Fundamental rights, contract law and the protection of the weaker party: a comparative analysis of the constitutionalisation of contract Law, with emphasis on risky financial transactions

Abstract

Originally, contract law was considered to be immune from the effect of fundamental rights, the function of which was limited to being individual defences against the vigilant eye of the State. This traditional view, however, has recently been put under pressure as a result of fundamental rights increasingly becoming relevant for contract law. The relationships between private parties under contract law have started losing their immunity from the effect of fundamental rights, which has led many authors to speak about the constitutionalisation of contract law. The idea behind resorting to fundamental rights in contract law is the protection of the weaker parties such as family sureties against stronger parties such as banks. At the same time, within the system of contract law itself one can trace the tendency towards a more society-oriented contract law which manifests itself in the growing concern for the interests of the weaker party. How should fundamental rights and the modern contract law relate to each other? What role can be played by fundamental rights in the modern contract law in cases involving an imbalance in power between the contracting parties? This book embarks on a comparative analysis and combines theoretical and practical perspectives to provide answers to these questions. In the first place, this book discusses the relationship between fundamental rights and private law in general in Germany, the Netherlands and the UK, as well as in EU law and the law of the ECHR, against the background of the underlying rationale for the distinction between public and private law as it has developed on the continent. Secondly, the book examines whether and, if so, how the interests of the weaker party can be protected on the level of fundamental rights, on the one hand, and contract law, on the other, in the context of risky financial transactions, such as suretyship and investment contracts. The final part of this book builds upon the insights and conclusions drawn from the theoretical and practical perspectives to develop recommendations regarding the desirable extent of the constitutionalisation of contract law. It is argued that the subordination of contract law to fundamental rights with a view to protecting the weaker party is questionable not only from the dogmatic point of view of the distinction between public and private law, but also for the very practical reason that it does not lead to the enrichment of legal discourse for the benefit of the weaker party, but instead entails adverse consequences for finding a solution in the circumstances of a case and the development of law in general. In contrast to fundamental rights, contract law is much better equipped to be able to address the issue of the power imbalance in contractual relationships and to provide a basis for a much more open debate concerning the desirable extent of the protection of the weaker party. It is only the dialogue between fundamental rights and contract law which may lead to a major breakthrough in the understanding of contractual justice and, above all, in providing solutions which would benefit the weaker party