Justice for Both was the title of Anna van Duin's PhD thesis, which formed the basis for this monograph. Remindful of Eleanor Roosevelt's words, which are cited at the end of the concluding chapter, Anna's study of effective judicial protection in contractual relations between consumers and businesses aims to do justice to boThsides. Anna's book provides a first comprehensive study of the manner in which the right to an effective remedy before a court, as laid down in Article 47 of the EU Charter of Fundamental Rights, affects the assessment of standard terms in consumer contracts. Based on a careful analysis of the case law of the Court of Justice of the European Union within the framework of the Unfair Contract Terms Directive, in combination with the comparison of Spanish and Dutch law on the subject, this book presents an insightful taxonomy of the functions that Article 47 of the Charter does and can fulfil in private law adjudication in Europe.

It is an honour for me to introduce Anna's work to a broader audience. As a supervisor of her research, together with Dr Joasia Luzak (University of Exeter), it was a pleasure to witness the development of Anna's thoughts on the role and functions of Article 47 of the Charter in the realm of private law. Her PhD research at the University of Amsterdam formed part of my project ‘Judges in Utopia’, funded by the Dutch Research Council (NWO Vidi 2014–2019). With a background of six years in legal practice and a keen interest in academic research, Anna was the ideal candidate for conducting a study encompassing both procedural and substantive aspects of effective protection of EU rights before national courts. Moreover, her fluency in Spanish allowed her to include an exploration of the national context of some of the most influential case law in the field, such as the well-known Aziz judgment. The comparison with Dutch law resulted in new insights into the national environments in which rights under EU law are sought to be effectuated. The outstanding nature of Anna's work was confirmed by the cum laude evaluation that she received at the occasion of her PhD defence on 23 October 2020 from a committee composed of experts in the field: Prof. Esther Arroyo Amayuelas (Professor of Civil Law at the University of Barcelona), Prof.

Mr Broke borrowed €2,000 from Mr Coin and entered into a contract which stated that he would return the money with interest in a year's time and until this time he would not without Mr Coin's written consent leave or change his job, borrow money, dispose of his property or change his address. Six months later, due to more hardship, Mr Broke also borrowed money from Mr Axle without obtaining Mr Coin's written consent. Mr Coin has now brought an action for breach of contract and is claiming the principal amount plus the entire year's interest as damages. Can Mr Broke challenge this?

Case Reference: Horwood v. Millar's Timber & Trading Co. [1917] 1 KB 305.

AUSTRIA

OPERATIVE RULES

Mr Broke can most likely challenge Mr Coin's action.

DESCRIPTIVE FORMANTS

For testing whether a contract or specific contract clause is “immoral” in the sense of Art. 879(1) CC, a weighing of interests is required.

It is evident that Mr Coin has a legitimate interest in receiving his money back, and also to secure that claim. However, the means stipulated in the present contract in order to pursue this interest are grossly disproportionate to Mr Broke's legitimate interests concerning his personal and economic liberty. Mr Coin may have a legitimate interest in that Mr Broke continues to earn a steady income, but not that this income results from exactly the same job. A similar assessment applies to the regulation regarding dispositions over property, where it must be considered that property could be used to acquire assets of equivalent value or even to repay the loan to Mr Coin. There may also exist a more or less legitimate interest in not complicating future enforcement measures, and knowing the debtor's address may be helpful in this respect, but this does not justify prohibiting a change of address or making that change dependent on the creditor's (arbitrary) consent. Finally, there may be a legitimate interest, at least at first sight, regarding the prohibition of taking further credit, because an increase of total debts may reduce Mr Coin's chance of recovering his money. But also this clause is disproportionate, because it even prevents debt-rescheduling for the purpose of paying the original creditor.

It is, therefore, very likely that an Austrian court would render these entire contractual limitations void. Mr Broke can then use the whole agreed period for repaying his debt.

