Unlike many other areas of law, contract law is not standardised within the European Union and the European Economic Area. This means that each member state has its own legal regulations, which cover, but are not limited to, the following topics:

  • How is a contract concluded? Are there any formal requirements?

  • What is the minimum content of a specific contract?

  • What happens if one of the contracting parties is unable to fulfil the contract?

One of the most important questions in contract law concerns the applicable law. The European Union has issued the Rome I Regulation on this matter, which applies in all member states of the European Union/European Economic Area. In principle, contracting parties can choose for themselves which law applies to their contract. If the parties have not made a choice, the type of contract determines the rules in the European Union/European Economic Area. 

Info: Although there is no standardised contract law within the European Union and the European Economic Area, there are standardised regulations around consumer protection. When entrepreneurs—such as self-employed artists—conclude contracts with consumers, certain mandatory protection rules apply in favour of consumers (e.g. if consumers within the EU or the EEA buy an item on the internet, they can withdraw from the contract within a certain period of time without giving reasons).

The following section gives you an overview of the consequences of your choice of law and how the applicable law is determined in the absence of a choice of law.

We have made a choice of law

As you have already learnt in the chapter on cross-border contracts, you and your contractual partners can agree on whether a specific legal system should apply to your contract. You are free to choose the jurisdiction.

Although you have agreed on the application of a specific legal system, basic protective provisions of another legal system are nevertheless applicable to your contract. These basic legal principles always apply to protect the general public and public safety (public order, "odre public", e.g. human rights). 

Example: You and your contractual partner agree on the production of an artistic tapestry in Austria. You agree that the law of the state of Bangladesh is applicable because, according to this legal system, child labour is legal in the textile industry under certain conditions. Since child labour is illegal in Austria and violates the public order (“odre public”), you are not allowed to have the tapestry made by children, although this would theoretically be permitted under the chosen law.

To do: Before making any choice of law, you should acquire basic knowledge of the applicable contract law and seek legal advice.

We have not made a choice of law

If you and your contractual partner have not made a choice of law, the question arises as to which legal system applies to your contract. The European Union issued the Rome I Regulation for this purpose. The applicable law depends on the specific type of contract.

Example: In the case of a purchase contract for a movable item (e.g. a work of art), the legal system of the country in which the seller habitually resides applies. 

Example: Service contracts (e.g. the restoration of a work of art) are governed by the law of the country in which the restorer habitually resides.

If a contract type is not explicitly mentioned in the Rome I Regulation, the applicable law is determined based on the habitual residence of the person providing the service characterising the contract.

Example: Cooperation agreements on artistic collaboration are not explicitly mentioned in the Rome I Regulation. The legal system that applies is determined based upon the habitual residence of the contractual partner who fulfils the most significant part of the contract.