Contract Law: A Comparative Analysis

Introduction

Contract law differs significantly across legal traditions. The most fundamental divergence concerns the requirements for a binding promise: common law systems require consideration, civil law systems use cause (causa) or have dispensed with it, and mixed systems combine elements of both. These differences reflect deeper variations in the conception of contractual obligation, the role of consent, and the balance between freedom of contract and substantive justice. Despite these doctrinal differences, commercial contract practice has achieved significant convergence through international instruments and model laws.

Formation: Consideration

Under English and American common law, a promise is binding only if supported by consideration — something of value given in exchange for the promise. Consideration may be a benefit to the promisor or a detriment to the promisee. It must be sufficient but need not be adequate: courts do not generally inquire into the fairness of the exchange. The classic definition is from Currie v. Misa (1875): “A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other.”

The doctrine excludes gift promises and modifications without fresh consideration. Promissory estoppel provides a limited exception, allowing enforcement of promises without consideration where the promisee has reasonably relied to their detriment. Under the Restatement (Second) of Contracts § 90, a promise is binding if the promisor should reasonably expect to induce action or forbearance and injustice can be avoided only by enforcement. The doctrine of consideration has been criticized for lack of commercial logic and has been abolished in some common law jurisdictions (Australia has retained it; the UK has limited its scope).

Formation: Causa

Civil law systems historically required cause (causa in Roman law, cause in French law, causa in Italian and Spanish law). Cause is the reason or purpose of the obligation — the objective legal function of the contract, distinct from the parties’ subjective motives. Under the French Civil Code (pre-2016 reform), an obligation without cause or with a false or illicit cause was void. The cause requirement served to distinguish enforceable contracts from gifts and to prevent enforcement of illegal or immoral agreements.

The reform of French contract law (Ordonnance 2016) eliminated cause as a distinct requirement, emphasizing instead consent, capacity, and lawful content. French law now focuses on the contract’s content rather than its cause: a contract is void if its content is illicit or contrary to public policy. German law never adopted cause as a general requirement for contracts; instead, the Abstraktionsprinzip (principle of abstraction) separates the obligatory contract (promise, Verpflichtungsgeschäft) from the real contract (transfer, Verfügungsgeschäft), allowing each to be independently valid or void. The UNIDROIT Principles of International Commercial Contracts and the Draft Common Frame of Reference have abandoned causation requirements, converging toward consent-based models where the test is simply the parties’ agreement to create binding legal relations.

Offer and Acceptance

Contract formation through offer and acceptance is universal, but specific rules vary significantly. Civil law systems generally provide that an offer is revocable unless it specifies a time limit or the offeree reasonably relies on it. German law treats an offer as binding (binding offer principle) unless the offeror excludes revocability. Common law treats offers as freely revocable until acceptance unless supported by an option (consideration). This difference has practical significance in commercial negotiations.

Civil law systems accept silence as acceptance in certain circumstances, particularly where the parties have an ongoing commercial relationship or where the offeree benefits from the offered performance. German § 362 HGB provides that silence after receipt of a commercial letter of confirmation constitutes acceptance. Common law generally does not treat silence as acceptance. The mailbox rule (acceptance effective on dispatch) in common law contrasts with the receipt rule (acceptance effective on receipt) in most civil law systems, creating potential conflicts in cross-border transactions.

Good Faith and Fair Dealing

Good faith (bona fides) plays fundamentally different roles. Civil law systems impose a general duty of good faith in contract negotiation, formation, performance, and enforcement. German law requires Treu und Glauben (good faith and fair dealing) under § 242 BGB, a master principle that informs interpretation, supplements contractual obligations, and may override express terms in exceptional circumstances. French law requires bonne foi under Article 1104 Code Civil (since 2016 reform), imposing a duty of good faith in performance that cannot be excluded by contract.

Common law traditionally resisted a general duty of good faith, though it has been recognized in specific categories (insurance contracts, employment, franchise relationships). The United States has adopted a more expansive approach under UCC § 1-304: “Every contract or duty within the Uniform Commercial Code imposes an obligation of good faith in its performance and enforcement.” The Restatement (Second) of Contracts § 205 similarly imposes a general duty. English law has resisted a general principle, maintaining piecemeal solutions through specific doctrines — misrepresentation, duress, undue influence, and implied terms.

Remedies for Breach

Common law emphasizes damages as the primary remedy, aiming to place the innocent party in the position they would have occupied had the contract been performed (expectation damages). The measure is the difference between the promised performance and the actual performance, not the amount invested. Specific performance is exceptional, available only when damages are inadequate — for example, where the subject matter is unique (land, rare goods). The equitable nature of specific performance means it is always discretionary and subject to defenses such as hardship, lack of mutuality, and unclean hands.

Civil law systems treat specific performance as the primary remedy: the creditor may demand actual performance, with damages as a substitute when performance is impossible or disproportionate. The German BGB § 241 establishes a right to performance; French law similarly prioritizes exécution forcée. This difference reflects the civil law’s emphasis on the binding force of the promise (pacta sunt servanda) and the common law’s historical preference for monetary relief. In practice, however, civil law creditors often prefer damages because specific performance litigation is costly and time-consuming, narrowing the gap between the systems.

Harmonization

International instruments have driven significant convergence. The UN Convention on Contracts for the International Sale of Goods (CISG, 1980) governs international sales contracts, superseding domestic rules for transactions between parties in contracting states. The CISG adopts civil law characteristics (no consideration requirement, good faith as interpretive principle) while incorporating common law flexibility. It has been ratified by over 90 countries, including all major trading nations except the UK.

The UNIDROIT Principles of International Commercial Contracts (2016) provide model rules that synthesize civil and common law approaches, designed for use in international arbitration and as a reference for legislative reform. The Principles adopt a consent-based approach to formation, impose a general duty of good faith, recognize hardship as a basis for modifying or terminating contracts, and prioritize specific performance while granting courts discretion to refuse it where unreasonable. The European Draft Common Frame of Reference (DCFR, 2009) similarly synthesizes European contract law traditions. These instruments demonstrate that despite deep doctrinal differences, practical convergence on commercial contract law is achievable.