This book adds an in-depth study of the law and practice on immorality of contracts in Europe to the Common Core series. It comprises country reports on 28 European legal systems, in line with the editors’ aspiration to give a comprehensive overview of shared and diverging views on immorality of contracts in the European Union. The reports have been drafted on the basis of 12 case scenarios, inspired by real-life cases that were adjudicated in European countries. Furthermore, given the importance of societal debate for the assessment of morality in contract law, significant attention is paid to the context in which the law on specific cases has developed. The combined insights from the national reports provide an overview of the current state of a “Common Core” on immoral contracts in Europe.

Comparative legal studies performed by a large network of academics from many different countries usually require many years of work and, indeed, a great deal of patience from all persons involved. This book, like most volumes in the Common Core series, is no exception to this rule. We presented a first draft questionnaire on immoral contracts – or, more precisely, on the limits to the validity of contracts on ground of morality or public policy – at the General Meeting of the Common Core project in 2012. After settling on the final version of the questionnaire, the first draft country reports were written between 2013–2015. The comparative remarks, the introductory chapters and the second and third drafts of the country reports were completed between 2016–2018. This past year was devoted to the final editing, updating and proofreading of the book.

We would like to express our deepest thanks to all national reporters and contributors for their enthusiasm and long-term commitment to this project, which did not provide any other remuneration but for the publication itself and the enjoyment of wonderful meetings in Turin, Gothenburg, Lecce, Palermo and Trento.

We are grateful to the general editors of the Common Core project, Mauro Bussani and Ugo Mattei, for their constant support, and to all participants to the annual meetings of the Contract Group for their valuable comments and suggestions.

Mr and Mrs Duck concluded a contract with Miss Swan stipulating that she would carry and give birth to a child for them. The child was conceived by artificial insemination of Miss Swan's egg with Mr Duck's sperm. According to the agreement between the parties, Miss Swan was reimbursed for expenses related to the pregnancy and birth (including healthcare and clothing). After giving birth to a healthy baby boy, whom she named Donny, Miss Swan, however, realised she felt so much affection for the baby that she was unable to hand him over to Mr and Mrs Duck. Can the couple require Miss Swan to give Donny to them? If not, can they reclaim the amount of money they paid to Miss Swan?

Variation 1: Would it make a difference if Miss Swan had received a sum of €25,000 for acting as a surrogate mother?

Variation 2: Would it make a difference if Donny had been conceived using genetic material of both Mr and Mrs Duck and Miss Swan would only have carried and given birth to him?

Case References: Trib. Monza 27 October 1989, Foro it. 1990, I, 298; Trib. Roma 17 February 2000, Foro it. 2000, I, 972; OLG Hamm 2 December 1985, NJW 1986, 781; Cass. Ass. plén. 31 May 1991, D. 1991.417.

AUSTRIA

OPERATIVE RULES

Mr and Mrs Duck cannot require Miss Swan to give Donny to them. They cannot require Miss Swan to reverse the reimbursement for the costs of giving birth and any consequential costs, but most likely can recover the reimbursement of pre-birth expenses.

Variation 1: The results would be the same. It is likely that the sum of €25,000 cannot be recovered.

Variation 2: The results would be the same.

DESCRIPTIVE FORMANTS

According to Art. 3(1) Reproductive Medicine Act, only eggs and sperms of spouses, registered partners or cohabitees may be used for medically supported reproduction of human beings. It is evident from the travaux préparatoires to this provision that the Austrian legislator intended to prohibit any form of surrogate motherhood. Conceiving Donny by artificial insemination of Miss Swan's egg with Mr Duck's sperm would therefore be illegal in Austria, and thus the surrogate motherhood contract between Mr and Mrs Duck on the one side and Miss Swan on the other would be void on the ground of violating a statutory prohibition (Art. 879(1), first alternative, CC).

