European Contract Law; Transfer of ownership

10/06/2013

Hannah Mangel I6005839

Anne Konings I6000299

Zoé Perret I6019261

European Contract Law

Bram Akkermans

Tutorial group 1, subgroup 1

Word count (group work): 8640

EUROPEAN CONTRACT LAW

Transfer of ownership

Table of Content

I. Introduction – Anne Konings & Zoé Perret

II. Transfer Systems of France, Ireland and Germany –

Anne Konings, Hannah Mangel & Zoé Perret

III. The existence of European Law on the Issue – Zoé

Perret

IV. The Solution chosen in the DCFR – Hannah Mangel

V. Policy Questions – Anne Konings

VI. Member State Positions - Anne Konings, Hannah Mangel

& Zoé Perret

VII. The Model Rule & Explanation of the Model Rule –

Hannah Mangel

1

I. INTRODUCTION (815 words)

On 11th of October 2011, the European Commission

published the Proposal for a Regulation of the European

Parliament and of the Council on a Common European Sales

Law (hereinafter CESL). Although the most concrete

attempt to come up with European Union hard law on the

harmonization of private law within the Union, this is

only the result of many years of heated debate on this

topic.

The primary aim of the CESL being the facilitation

of cross-border trade in the internal market, the

commission has claimed the differences in national

contract law is one of the main obstacles to intra-union

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trade.1 The Commission has conducted surveys on this

matter, in which businesses named differences in contract

laws one of the most prominent impediments to them

trading with businesses in other member states.2 However,

this has been contested by member states (c.f. Member

state positions on the CESL in Question 6). This weighs

especially heavy for SMEs and consumers. Therefore, a

high level of consumer protection throughout the EU has

been made a second objective of the CESL. This is due to

the fact that we can witness a great difference in the

standard of consumer protection within the laws of the

different member states. Uncertainties about the

protection awarded under a different sales law have led

to uncertainty among consumers and have undermined trade

in the internal market to a remarkable extent, as the

commission argues.3

It can be argued that the proposal has been stripped

down to a common sales law as the introduction of an

entire civil code for the member states has proved to be

too problematic/controversial. Even though academia has

developed the Draft Common Frame of Reference, which is

deemed to be an example of a civil code for Europe, this

has only been a project of a group of enthusiastic

scholars. Getting a civil code adopted in the whole of

the Union in form of hard law has proved to be a

different story however. A common sales law has therefore

1 Proposal CESL, 2011, page 2.2 Proposal CESL, 2011, page 2.3 Proposal CESL, 2011, page 2.

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been chosen as a good compromise. But even the proposal

for a common sales law has been subject of heated debate,

as some Member states find it unnecessary and question

whether it might not be more advisable to fix existing EU

law on these matters.

The CESL features a very limited amount of

provisions, which have been deemed necessary for the

operation of a sales law. Recital 27 of the proposal

however reiterates gaps that have been left out on

purpose and that are to be determined by the applicable

law. Most prominently, this includes the entire area of

property law. It appears the CESL has been modelled by

taking into account the German and Austrian example of a

complete separation between property law and the law of

obligations, this has been left to the national

legislators to determine. It has been argued that this is

exactly the weakness of the CESL: it does not cover

enough situations, which can arise under the contract.

So, not like the DCFR, it is not too encompassing but

actually too little. When considering what the property

law aspects of a contract of sale are, it becomes clear

that issues such as revindicatio if the transfer was not

valid, the transfer of ownership and the passing of risk

as well as the retention of title are all property law

issues that have not been regulated under the CESL. The

goal of this course is to come up with model rules for

these issues by first considering the systems of at least

3 member states, then going on a quest for already

4

existing EU or international law, examining the solutions

of those laws and in the end coming up with a feasible

model rule for the assigned topic, which is possible to

be accepted by the member states and all stakeholders and

which serves the identified policy issues.

This paper will deal with the topic of transfer of

ownership. The concept of ownership being one of the most

basic principles of property law, the transfer of

ownership is however deeply intertwined with the central

aspects of contract law. It is the central and defining

obligation of the seller of a thing. It has nevertheless

not been regulated under the CESL. This working group has

compared the transfer systems of the different member

states chosen, the Republic of Ireland, Germany and

France. It has been found out that transfer systems can

be categorized in two distinctions. First, one can

distinguish between causal or abstract systems. Second,

one can identify consensual or delivery/tradition

systems. Lastly, there are different definitions of

ownership, which have been developed throughout Europe: a

functionalist approach, most prominent in the Nordic

countries and second a unitary approach. These notions

will be explained in the following sections. They will be

compared in order to develop a model rule for the

European Union Sales Law.

II. TRANSFER SYSTEMS OF IRELAND, FRANCE AND GERMANY

5

TRANSFER SYSTEM: FRANCE (1400 words) Zoé Perret

Introduction

French legal system does not fit easily into the

predefined model of German and Austrian thinking. The

non-existence of numerous topics in French law, present

in the German model, is due to the simplified rules on

the transfer of ownership in the Code Civil. Moreover,

the French did not follow the more abstract model adhered

to in other Member States.

