Difference between revisions of "Service Contracts"

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The legal scope of service contracts, however, is rather unclear. On the European level, there is no comprehensive, consistent body of legal rules, but rather a countless number of specific provisions which are widely dispersed; national rules on services are markedly heterogeneous. The fuzziness starts at the conceptual level. Whereas the [[Bürgerliches Gesetzbuch (BGB)|''Bürgerliches Gesetzbuch'' (BGB)]] distinguishes between contracts with an obligation to achieve results (Contracts for Work and Labour, ''Werkvertrag'') and contracts for the simple supply of services (Service Contracts, ''Dienstvertrag''), many other national legal orders and European provisions simply refer to services in general (''Dienstleistungen''). This broader term is occasionally used in German law as well, though inconsistently (see §§ 612(1) and § 631(2) BGB). From a comparative perspective, one can observe different approaches towards classifying service contracts: (1) The distinction between result-oriented and activity-oriented types of contracts is a rather peculiar feature of German law. Employment contracts belong to the latter category, but are subject to numerous specific rules. (2) Many more legal systems distinguish between ‘intellectual’, non-objective services and services that are related to the construction or processing of chattels or immovables (eg ''contratos de servicio'' and ''contratos de obra'', respectively). (3) A third approach is to apply one uniform type of contract for all services, even partly including employment contracts (''contrat d’entreprise'', contract for the supply of a service). But even in legal orders pursuing such a comprehensive approach, various special regimes apply, particularly to storage contracts. The Principles of European Law – Service Contracts (PEL SC) and the [[Common Frame of Reference (CFR)]] are more comprehensive in this respect. However, they except employment contracts and a series of specific types of contracts (namely contracts for transport, insurances and financial services) and differentiate, moreover, on a further level between different types of service contracts (construction, processing, storage, design, information and advice and treatment) for each of which additional specific rules apply.
The legal scope of service contracts, however, is rather unclear. On the European level, there is no comprehensive, consistent body of legal rules, but rather a countless number of specific provisions which are widely dispersed; national rules on services are markedly heterogeneous. The fuzziness starts at the conceptual level. Whereas the [[Bürgerliches Gesetzbuch (BGB)|''Bürgerliches Gesetzbuch'' (BGB)]] distinguishes between contracts with an obligation to achieve results (Contracts for Work and Labour, ''Werkvertrag'') and contracts for the simple supply of services (Service Contracts, ''Dienstvertrag''), many other national legal orders and European provisions simply refer to services in general (''Dienstleistungen''). This broader term is occasionally used in German law as well, though inconsistently (see §§ 612(1) and § 631(2) BGB). From a comparative perspective, one can observe different approaches towards classifying service contracts: (1) The distinction between result-oriented and activity-oriented types of contracts is a rather peculiar feature of German law. Employment contracts belong to the latter category, but are subject to numerous specific rules. (2) Many more legal systems distinguish between ‘intellectual’, non-objective services and services that are related to the construction or processing of chattels or immovables (eg ''contratos de servicio'' and ''contratos de obra'', respectively). (3) A third approach is to apply one uniform type of contract for all services, even partly including employment contracts (''contrat d’entreprise'', contract for the supply of a service). But even in legal orders pursuing such a comprehensive approach, various special regimes apply, particularly to storage contracts. The Principles of European Law – Service Contracts (PEL SC) and the [[Common Frame of Reference (CFR)]] are more comprehensive in this respect. However, they except employment contracts and a series of specific types of contracts (namely contracts for transport, insurances and financial services) and differentiate, moreover, on a further level between different types of service contracts (construction, processing, storage, design, information and advice and treatment) for each of which additional specific rules apply.


Comparable contract law categories are lacking within currently applicable European law. The legal framework does not even precisely define the (subordinate) concept and an inclusive, positive definition does not exist. Instead, the term is defined, if at all, by reference to various (inconsistent) exclusive features. As a starting point, the term includes any independently rendered economic performance that does not consist in a provision of goods. In essence, this only excludes employment contracts ([[European labour law) and sales contracts ([[Sale|sale]], [[Sale of Consumer Goods|sale of consumer goods]]), but not [[Contract for Work and Labour|contracts for work and labour]], at least not on a comprehensive basis.
Comparable contract law categories are lacking within currently applicable European law. The legal framework does not even precisely define the (subordinate) concept and an inclusive, positive definition does not exist. Instead, the term is defined, if at all, by reference to various (inconsistent) exclusive features. As a starting point, the term includes any independently rendered economic performance that does not consist in a provision of goods. In essence, this only excludes employment contracts ([[European Labour Law|European labour law]]) and sales contracts ([[Sale|sale]], [[Sale of Consumer Goods|sale of consumer goods]]), but not [[Contract for Work and Labour|contracts for work and labour]], at least not on a comprehensive basis.