LAW, MORALITY AND EUROPEAN INTEGRATION

The project of European integration that was embarked upon in the 1950s finds itself at a crossroads. Its internal and external borders are put under pressure in an actual sense by the refugee crisis as well as in an economic sense by the consequences of the economic crisis that has impacted the EU's development in recent years. Law, which forms one of the pillars of the integration project, does not remain unaffected by this. European contract law may be conceived of as the combination of EU law on contractual transactions and national systems of contract law. It provides the framework for the conclusion of transactions within the EU's internal market and, thus, shapes the internal market (e.g. determining which products can be traded in the EU and among Member States) as well as brings out, into the open, tensions among Member States and the Union (e.g. whether a common rule can be decided upon and which institution has the final say on that). The questions of how to conceptualise the European legal order and how to handle conflicts among rules deriving from different levels of governance are discussed by constitutional theorists and, increasingly often, scholars in the field of European private law.

In contract law, these questions are not as new as they may seem. All European countries have rules that establish which transactions can be made the subject of a contract. Mandatory rules of law may prohibit the conclusion of certain types of contract; for example, a law may forbid the conclusion of a contract for sex work, mediation in surrogate motherhood arrangements, or the organisation of a lottery. Furthermore, contracts infringing public policy or good morals are held to be null and void. Rules of contract law, thus, express the relationship between law and morality; they determine which issues can be made the subject of a legally valid and enforceable agreement according to the values underlying the legal order to which they pertain. Since different Member States adhere to values that sometimes converge and sometimes diverge, while the demarcation between illegal and immoral contracts also differs from one country to another, European contract law has long faced the question of how to approach Member States’ diversity from a European perspective. In particular, Member States’ views on morality may clash with the EU's market-oriented approach.

Wicked Ltd, a telephone sex service provider, concluded a contract with Fun Ltd for the marketing of telephone cards. In connection with this marketing contract, the two companies concluded a loan contract by which Wicked Ltd borrowed €50,000 from Fun Ltd. Wicked Ltd delivered to Fun Ltd telephone sex cards and other telephone sex-related services for a value of €80,000. Some months later, the business relationship between Wicked Ltd and Fun Ltd started to deteriorate until it was eventually terminated. Fun Ltd has claimed from Wicked Ltd the repayment of the €50,000 loan. Can Wicked Ltd set off the claim and counterclaim €30,000 from Fun Ltd as payment for the delivered services?

Case Reference: BGH, 09.06.1998 – XI ZR 192–197.

AUSTRIA

OPERATIVE RULES

Wicked can set off Fun's claim and counterclaim €30,000.

DESCRIPTIVE FORMANTS

Telephone sex contracts were held compatible with the concept of “good morals” under Art. 879(1) CC in two Supreme Court cases of 2003, that is, before the Supreme Court's about-turn regarding sex work contracts in 2012 (see Case 1). In these cases, the Court argued that no direct physical contact takes place and the woman's genital area is not downgraded to a commercial asset, but a mere “vocal-acting performance” is delivered. It is also considered that this form of sexual behaviour precludes involvement in criminal activities (which is submitted to be linked to sex work frequently), avoids the risk of infections, and allows women to earn income without physical exploitation.

On this case law basis, it is clear that the contracts between Wicked and Fun, which only intend to promote telephone sex services and are, therefore, even more “remote” from any sex-related performance than the performance of a telephone sex contract itself, would be held valid by an Austrian court.

BELGIUM

OPERATIVE RULES

Wicked Ltd can most probably not set off the claim and submit a counterclaim of €30,000 from Fun Ltd as payment for the delivered services.

DESCRIPTIVE FORMANTS

As far as we know, there is no published Belgian case law on a similar case. However, the legal formants for the case are clear.

Mr Bighead, a famous sportsman, agreed with Miss Butterfly, a known sex worker, that he would pay her €10,000 for her services. After the contract was performed, Mr Bighead declared that he is not going to pay her anything. Can Miss Butterfly recover the amount promised to her?