Very little academic work can be found on the topic of

transfer of ownership. French legal scholars generally

consider the transfer of ownership to be a minor legal

issue, due to the fact that in custom transfer commonly

takes place automatically. Hence, legal work specifically

dealing with the topic of transfer of ownership in the

French legal system is rather limited.

It must be noted that substantive changes in the field

during the 5 year period from 2004 until 2009.

Consequently, some provisions in the Code Civil gave been

amended, changing the numbering of the articles.

Notion of ownership and transfer system in French

property law

General Principles

French law encompasses the rules on rights and ownership

as part of the Droit des Biens (Law of Goods). This “group” deals

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with the different types of assets and the various ways

in which they can be used. The Code Civil does not define

“Biens” (“goods”). Nevertheless, article 2260 of the Civil

Code provides that “goods” should be understood as

“assets”. “Assets” merely amount to rights that have an

economic value and that can be owned. Hence, French legal

scholars should refer to the transfer of assets, although

generally scholars still use the term “goods”. This is a

minor practice that can be observed in the terminology in

the realm of the topic of transfer of ownership.

The French legal system makes the distinction

between two legal methods regarding the use of assets;

right in rem (known as droits reels in French law) and rights

in personam (amounting to the obligations, known as droits

personels in french law). Both rights are subjective; they

only confer rights to individual parties. Recently, droits

intellectuels (intellectual rights) were also developed in

France.

There is no official numerus clausus in the French property

law rules, however in practice there are actually merely

two rights to be found in statutes

The rules governing property law can be found in the

Code Civil4. Articles 711 and 712 CC provides the

different ways to acquire ownership. Additionally, legal

scholars have added two more ways of acquisition of

ownership, namely by operation of law and by means of

occupation5. Articles 1582-1701 CC govern the rules on

4 Faber & Lurger, 2011, volume 4, page 27.5 Terré et al., 1998, page 313.

7

sale of goods. Moreover, articles 2333-2354 govern

security rights. The Code Civil governs other aspects of

property law, stating all the articles is not relevant

for this part of the paper. Nevertheless, it is

noteworthy to acknowledge that additional rules governing

the transfer of goods/assets are not included in the Code

Civil but in other codes; such as the Code De Commerce

(Commercial Code)6.

Ownership- right in rem

The system of transfer of ownership is governed by the

solo consensus principle. Consequently, the parties involved

conclude transfer of property merely by means of an

express intent7. Nevertheless, a valid legal transaction

is mandatory for the transfer of property; such document

can be a contract. A number of criteria must be fulfilled

in order to arrive at a valid legal transaction; it must

have a valid causa (the French system abides to the causal

principle) and must give effect to the right in rem of

third parties. France has a causal system of transfer.

In accordance with the wording of article 544 CC8,

the right to ownership is the most powerful and extensive

6 Seube, 2005, page 4.7 The ‘uniform’ concept of transfer of ownership. See also Faber &Lurger, 2011, volume 4, page 27. 8 Article 544 Civil Code: “Ownership is the right to enjoy anddispose of things in the most absolute manner, provided they are notused in a way prohibited by statutes or regulations.”

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right in rem in French property law. Property rights are

absolute, exclusive and perpetual9.

The absolute nature of the right10 entails that the owner

withholds all rights over his/her property, namely usus,

fructus, absusus11 as well as erga omnes effect12. In accordance

with article 545 Code Civil; limits upon the absolute

right to property can only be created by means of law13.

Erga Omnes effect implies that the owner has the right to

claim against all parties, as long as it does not

infringe the right of others (only limitation to this

absolute right)14.

Ownership necessitates that only the owner (or the

several valid legal owners) can make use of the owned

goods, third parties may not transgress this rule; it is

the exclusive characteristic of ownership15.

The third characteristic of the important and

comprehensive right of ownership is the perpetual aspect

of the right16. The perpetual characteristic deals with

two distinct situations. Firstly, the right of ownership

will cease when the good no longer exists, the right last

9 Bouckaert, 2010, page 34. See also Faber & Lurger, 2011, volume 4,page 31. 10 Terré et al., 1998, page 107.11 Bermann & Picard, 2008, page 149.12 Bermann & Picard, 2011, page 33.13 See Article 545 Code Civil: “No one may be compelled to yield hisownership, unless for public purposes and for a fair and previousindemnity.”14 Bermann, 2008, page 305.15 Chabas, 1994, page 84. 16 Chabas, 1994, page 103. See also Faber & Lurger, volume 4, 2011,page 34.

9

as long as the good17. This is also known as the residual

right18. Secondly, the right of ownership does not cease

to exist in cases where the owner does not make use the

good19.