The term ‘service’ therefore primarily functions as a residual category in European law. Its scope, however, appears to be too broad in some respects. Difficulties mainly arise with respect to the classification of contracts that are not mainly focused on activities: the European legislature ranks even the cession of a right to use ([[Lease|lease]]) and the transfer of rights (real and intellectual property rights, claims) among services, but only in specific areas of law, see mainly Art 3(1) Distance Selling Directive (Dir 97/7), Art 3(2)(a) Doorstep Selling Directive (Dir 85/577), Art 2(a) Directive concerning misleading and comparative advertising (Dir 2006/114), cf, however, Art 3(c) Consumer Credit Directive (Dir 2008/ 48), see also Art 2 of the draft Directive on the Liability of Suppliers of Services (COM(90) 482). Hence car rental agreements aimed at providing consumers with a means of transport have been qualified as ‘services’ by the ECJ. As a consequence, these contracts are subject to the rules of the Distance Selling Directive (ECJ Case C-336/ 03 – ''easyCar'' [2005] ECR I-1947). The so-called ‘services of general interest’ are also not primarily focused on activities (energy and water supply, telecommunications, postal services and railways). Nonetheless, various legal rules exclude specific services from their scope of application, but not from the notion of services as such. A very pronounced example is to be found in Art 1(2) and (3) Services Directive (Dir 2006/ 123). The notion of services in EU primary law is much narrower in scope ([[Free Movement of Services|free movement of services]]). This helps to avoid an overlap with other fundamental freedoms (with the [[Freedom of Establishment|freedom of establishment]], in particular: no permanent presence), but also correlates with the very function of fundamental freedoms (cross-border element). Yet both restraints do not contribute to any considerable specification in factual terms.
The term ‘service’ therefore primarily functions as a residual category in European law. Its scope, however, appears to be too broad in some respects. Difficulties mainly arise with respect to the classification of contracts that are not mainly focused on activities: the European legislature ranks even the cession of a right to use ([[Lease|lease]]) and the transfer of rights (real and intellectual property rights, claims) among services, but only in specific areas of law, see mainly Art 3(1) Distance Selling Directive (Dir 97/7), Art 3(2)(a) Doorstep Selling Directive (Dir 85/577), Art 2(a) Directive concerning misleading and comparative advertising (Dir 2006/114), cf, however, Art 3(c) Consumer Credit Directive (Dir 2008/ 48), see also Art 2 of the draft Directive on the Liability of Suppliers of Services (COM(90) 482). Hence car rental agreements aimed at providing consumers with a means of transport have been qualified as ‘services’ by the ECJ. As a consequence, these contracts are subject to the rules of the Distance Selling Directive (ECJ Case C-336/ 03 – ''easyCar'' [2005] ECR I-1947). The so-called ‘services of general interest’ are also not primarily focused on activities (energy and water supply, telecommunications, postal services and railways). Nonetheless, various legal rules exclude specific services from their scope of application, but not from the notion of services as such. A very pronounced example is to be found in Art 1(2) and (3) Services Directive (Dir 2006/ 123). The notion of services in EU primary law is much narrower in scope ([[Free Movement of Services|free movement of services]]). This helps to avoid an overlap with other fundamental freedoms (with the [[Freedom of Establishment|freedom of establishment]], in particular: no permanent presence), but also correlates with the very function of fundamental freedoms (cross-border element). Yet both restraints do not contribute to any considerable specification in factual terms.

Latest revision as of 16:22, 21 September 2021

by Florian Möslein

1. Concept and scope

Service contracts are of great economic importance. According to recent estimates by the European Commission, the service sector accounts Europe-wide for 50 per cent of the gross domestic product and for 60 per cent of jobs. The sector might gain even further importance: ‘Everything Is A Service’ reads one of the pointed headlines in Jeremy Rifkin’s book on access society.