AUSTRIA

OPERATIVE RULES

Miss Butterfly can recover the agreed amount.

DESCRIPTIVE FORMANTS

Sex work is not generally an illegal activity under Austrian criminal and administrative laws; the same applies to operating a brothel. Certain public law regulations constitute a legal framework for these activities by, for example, requiring sex workers to register with a public authority, to undergo regular medical checks, or by prohibiting sex work at certain places (such as housing areas).

The central rule for assessing the validity of a contract between a sex worker and her or his client for the performance of sexual services is the second alternative mentioned in Art. 879(1) Civil Code (CC), according to which “a contract infringing a statutory prohibition or good morals is void”. The reference to “good morals” was introduced in 1916 by one of the major amendments to the 1811 Civil Code, which reformed large parts of the Austrian law of obligations under the influence of the newly adopted German Civil Code. Regarding Art. 879(1) CC, however, no change as to substance was intended. The purpose was to cover contracts which are not explicitly forbidden by a specific statutory provision, but violate basic value judgements inherent in the Code, by way of a short-term general clause.

Today, courts and academics basically agree that the concept of “good morals” embodies rights which are not explicitly recognised by statutory provisions but ensue from the totality of legally protected interests, for which the value judgements and fundamental principles of the (Austrian) legal system are determinative. “Good morals” can thus be equated with “unwritten law”. According to the predominant view, moralities (in the sense of non-legal conceptions) are only relevant to the extent they are reflected in the legal system. The main test usually applied is a weighing of interests (see section 1.3 below). Some authors tend to emphasise extra-legal morality values somewhat more strongly.

The case studies included in this volume have been prepared on the basis of a questionnaire, according to the consolidated methodology of the project “The Common Core of European Private Law”. In drafting most of the fictitious disputes, we have drawn inspiration from real litigations adjudicated by courts. We have not only simplified the facts of these real litigations, but also slightly changed them by adding several fictional elements. The names of the parties are purely the product of our fantasy. The questionnaire consists of the following cases.

CASE 1: SEX WORK CONTRACTS

Mr Bighead, a famous sportsman, agreed with Miss Butterfly, a known sex worker, that he would pay her €10,000 for her services. After the contract was performed, Mr Bighead declared that he is not going to pay her anything. Can Miss Butterfly recover the amount promised to her?

CASE 2: CONTRACTS PROMOTING SEX WORK

Mr Pioneer rented out his limousine to Miss Pearl, a known sex worker, on a month-to-month basis for €2,000. After the first month, Mr Pioneer's employees, who are responsible for the maintenance of the vehicle, informed him that they have come across evidence which suggests that the vehicle is being used for the purposes of Miss Pearl's profession. Six months have since lapsed and Miss Pearl failed to pay last month's rent for the use of the vehicle. Can Mr Pioneer recover the unpaid amount?

Variation: Would it make a difference if Mr Pioneer had raised the rent of the vehicle to €3,000 per month after confirming that the vehicle was being used for Miss Pearl's profession?

Case Reference: Pearce v. Brooks [1866] LR 1 Ex 213.

CASE 3: CONTRACTS PROMOTING TELEPHONE SEX

Wicked Ltd, a telephone sex service provider, concluded a contract with Fun Ltd for the marketing of telephone cards. In connection with this marketing contract, the two companies concluded a loan contract by which Wicked Ltd borrowed €50,000 from Fun Ltd. Wicked Ltd delivered to Fun Ltd telephone sex cards and other telephone sex-related services for a value of €80,000. Some months later, the business relationship between Wicked Ltd and Fun Ltd started to deteriorate until it was eventually terminated. Fun Ltd has claimed from Wicked Ltd the repayment of the €50,000 loan. Can Wicked Ltd set off the claim and counterclaim €30,000 from Fun Ltd as payment for the delivered services?