Additionally, another characteristic of the right to

ownership is the principle of droit de suite. The latter

principle allows owners to claim their property

irrespective of who holds the goods20. This principle was

developed by academic writings. Protection of property

rights is available in legislation; actions21 and

remedies22 exist.

System of transfer of ownership in France

General remarks

French property law has a uniform conception of transfer

of ownership. Hence, this theory entails that the

transfer of ownership takes place at ONE moment in

time23. The transfer takes place when both parties

expressly intend to make the transfer of ownership; solo

consensus24. The characteristic of solo consensus is specific to

17 Bouckaert, 2010, page 34.18 Honoré, 1961, page 161-128.19 Faber & Lurger, 2011, volume 4, page 34.20

Larroumet, 2006, page 24.21 Watson, 1968, page 96. See also Faber & Lurger, 2011, volume 4, page 39. 22 Faber & Lurger, 2011, volume 4, page 46.23 François Terré et al., 1998, page 318. See also Faber & Lurger, 2011, volume 4, page 75 and 27.

24 Mircioiu, 2011.

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French property law; it does not exist in German property

law for example. France has a causal consensual system of

transfer.

An ‘automatic’ transfer takes place during the one moment

in time during which the transferor passes on his right

of ownership onto the other party. Hence, there is no

formal declaration of intent for the transfer of

ownership. Nevertheless, the declarations of all involved

parties to the contract are implied25. However, formal

declarations occur in situations where the transfer of

ownership necessitates being effective against third

parties to the contract26.

Legal requirements and nature of transfer of ownership

There is no single mandatory form of transfer of

ownership under French property law. Generally, the

transfer takes place as a result of the express intent of

both parties; the transferor passes on the right of

ownership to the other party.

25 Zenati-Castaing & Revet, 2008, page 283.

26 Article 1865 Civil Code: “A transfer of shares of capital must bedrawn up in writing. It shall be made invokable against thepartnership under the forms provided for in Article 1690 or, wherethe articles so stipulate, by transfer on the registers of thepartnership.It may be invoked against third persons only after completion ofthose formalities and after recording.”

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The basis of transfer of ownership in France is the

principle of party autonomy27; parties are free to

transfer property by means of contract under the terms of

their wish, as long as they comply with the legal

requirements. The transferor must evidently own the good

in order to be able to transfer it.

As previously mentioned in this present text, a transfer

of ownership requires a valid contract in line with the

legal conditions laid down in articles 1108-1167 CC.

Articles 1108-1133 CC provide the rules governing the

formation of the contract, and articles 1134-1167CC lay

down the rules regarding the performance of the contract.

Article 1108 CC is the most noteworthy article displaying

the obvious intertwined nature of property law and

contract law together. Article 1108 CC provides four

legal conditions for a valid transfer of ownership. It

noteworthy to state that the four conditions are merely

general contract law conditions; consentement, capacité, objet,

cause28. The relevance and effect of property law on

contract law will further be discussed and developed in

the paper. Hence, the conditions present in both contract

and property law will not be further discussed here.

Under French property law the transfer of ownership

is of a consensual character29. This consensual nature is

27 Terré et al., 1998, page 316.28 Article 1108 Code Civil: “Four requisites are essential for thevalidity of an agreement: The consent of the party who bindshimself; His capacity to contract; A definite object which forms thesubject-matter of the undertaking; A lawful cause in theobligation.”29 Terré et al., 1998, page 316.

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directly derived from the law, namely articles 1138, 711,

938 and 1583 CC30. Consequently, the right of ownership

and the good are not transferred at the same point in

time31. The right of property is automatically

transferred when the contract is concluded; the good need

not to be transferred at this same moment in time32.

In conclusion, the simplified unitary French transfer

system displays the evident close connection and

interactivity between contract and property law in the

wording and application of the law. However, French

property law counts its independent and distinct rules

from other Member States upon certain elements of

transfer of ownership.

TRANSFER SYSTEM: GERMANY (1187 words) Hannah Mangel

Introduction

German Law depends on, as is characteristic for central

European jurisdictions, a concept of unitary right of

ownership, as is stipulated in §903 BGB. It stipulates

when a transferor is allowed to transfer ownership. All

rights and duties deriving from the right of ownership

are therefore transferred to the acquirer.33 The

transfer of movables is possible without further

30 Terré et al., 1998, page 316.31 Delebecque & Collart-Dutilleul, 2011.32 Faber & Lurger, 2011, volume 4, page 85.33 Faber et al., 2011 , page71.

13

formalities, as oppose to immovable as stipulated in §

929 BGB.

Principle of Separation and Abstraction

Germany’s private law depends on a strict separation

between the law of obligations, whereas a contract is the

willful/voluntary creation of an obligation in accordance

with § 311 BGB, and property law. This is due to the

legal theory of Friedrich Von Savigny. In German legal

theory this is called the Principle of Separation and

Abstraction. The basis of the transfer of ownership is

the agreement on the transfer.34 The principle of

separation has three aspects:

1. The contractual agreement (Verpflichtungsgeschäft) and

the real agreement (in rem = Verfügungsgeschäft) are to

be separated (Separation).