The legal scope of service contracts, however, is rather unclear. On the European level, there is no comprehensive, consistent body of legal rules, but rather a countless number of specific provisions which are widely dispersed; national rules on services are markedly heterogeneous. The fuzziness starts at the conceptual level. Whereas the Bürgerliches Gesetzbuch (BGB) distinguishes between contracts with an obligation to achieve results (Contracts for Work and Labour, Werkvertrag) and contracts for the simple supply of services (Service Contracts, Dienstvertrag), many other national legal orders and European provisions simply refer to services in general (Dienstleistungen). This broader term is occasionally used in German law as well, though inconsistently (see §§ 612(1) and § 631(2) BGB). From a comparative perspective, one can observe different approaches towards classifying service contracts: (1) The distinction between result-oriented and activity-oriented types of contracts is a rather peculiar feature of German law. Employment contracts belong to the latter category, but are subject to numerous specific rules. (2) Many more legal systems distinguish between ‘intellectual’, non-objective services and services that are related to the construction or processing of chattels or immovables (eg contratos de servicio and contratos de obra, respectively). (3) A third approach is to apply one uniform type of contract for all services, even partly including employment contracts (contrat d’entreprise, contract for the supply of a service). But even in legal orders pursuing such a comprehensive approach, various special regimes apply, particularly to storage contracts. The Principles of European Law – Service Contracts (PEL SC) and the Common Frame of Reference (CFR) are more comprehensive in this respect. However, they except employment contracts and a series of specific types of contracts (namely contracts for transport, insurances and financial services) and differentiate, moreover, on a further level between different types of service contracts (construction, processing, storage, design, information and advice and treatment) for each of which additional specific rules apply.

Comparable contract law categories are lacking within currently applicable European law. The legal framework does not even precisely define the (subordinate) concept and an inclusive, positive definition does not exist. Instead, the term is defined, if at all, by reference to various (inconsistent) exclusive features. As a starting point, the term includes any independently rendered economic performance that does not consist in a provision of goods. In essence, this only excludes employment contracts (European labour law) and sales contracts (sale, sale of consumer goods), but not contracts for work and labour, at least not on a comprehensive basis.

The term ‘service’ therefore primarily functions as a residual category in European law. Its scope, however, appears to be too broad in some respects. Difficulties mainly arise with respect to the classification of contracts that are not mainly focused on activities: the European legislature ranks even the cession of a right to use (lease) and the transfer of rights (real and intellectual property rights, claims) among services, but only in specific areas of law, see mainly Art 3(1) Distance Selling Directive (Dir 97/7), Art 3(2)(a) Doorstep Selling Directive (Dir 85/577), Art 2(a) Directive concerning misleading and comparative advertising (Dir 2006/114), cf, however, Art 3(c) Consumer Credit Directive (Dir 2008/ 48), see also Art 2 of the draft Directive on the Liability of Suppliers of Services (COM(90) 482). Hence car rental agreements aimed at providing consumers with a means of transport have been qualified as ‘services’ by the ECJ. As a consequence, these contracts are subject to the rules of the Distance Selling Directive (ECJ Case C-336/ 03 – easyCar [2005] ECR I-1947). The so-called ‘services of general interest’ are also not primarily focused on activities (energy and water supply, telecommunications, postal services and railways). Nonetheless, various legal rules exclude specific services from their scope of application, but not from the notion of services as such. A very pronounced example is to be found in Art 1(2) and (3) Services Directive (Dir 2006/ 123). The notion of services in EU primary law is much narrower in scope (free movement of services). This helps to avoid an overlap with other fundamental freedoms (with the freedom of establishment, in particular: no permanent presence), but also correlates with the very function of fundamental freedoms (cross-border element). Yet both restraints do not contribute to any considerable specification in factual terms.

The Handbook of the European Commission on the implementation of the Services Directive may serve as an illustration of how broad the spectrum of services can be. It enumerates—without, however, being exhaustive—the following examples: ‘the activities of most of the regulated professions (such as legal and fiscal advisers, architects, engineers, accountants, surveyors), craftsmen, business-related services (such as office maintenance, management consultancy, the organization of events, recovery of debts, advertising and recruitment services), distributive trades (including retail and wholesale of goods and services), services in the field of tourism (such as services of travel agencies), leisure services (such as services provided by sports centres and amusement parks), construction services, services in the area of installation and maintenance of equipment, information services (such as web portals, news agency activities, publishing, computer programming activities), accommodation and food services (such as hotels, restaurants, catering services), services in the area of training and education, rental (including car rental) and leasing services, real estate services, certification and testing services, household support services (such as cleaning services, private nannies or gardening services)’. The list goes so far as to include activities that do not even fall under the extremely broad initial definition (trade). This example shows quite clearly the conceptual fuzziness and context-sensitivity of the European notion of services. ‘Everything Is A Service’ is a phrase that seems to apply to the vocabulary of European legal concepts as well.