Mr Pioneer rented out his limousine to Miss Pearl, a known sex worker, on a month-to-month basis for €2,000. After the first month, Mr Pioneer's employees, who are responsible for the maintenance of the vehicle, informed him that they have come across evidence which suggests that the vehicle is being used for the purposes of Miss Pearl's profession. Six months have since lapsed and Miss Pearl failed to pay last month's rent for the use of the vehicle. Can Mr Pioneer recover the unpaid amount?

Variation: Would it make a difference if Mr Pioneer had raised the rent of the vehicle to €3,000 per month after confirming that the vehicle was being used for Miss Pearl's profession?

Case Reference: Pearce v. Brooks [1866] Lr 1 Ex 213.

AUSTRIA

OPERATIVE RULES

Mr Pioneer can recover the unpaid amount.

Variation: Mr Pioneer might not be able to recover the full amount.

DESCRIPTIVE FORMANTS

Recent Supreme Court decisions on a comparable issue do not exist. However, it is almost evident that the assessment would basically be analogous to that of Case 1. In its 1989 case on sex work contracts, the Supreme Court ruled that a contract for renting out sauna rooms to a nightclub client is void on the ground of “immorality” because this contract enabled the performance of sex work activities and generating profit therefrom. However, after changing its approach to sex work contracts in 2012, the Supreme Court would most certainly consider such a renting agreement valid, irrespective of whether it is entered by the client or – as in the case of Miss Pearl's limousine – by the sex worker herself. This assumption can be backed by the argumentation employed by the Supreme Court in its 2012 case, in which it concluded that if an enforceable claim for the payment of money arises from a sex work contract (which is the only relation where a person's dignity and sexual integrity is at stake), the same must apply to a contract between the client and the nightclub owner (who, in turn, pays the sex worker). Accordingly, renting out a limousine to a sex worker would be treated as any other leasing contract today.

Due to tight financial circumstances, Ms Moneypenny decided to conclude a credit agreement with Bond Bank for a sum of €5,000. According to the terms of the contract, she would pay back this sum in 30 monthly rates of €250. Moreover, the last rate would be equal to the loaned amount. This meant that in total Ms Moneypenny would have to pay a sum of about €12,000 to the Bank. After paying 19 monthly rates, Ms Moneypenny found herself in such debt that she was no longer able to continue paying back the loan to Bond Bank. The Bank is now suing for the remaining amount of the loan. Can Ms Moneypenny challenge this claim?

Case Reference: CJEU C-453/10, Pereničová and Perenič v. SOS finance spol. s.r.o., ECLI:EU:C:2012:144.

AUSTRIA

OPERATIVE RULES

Ms Moneypenny can challenge the claim.

DESCRIPTIVE FORMANTS

Art. 879(2)(4) CC and Art. 1 Usurious Contracts Act, using identical wording, declare usurious contracts void. The rule's requirements can be characterised as follows: first, there must be a clear disproportion between the values of performance and counter-performance, which is evidently fulfilled in the present case (€5,000 versus €12,500). Second, the disadvantaged party's free will must be in some way impaired upon the conclusion of the contract; the law mentions, as examples: plight (Zwangslage), a narrow mind (Verstandesschwäche), lack of experience, and emotional excitement. Ms Moneypenny's tight financial circumstances will fall within the first of these criteria. Third, as a subjective element on the creditor's side, the latter must take advantage of the disadvantaged party's situation. The statutory language, referring to “exploitation”, appears to be rather strict in this respect, but the commonly accepted interpretation mitigates this and holds that already negligent ignorance of the other party's situation and of the disproportion in value suffices. The facts of Case 11 do not provide much information in this respect, but it is rather obvious that no one would enter into a credit contract like this voluntarily without any impairment of free will, and that this must at least be assumed by the creditor.

Art. 7(2) Usurious Contracts Act provides a special rule on the consequences of usurious credit contracts: the disadvantaged party can use the full credit period for repaying its debt (i.e. the nominal credit amount of €5,000), and interest is reduced to the double “basic interest rate” (Basiszinssatz) applying at the time of the conclusion of the contract.