2. The legal basis for the real agreement is contained

in the contractual agreement. As they are separated,

the real agreement as such is without a cause, it is

abstract from the contract (material independence).

3. The validity of the one does not affect the validity

of the other (formal independence).35

The arguments for a doctrine of this sort have been named

as legal certainty and protection of bona fide

purchasers. Also, it relieves the third party bona fide

34 Faber et al., 2011, page 72.35 Wolf, 2005, page 194. See also, Faber et al., 2011, page 5.

14

purchaser from the duty to check whether the seller can

transfer ownership.36The contractual agreement is defined

as necessary to the creation of an obligation in

accordance with § 433 BGB, whereas the real agreement is

defined in § 929 BGB. This separation of regulation

manifests once more the division between the law of

obligation (Schuldrecht) and property law (Sachenrecht).

Basics of the functioning of the transfer system

The central element of agreement in German law is the

declaration of intention (Willenserklärung). Title 3 of the

BGB regulates contracts, which are entered into with the

existence of two corresponding declarations of intention,

c.f. §§145 ff. BGB. Also for the real agreement, an

understanding between the parties is necessary, and

therefore the existence of declarations of intention. For

movables this is usually done following the contractual

agreement immediately, and it may be without form. A

manifestation of this can nevertheless be found in the

paragraph regulating the transfer of immovables, namely §

873, which prescribes an agreement between the parties

with regards to the transfer of the right of ownership.

The agreement in rem is directed not towards creating an

obligation but to the immediate change of the legal

situation. The manifestation of its validity is none

other than the actual transfer of the right.37 This is

36 Füller, 2006, page 127.37 Wolf, 2005, page193.

15

made public by the transfer of possession.38 Here, the

principle of separation and abstraction becomes clear in

its application. The transfer of ownership is not a

consequence of the contractual agreement but of the real

agreement.39 With the contractual agreement one creates

rather an obligation (and a personal claim of the

creditor) directed towards the conclusion of the real

agreement rather than towards the transfer of ownership

as such. This means that the conclusion of the contract

as such does not affect the property rights of the

parties.

Consequences of the Principle of Separation

The principle of separation and abstraction has important

consequences, especially in practice, with regards to

validity and remedies. Firstly, it appears that under

German law a double sale of an object is possible, as the

contractual agreement remains untouched by the nemo dat

rule of property law.40 As the contractual agreement is

neutral, it is possible to contract about an object

twice. However, as the owner cannot transfer ownership

twice, the party to the second contract will have a claim

in tort against the owner. Note that the system of third

party protection arising under the German system is a

direct result of this separation between contract and

38 Faber et al., 2011, page 71.39 Faber et al., 2011, page 73.40 PEL/Lurger & Faber, 2011, page 407.

16

real agreement. It is a very different system when

compared to the French system, for example. 3rd party

protection in its essence is not necessary in such an

abstract system, as the transfer of ownership will be

valid irrespective of the validity of the contract. All

subsequent transfers then also are valid.

Remedies

Further, there are consequences with regards to remedies

due to the fact that the real agreement will remain valid

even when the contract is found to be void. Therefore,

there need to be separate remedies directed towards the

contractual and the real agreement.41 Where the

contractual agreement is subject to (most prominently)

the remedy of avoidance (§143 BGB), such a remedy cannot

be used towards the real agreement. The respective

remedies are found in a different part of the BGB. In

accordance with §812 I BGB the original owner can demand

revindicatio of the object if there has been unjustified

enrichment or on the basis of § 985 BGB if both the

contractual and the real agreement are invalid.

This could be due to a situation of identity of

defects (Fehleridentität), which is however not seen as a

break with the principle of abstraction but rather a

limitation to its effectiveness.42 This is the case when

one party has committed fraud or when one of the parties

does not have the capacity to contract, due to mental

41 Wolf, 2005, page 195.42 Prütting, 2010, page 14.

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illness or age.43 Identity of defects renders the

contract void, not avoidable. This is also the case under

a (arguably rare) situation of mistake, which affects

both the contractual and the real agreement. Normally,

mistake will lead to the avoidability of the contract,

whereas in the case of Fehleridentität, the contract and real

agreement will be void. Note that usually a real

agreement is not subject to the remedy of avoidance (see

the above section on remedies).44 Other exceptions to

the abstract transfer system are contracts, which are

contrary to bonos mores and if this is in line with the

intention of the parties (Geschäftseinheit), although this

may only be the case for movables, see §925 BGB.45

Eigenständiges Sachenrecht

The German legal scholar Jens Thomas Füller in his

seminal work “Eigenständiges Sachenrecht?” calls the

separation between the law of obligations and property

law an illusionary dualism and calls for an abolition of

the principle of separation.46 He gives several reasons

why contract law should, in his opinion, not be separated

to such an extent from all other areas of private law.