2. Trends in legal development

Service contracts present a rather inconsistent picture in legal history. A distinct legal concept of services was unknown to Roman law. The locatio conductio also included, apart from rental and leasehold, the so-called service lease, covering the supply of services (locatio conductio operarum) as well as the processing of goods (locatio conductio operis). Instead of these rather simple, externally controlled and non-gratuitous services, more sophisticated services were generally provided on the basis of a mandatum, ie without any legally enforceable entitlement to consideration (simple ex gratia payment: honorarium). Whereas the French Code civil broadly followed this concept of Roman law and is still based on the model of a cession of a right to use, the Allgemeines Landrecht für die Preußischen Staaten (ALR), even though distinguishing equally between simple and more sophisticated services, provided a specific section on contracts that are primarily focused on activities. In the course of the preparatory works for the Bürgerliches Gesetzbuch (BGB), services of any kind were ultimately integrated into a uniform type of contract, notwithstanding the strong opposition of physicians and lawyers at the time. Contracts for Work and Labour, however, are governed by separate rules.

Our times have been characterized by diverse lines of development all across Europe. Above all, we can observe a widespread tendency to segregate services into more specific types of contract (brokerage, transport, insurance contracts, etc). However, there are also (legislative) steps in the opposite direction, towards a more comprehensive concept of service contracts. Examples of this trend are mainly found in Swedish, Portuguese and English law. On the European level, the Common Frame of Reference (CFR) points towards a certain combination of both, seemingly contradictory tendencies. The rulebook tries to combine functionally different types of contracts in a common framework of service contracts, thereby combining specialization and generalization. However, this will not avoid the difficulties of differentiation.

3. Regulatory approach in European private law

In European law as currently applicable three topics are gaining particular importance, as opposed to traditional national rules on service contracts. These topics mainly, but not exclusively, concern the pre-contractual stage.

First, European rules focus on access to services. Such rules are a characteristic feature of the recently liberalized markets for services of general interest, now increasingly supplied by private providers. Even though sector-specific and regulatory in its approach, the respective legislative instruments often respond to specific contract law issues as well. They aim to ensure that consumers have access to corresponding services of good quality at affordable prices (see eg Art 20(2)1 Universal Service Directive (Dir 2002/22)). The key question for contract law is whether such principles can also be applied to services of all kinds or even to consumer contracts in general. An all-inclusive generalization, however, does not seem very plausible given that the access rules are premised on specific features of the respective markets (in particular, the importance of access to the network). Nonetheless, questions of access to services are undoubtedly becoming ever more important. In particular, access to (goods and) services that are advertised and made available to the general public must be open to everyone in a non-discriminatory manner. In principle, service providers must treat persons equally, irrespective of their race, ethnic origin or gender (Directive implementing the principle of equal treatment between persons irrespective of racial or ethnic origin (Dir 2000/43), Directive implementing the principle of equal treatment between men and women in the access to and supply of goods and services (Dir 2004/113)), and irrespective of the nationality or place of residence of the recipient (Art 20(2) Services Directive). The list of criteria might possibly be extended further in the future (religion, sexual orientation or disabilities, for example).