Mr Strict entered into a contract with his daughter, Clementine, to pay for her round-the-world trip in return for her promise to only marry a man belonging to Mr Strict's faith. During the trip, Clementine fell in love with Mr Dreamy, who belongs to a different faith from her father, and married him. Mr Strict has now brought an action for breach of contract and is consequently demanding repayment of the amount he spent on Clementine's trip. Is the contract between Mr Strict and his daughter valid? Can Clementine challenge the action brought forth by her father?

Variation: Would it make a difference if Clementine fell in love with Miss Dreamy, who belongs to the same faith as her father, and entered into a civil partnership with her?

Case Reference: Lowe v. Peers [1768] 4 Burr 2225.

AUSTRIA

OPERATIVE RULES

At least the obligation incurred by Clementine is not valid. Clementine can challenge the action brought forth by her father.

Variation: There would be no difference.

DESCRIPTIVE FORMANTS

Austrian law provides explicit regulations for comparable, though not fully identical, stipulations in the law of successions, which are made applicable to bilateral contracts by way of reference. The following discussion will first deal with these statutory provisions, which concern benefits granted under a condition of not getting married, in order to reveal the relevant values and policies pursued by Austrian law in this area, and then turn towards the contractual arrangement at hand in Case 8, i.e. a bilateral contract under which both parties oblige themselves to some performance, here, in Clementine's case, an obligation not to marry a man of a different faith than her father’s.

Until a recent reform of the law of successions, which entered into force on 1 January 2017, Art. 700 CC explicitly provided that a condition stipulated in a will, according to which an (adult) heir or legatee may not marry, is to be treated as if it were “not included” in the will. The heir or legatee may thus receive the benefit without any condition. As for the policy pursued by former Art. 700 CC, see section 1.3 below.

Mr Hazard, a businessman, needed a loan of €50,000. Bossy Bank agreed to this on the condition that Mr Hazard's daughter, Miss Penny, secured it for its full amount through a suretyship. The 19-year-old Miss Penny owned no assets and had no experience in business. As a worker in a fish factory, she only earned €600/month (after tax). The suretyship contract was concluded when Bossy Bank's employee handed out a standard form contract to Miss Penny and said, without further explanation: “Could you please sign this, Miss? We need it for our files”. Four years and €2,000,000 in debts later, Mr Hazard has gone bankrupt. Bossy Bank now claims the €50,000 from Miss Penny. Can Miss Penny challenge this?

Variation: Would it make a difference if the suretyship was concluded by Mr Hazard's wife, Mrs Hazard, who worked as a customer service employee in Mr Hazard's business and earned €2,000/month after tax?

Case Reference: BVerfG, 19.10.1993, 1 BvR 567 u. 1044/89.

AUSTRIA

OPERATIVE RULES

Miss Penny can challenge the claim.

Variation: Mrs Hazard could most likely challenge the bank's claim to some extent.

DESCRIPTIVE FORMANTS

Austrian law provides two rather similar regimes for combating unfair suretyships. Under the more general approach, developed by the Supreme Court by applying the “immoral contracts” rule in Art. 879(1) CC, a suretyship is void based on three groups of criteria. The first requirement is a “disapproval of the suretyship as to its content” (inhaltliche Missbilligung) which, in the first place, means that there must be a “gross disparity” between the surety's financial assets and the amount guaranteed under the suretyship. In addition, further aspects may be relevant within this first criterion. For instance, where the surety has a personal economic interest in the credit, this will speak against an “immoral” character of the guarantee (but it has been accepted that, where such personal interest results from maintenance rights vis-à-vis the debtor, for example where the debtor's wife stood surety, this personal interest will usually be outweighed by a considerable degree of dependence on the principal debtor). As a second requirement for nullity, the suretyship must be disapproved as to the circumstances of the conclusion of the security agreement, due to a factual limitation of the surety's free will.