Although he does acknowledge that the principle of

abstraction is superior to the causal system when it

comes to explaining the transfer of ownership and the

43 Prütting, 2010, page14.44 Prütting, 2010, page 15.45 Faber et al., 2011, page 74.46 Füller, 2006, page 526.

18

retention of title but claims that this is only a

question of perspective.47 In causal systems, these

matters can be derived from the principle of party

autonomy instead. A further advantage is that the German

system succeeds in simplifying the sale out of a bulk.

However, the deciding moment can without any problems be

seen as a delivery with an intent directed towards

separation from the bulk and transfer of ownership of

exactly the separated goods.48 Füller concludes that

there is no justification for the existence of a

separation and gives possible solutions for the

integration of contract and property law.

TRANSFER SYSTEM: REPUBLIC OF IRELAND (1042 words) Anne

Konings

Introduction

Ireland, historically, was part of the United Kingdom

until 1922 and was, as England, part of a feudal system.

It should therefore not come as a surprise that their

system of transfer is inherently the same as the English

transfer system. Ireland also is part of the common law

system and its legal system is a mix between the Irish

constitution of 1937, English statute law and English

common law prior to 1922 and Irish statute law and Irish

common law post 1922.

47 Füller, 2006, page 547.48 Füller, 2006, page 548.

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Ownership and Possession

Ownership and possession under Irish law are classified

as real rights (in rem) as opposed to personal rights.

There is a distinction between property and obligations

in the common law systems; a contract regarding a

transfer of an object is therefore not the same as a

transfer. Ownership is difficult to define in common law

systems but what is clear is that it goes hand in hand

with possession. There is also not an exact definition of

possession, however there is a distinction between

possession in person and possession in law; for the

latter it can be the actual physical possession or the

intention to exclude others from use or control.

Furthermore three different degrees of possession can be

categorized namely actual possession, constructive

possession and custody.49 Acquisition of possession

usually takes place by delivery.

Possession in particular cases can even be seen as

conclusive evidence of ownership. This rule was

established in Haggan v Pasle50 where an owner of a piano,

mortgages it, retained possession and then sold it to the

plaintiff without informing him of the mortgage. The

plaintiff took possession but the original owner’s

landlord seized possession as payment for rent from the

original owner as he pleaded that the piano belonged to

49 Faber et al., 2009, page 180.50 (1878) 2 LR Ir 573.

20

the mortgagee. The court decided that the plaintiff was

the true owner of the goods.

It was determined by Bell that ownership could be seen as

the greatest right that can exist in relation to

property. As ownership is restricted by e.g other

property rights or falls under restrictions of the

private right of others, scholars as what is left after

lesser rights have been granted define ownership.

Consensual v Delivery

In Irish law, generally speaking, the transfer of all

rights happen at one single moment. However there is a

freedom between parties to make other arrangements.

Therefore it is possible that the transferee has

ownership but the possession is still with the

transferor. Under English law, a requirement of delivery

of the goods was necessary for the transfer of ownership

to be complete. Irish law followed this example;

therefore Ireland operates under a unitary transfer

system, which requires delivery (traditio).

Over the years however, two deviations to the delivery

requirement developed. It was acknowledged that gifts

don’t require delivery, but can be made by deed51 and, as

mentioned before, in sales contracts, ownership can pass

from buyer to seller when the contract is made without

the actual delivery of the goods. This has been

incorporated in the Sale of Goods Act (1893) and the

51 Standing v Bowring (1885) 31 ChD 282.

21

Irish Sale of Goods and Supply of Services Act (1980).52

Therefore, only in these two abovementioned situations,

there is a consensual transfer system in comparison to

every other situation where we still deal with a delivery

system.

Abstract or causal?

As was mentioned in the national report on transfer of

movables, the concept of abstract or causal has not been

debated in the common law system nor has there been any

case law on this topic. Van Vliet in his book proposes

that one can determine whether the system of transfer is

either abstract or causal by examining the effect of the

invalidity of the underlying contract on the validity of

the transfer. In that case we can determine that Irish

law falls under the causal system; a void contract does

not transfer title. An avoidable contract does transfer

title but both parties are obliged to return the

situation as it was before, e.g. all benefits should be

returned.53 Wolfgang Farber argued that s. 23 of the SGA

also hints at a causal system since it protects the

acquirer of good faith who bought from a seller with a

voidable title, which indirectly attests the dependence

of the transfer in itself on the underlying contract.54

Party autonomy

52 Sale of Goods Act (1893) art. 17(1).53 Faber et al., 2009, p 197.54 Faber et al., 2009, p 198.

22

In Irish law, party autonomy plays an important role

especially sale of goods. In s. 17 SGA 1892, as mentioned

before, outlines the fact that the intent of the parties

can be found in the terms of their contract especially in

regards to when the transfer takes place. Therefore the

general rule is that ownership passes at that point when

both parties intended it to pass. In other types of

transfers (gifts or property), party autonomy is limited,

in those cases actual delivery must take place55

Unascertained goods

Irish law is pretty clear about unascertained goods, s.

