under the common law, of course, without the jurisdictional dividebetween public and private law, the private law of unjust enrichment applies to stateagencies as well as private individuals). The ECJ had expressed an opinion on the



17 [1995] 2 AC 207, [1995] 2 All ER 691 (HL).

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point in several cases.18 The court had acknowledged that such a defence might beavailable. This opinion was then influential in the development of the same passing ondefence to some restitutionary claims for money against public authorities in theleading English decisions commencing with Woolwich Building Society v IRC (No2).19

These examples of the influence of comparative law and European law on thedevelopment of English private law symbolise a fundamental reorientation towardsthe evolutionary process of private law. The process has become open to the influenceof Civil law and European law doctrines to an extent which would have beenunthinkable a decade ago. This development is only explicable by reference to a newforce in the process: the recognition of the importance of harmonisation of private law,or the voice of the European Community.



18 Amministrazione delle Finanze dello Stato v San Giorgio Case 199/82 [1983] ECR 3595 (ECJ); Les Fils deJules Bianco SA v Directeur General des Douanes et des Droits Indirects Case 331/85 [1988] ECR 1099(ECJ); EC Commission v Italy Case 104/86 [1988] ECR 1799 ECJ).

19 [1993] AC 170, at 177, [1992] 3 All ER 737, at 764 (Lord Goff) (HL); Law Commission, Restitution:mistakes of law and ultra vires public authority receipts and payments, Report No 227 (London 1994); forthe limited application of this defence, see: Kleinwort Benson Ltd v Birmingham City Council [1996] 4 AllER 733, at 740 (Evans LJ) (CA).

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Documents

The Voice of the Community in Private Law Discourse