A second focus concerns the distribution of services. This does not relate to ensuring the supply of specific services, but to facilitating well-informed, perhaps even well-considered decisions on the conclusion of a contract, and avoiding any mala fide action by the opposite side. Obligations of pre-contractual information and conduct are therefore imposed on providers of services. While such obligations are mainly stated in comprehensive rules on contract law or even on fair competition, the rules explicitly include service contracts (eg Art 2(1) Distance Selling Directive; Art 1(1) Doorstep Selling Directive as well as Art 2(f) E-Commerce Directive (Dir 2000/31); Art 2(c) Unfair Commercial Practices Directive (Dir 2005/29); Art 2(a) Directive on Misleading and Comparative Advertising (Dir 2006/114/EC)). Occasionally, such obligations are to be found in rules on specific types of services, in particular in the field of financial services (Art 2(b) Directive on Distance Contracts for Financial Services (Dir 2002/65) and, in particular, Arts 19 ff Directive on Markets in Financial Instruments (Dir 2004/39); similarly Art 2(1) Directive on Package Travel (Dir 90/314)). Moreover, the Services Directive has now for the first time introduced pre-contractual information obligations that apply not only specifically to service contracts, but that also concern these types of contracts in a ‘horizontal’ manner, ie comprehensively. These obligations are not even restricted to consumer contracts. The provider needs to give the relevant information either autonomously or upon request. The information concerns the providers’ own identity and trustworthiness, the features and legal design of the respective service as well as the price determination structure (see Art 22 Services Directive). The extension of pre-contractual information obligations meets the concern that services are, in general, much more difficult to compare and to determine than goods. As a result, there is an increase in the demand for information not only about the subject matter of service contracts, but also about the service supplier and the terms of the contract.

A third focus concerns the subject matter itself. Again, and for similar reasons, a specific regulatory approach for service contracts becomes apparent. The classical contract law mechanism of sanctioning defective quality by means of liability reaches its limits when it comes to services. In most cases, the subject matter is much too specific to be compared with a market standard and has parameters not easily defined by the parties in advance. The draft Directive on the Liability of Suppliers of Services would only have provided for a partial regime on contractual liability anyway, but it was withdrawn long ago. Instead, Art 26 of the Services Directive illustrates a (tentative?) tendency towards standardization of services which is implemented not by the (European) legislature, but by the self-regulation of industry and customer organizations.

4. Towards a Common European Frame for Service Contracts (CFR)?

In contrast to the Principles of European Contract Law, which did not contain any specific rules on services contracts, a comprehensive legal framework for service contracts is formulated by both the Study Group on a European Civil Code as is the Common Frame of Reference (CFR), the authors of the CFR having built on the foundation laid by the Study Group. The PEL SC comprises roughly 1,000 pages, including explanations. The regulation is divided into a rather succinct general part and extensive special rules concerning specific types of contracts. As regards content, the body of rules looks like its national prototypes—not surprising given that it aims at a comprehensive regulation—and includes non-mandatory rules on service contracts. As a consequence, rules on liability and warranties, for example, are also covered. However, the CFR very much reflects the regulatory approach of Union law, given its particularly extensive rules on pre-contractual information obligations. Moreover, the rules explicitly refer to the standardization of services by industry organizations, in particular with respect to the general standard of care. A final point of note is that the performance of service contracts is not primarily conceptualized as a simple spot exchange, but rather as a permanent relationship of cooperation requiring specific governance instruments. This concept is in turn based on the idea that services as a subject matter often cannot be determined ex ante, at least not in a very precise manner. During the term of a contract, the supplier and recipient of services are therefore subject to several obligations of cooperation and information; conversely, they simultaneously enjoy specific rights of adjustment and withdrawal.

Literature

Stefan Grundmann, Europäisches Schuldvertragsrecht (1999); Monika Anders and Burkhard Gehle, Das Recht der freien Dienste (2001); Marco BM Loos, ‘Towards a European Law of Service Contracts’ (2001) 4 ERPL 565; Karl Riesenhuber and Jens-Uwe Franck, ‘Das Verbot der Geschlechterdiskriminierung beim Zugang zu Gütern und Dienstleistungen’ [2005] Europäisches Wirtschafts- und Steuerrecht 245; Peter Rott, ‘A New Social Contract Law for Public Services’ (2005) 3 ERCL 323; Karl Riesenhuber, Europäisches Vertragsrecht (2nd edn, 2006); Christiane Wendehorst, ‘Das Vertragsrecht der Dienstleistungen im deutschen und künftigen europäischen Recht’ (2006) 206 AcP 205; Hans-W Micklitz, Service Standards: Defining the Core Consumer Elements and their Minimum Requirements (2007), available for download at <www. anec.eu/attachments/ANEC-R&T-2006-SERV-004final.pdf>; Martin Schauer, ‘Contract Law of the Services Directive’ (2008) 4 ERCL 1; Martin Schmidt-Kessel, ‘Die Informationspflichten des Dienstleisters nach der Dienstleistungsrichtlinie’ [2008] Zeitschrift für Gemeinschaftsprivatrecht 63.

Retrieved from Service Contracts – Max-EuP 2012 on 14 August 2022.

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