16 of the SGA 1893 provides that in case of a contract

dealing with unascertained goods, no property is

transferred to the buyer unless and until the goods are

ascertained. What exactly falls under ascertained is not

specified but it is generally accepted that it means

‘identified in accordance with the agreement after the

time a contract of sale is made.’56

S. 16 can cause problems in relation to bulk buys. In Re

Wait57, the owner of a cargo of 1000 tons on a particular

ship, sold 500 tons of said bulk. The buyer paid part of

the cargo in advance but before the cargo reached its

destination, the owner became bankrupt. The court decided

that the buyer was unable to claim any of the cargo as

the contract was about unascertained goods which had not

55 Faber et al., 2009, page 200.56 Re Wait [1927] 1 Ch 606.57 Ibid.

23

been separated from the bulk. In order to ascertain part

of the bulk, it must be physically separated from the

bulk.

The passing of property in unascertained goods is laid

down in s. 18 (5), it reads that in order for ownership

of unascertained goods to pass, the goods must be

unconditionally appropriated to the contract by one party

with consent of the other.58 Because no real agreement as

to when the ownership passes is specified, a real

agreement is essential to the parties to agree when the

passing occurs.

III. EXISTENCE OF EUROPEAN LEGISLATION OR CASE LAW

REGARDING THE TRANSFER OF OWNERSHIP? (884 words) (Zoé

Perret)

The transfer of ownership in three different legal

systems (Germany, France, Ireland) has briefly discussed

in the previous part in order to provide an overview of

the status quo and difference between distinct systems of

transfer of ownership. Furthermore, it is of relevance

for the purpose of this paper to observe the existence of

EU legislation or case law governing the transfer of

ownership. For the sake of clarity only the relevant EU

legal instruments will be discussed (i.e. CESL, PECL,

DCFR).

58 Sales of goods act 1893.

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The Principles of European Contract Law (hereinafter

PECL) was be drafted by a group of independent experts

from each EU Member States; it constitutes a collection

of principles governing certain aspects of private law,

more particularly contract law. The principles govern all

general rules of contract law (i.e., formation, validity,

content, performance, breach, remedies). However, the

PECL does not contain any rule governing the delivery of

goods.

There is a heated debate among scholars regarding the

existence or not of transfer of ownership regulated in

the PECL. Some scholars state the clear and evident

inexistence of transfer of ownership within the PECL; as

a matter of there is no explicit principle on that rule.

Nevertheless, it must be noted that contract and property

can never be entirely independent from another; contract

law and property are intertwined. Contract law effects

property, and vice versa. Hence, other scholars, as well as

the members of this group believe, that the PECL

implicitly governs transfer of property by means of

regulating contract law. Consequently, the principles

would have an effect on the transfer of property although

the instrument does not actually govern this principle.

The Common European Sales Law (CESL) is the result of

fierce negotiations. This instrument is intended to

25

facilitate contracts for the sale of goods and

services59. The CESL’s scope extends to contracts where

at least one party to the contract has its habitual

residence in the EU. Nevertheless, this instrument was

also the topic of heated debate relating to the transfer

of ownership as well as other topics.

The CESL was found to be unclear, scholars and

legislators expressed their worry regarding legal

uncertainty; the CESL did not receive as much support as

was forecasted. Moreover, and particularly relevant to

the topic of this paper is the scope and goal of this

instrument. The CESL did not explicitly regulate upon

general contract law rules such as the transfer of

ownership, as well as illegality, capacity60. Property

law, consequently transfer of ownership, was excluded

from the instrument’s material scope61. Article 91 CESL

can be interpreted as implying the principle of transfer

of ownership62; article 91 CESL lays down the obligations

of the seller. The latter is close to article IV.A-2:101

59 ‘UK Government Response to Common European Sales Law Proposal’,

December 3, 2012. Retrieved via http://www.mwe.com/UK-Government-Response-to-Common-European-Sales-Law-Proposal-12-03-2012/?PublicationTypes=d9093adb-e95d-4f19-819a-f0bb5170ab6d, last visited26/05/2013.

60 ‘UK Government Response to Common European Sales Law Proposal’,December 3, 2012. Retrieved via http://www.mwe.com/UK-Government-Response-to-Common-European-Sales-Law-Proposal-12-03-2012/?PublicationTypes=d9093adb-e95d-4f19-819a-f0bb5170ab6d, last visited26/05/2013.61 Dannemann & Vogenauer, 2013, page 68-72.62Ibid.

26

http://www.mwe.com/UK-Government-Response-to-Common-European-Sales-Law-Proposal-12-03-2012/?PublicationTypes=d9093adb-e95d-4f19-819a-f0bb5170ab6d






DCFR63. Nevertheless, this implied notion of transfer of

ownership is also a matter of interpretation as in the

PECL. The members of this group, believe that contract

and property law interact so closely that they must be

read and understood together or in parallel to each

other. The CESL should have expressly included the

transfer of ownership.

Hence, some gaps remain in the CESL, giving rise to the

application of domestic law in order to fill these gaps;

leading to independent domestic interpretations and legal

uncertainty. Consequently, the CESL is not a stand-alone

code of contract law; the CESL did not fulfil its

objective of being able to regulate alone and

independently on contract law64.

The DCFR expressly regulates transfer of ownership

in Book VIII65. The articles are detailed and legal

scholars have attempted to take many issues at hand and

resolve them; such as whether to use a unitary approach

or a functional approach. The DCFR drafters opted for the

unitary system of transfer, this appears to be one of the

most impactful choice of this instrument; it is

noteworthy to take into account that the DCFR was mostly

drafted following an Austrian system. Another important

and shocking choice made by the DCFR drafters is that

63 Dannemann & Vogenauer, 2013, page 591.64 UK Government Response to Common European Sales Law Proposal’,December 3, 2012. Retrieved via http://www.mwe.com/UK-Government-Response-to-Common-European-Sales-Law-Proposal-12-03-2012/?PublicationTypes=d9093adb-e95d-4f19-819a-f0bb5170ab6d, last visited26/05/2013.65 Van Vliet, 2011.

27




there is no ‘real’ agreement; consequently the transfer

is nor a juridical or legal act, which is incompatible

with the existing legal systems of transfer66. Although

the DCFR regulates the transfer of ownership, not all

aspects of the effect of property upon contract were

taken into account. Hence the legislation is not fully

functional yet, gaps remain.

Regarding case law, there have been some ECJ

mentioning the transfer ownership, particularly in cases

revolving around taxes. However, no relevant case law

could be found for the topic at hand.

Hence, there is a limited amount of EU legal

involvement in the transfer of ownership so far. The EU

has rather focused itself on adopting legislation

governing the enforcement of pre-existing Member States’

domestic property laws67. Directives regulating the

enforcement of different specific from of property exist,

such as intellectual property. However, this does not

mean that it would be an impossible task to draft a

common contract law code for the EU. For that goal to be

achieved drafters will have to consider both contract and

property law in order to find coherence and have a

functional system; otherwise the implementation will be

radically dysfunctional with national law doctrines and

principles.

66 Van Vliet, 2011.67 “The Directive on the Enforcement of intellectual propertyrights”. Retrieved viahttp://ec.europa.eu/internal_market/iprenforcement/directive/index_en.htm, last visited 28/05/2013.

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http://ec.europa.eu/internal_market/iprenforcement/directive/index_en.htm

http://ec.europa.eu/internal_market/iprenforcement/directive/index_en.htm

IV. THE SOLUTION CHOSEN BY THE DCFR (1094 words) (Hannah

Mangel)

The transfer of ownership under the CESL is mentioned in

Art. 91 CESL which regulates the obligations of the

seller. The transfer of ownership of the good is here

mentioned as the main obligation of the seller towards

the buyer. However, one cannot find any solution as to

what transfer will constitute. This will have to be

determined due to national law, which has been determined

as applicable in accordance with the Rome I Regulation.

It constitutes an area where there is gap filling.68

Delivery, which can relate to a transfer of ownership in

the national legal systems is expressly regulated in Part

4 of the CESL, which only relates to digital content.

However, in general no transfer system has been chosen

under CESL.

The authors of this paper therefore have decided to look

at the solution opted for under the DCFR to deduct a

European tendency with regards to a favoured transfer

system. As the DCFR is supposed to function much more as

a complete European civil law code,

The drafters of the DCFR have opted for a unitary

approach to ownership. Book 8 Article 1:202 defines

ownership as the “most comprehensive right a person, the

‘owner’, can have over property, including the exclusive

68 Proposal on a Common European Sales law, 2011, page 19 to 20 atparagraph 27 of the preamble.

29

right, so far as consistent with applicable laws or

rights granted by the owner, to use, enjoy, modify,

destroy, dispose of and recover the property.“ The

ownership will pass in the sense of the given definition,

meaning that partial transfer will not be possible. For

this occasion, the DCFR has designated the possibility of

the creation of limited property rights in Book 8,

Chapter 1. However, the drafters have opted for a

relative approach to unitary ownership. Art. 2:201

outlines the effects of the transfer of ownership. As

Subparagraph 1 prescribes, ownership is transferred with

effect between the parties as well as third parties. A

relative transfer of ownership cannot be found in the

DCFR. However, the unitary nature of ownership has been

put into perspective with regards to its extent.

Exceptions to the unitary nature of ownership can be

found in Book 8 Art. 2:201, subparagraphs 2, 3 and 4

(unpaid interest). One of the exceptions is the transfer

of risk, where it is possible that the risk does not

transfer with ownership. In general the passing of risk

is regulated in Chapter 5 DCFR, and it matches the

delivery approach.

The approach to transfer taken in the DCFR is that

of a causal tradition system.69 The causal nature of the

system manifests itself in Article 2:202 Sub. 1(d) d and

2 where the effect of initial invalidity is the

invalidity of the transfer, and when the contract is

69 Van Vliet, 2011, page 5.

30

avoided, transfer is treated as never having passed

between the parties. The causal system encompasses the

legal unity of the contractual agreement and the

transfer. It is also necessary to note that the transfer

will always need a valid legal ground in a causal

system.70

The DCFR rejects the concept of a separate real

agreement.71 The dogmatic approach to this matter marks

one of the most criticized principles of the DCFR. On the

one hand, the drafters argue that the existence of a

transfer of ownership can be derived from the performance

of the contractual agreement as its result.72 A separate

real agreement is regarded as too dogmatic and therefore

superfluous.73 It is further regarded as over-

protective.74Although it is problematic to assume the

intent of the parties to let ownership pass when the real

agreement has been entered into only “impliedly by

conduct”75, it is not needed as a separate agreement. The

drafters acknowledge practical advantages of the real

agreement, especially with regards to retention of

ownership issues but opt for excluding it, drawing

inspiration from member states laws.76

This approach is heavily criticized in commentaries.

70 Van Vliet, 2011, page 6.71 Van Vliet, 2011, page 7.72 PEL/Lurger, Faber 2011, page 444.73 Van Vliet, 2011, page 7.74 PEL/Lurger, Faber 2011, page 450.75 PEL/Lurger, Faber, 2011, page 444.76 PEL/Lurger, Faber, 2011, page 445.

31

Criticism revolves around the fact that the drafters

acknowledge that in order for ownership to transfer,

consent among the parties is needed, however denying that

transfer is a legal act. This is odd, as the definition

of transfer fits the DCFR’s own definition of a juridical

act in Book II; Article 1:101 sub. 2: a statement or

agreement, which is intended to have legal effect as

such. It is therefore unclear whether transfer is a

result of the contractual agreement or a separate

juridical act. It seems unreasonable that it be a result,

as Van Vliet points out, the handing over of possession

only means transfer of ownership if the intent of the

parties has manifested itself to that end, as the law

attaches different meaning to an act depending on the

intention of the parties.77 The legal meaning of

“delivery” within the causal tradition system can

therefore only be fulfilled when there is intent. The

study group has acknowledged this deficiency in the PEL

Acquisition Ownership78. It is consequently clarified

that the term “transfer” is to mean the effect that

occurs as consequence of the contract.79

The tradition/delivery system manifests itself in

the “delivery default rule”.80 The drafters rely once

again on the party autonomy maxim with regards to the

transfer. This means, if there is an agreement as to when

77 Van Vliet, 2011, page 8.78 PEL/Lurger, Faber, 2011, page 211.79 PEL/Lurger, Faber, 2011, page 407.80 PEL/Lurger, Faber, 2011, page 410.

32

ownership will pass, this will take precedence over the

general rule of Book VIII. This rule is a stepping-stone

for the possibility of retention of title clause in

contracts. However, if there is no agreement the delivery

approach set forth in 2:202 sub. 1 (e) will apply by

default, according to which ownership passes with

delivery of the object or where there is an equivalent to

delivery.

For sale out of a bulk, the DCFR has opted for a

special system, which makes it possible to grant the

buyer co-ownership in the bulk if the goods that will be

transferred have not been identified yet.81 The pre-

condition to this is however that at least the bulk be

identified. This is laid down in VIII. -2:305(1) DCFR.

This system being a copy (if only in parts) of the UK

Sale of Goods Act 1979, differences between the systems

must be mentioned. In the UK we can find a consensual

transfer system, as oppose to the delivery system in the

DCFR.82 This means that in the UK no delivery is needed

for ownership to pass, which gives much more leeway in

the operation of the co-ownership system. On the other

hand, in the UK, consideration (payment) is a pre-

condition for co-ownership, whereas under the DCFR this

is not necessary. This will be important in cases where

more units out of the bulk have been sold than actually

form part of it. Then, payment will be essential in the

UK for rules of third party protection. In the DCFR, this

81 Van Vliet, 2011, page 14.82 Van Vliet, 2011, page 14.

33

is not the case.83

V. POLICY QUESTIONS (744 words) (Anne Konings)

The goal of the proposals CESL and DCRF are ultimately to

design a set of rules, which consumers or businesses can

choose instead of Member State legislation. The main

policy objectives of these proposals are to enhance the

sustainability of the internal market in the EU by aiding

cross-border trade between both B2C and B2B transactions;

to achieve a high and uniform lever of consumer

protection; and to maintain freedom of contract.

In order to achieve this, these rules need to be suitable

for consumers and businesses in all Member States. As we

have seen so far in this paper on transfer of ownership,

out of three legal systems, there is no uniform rule.

Which means that with 27 (soon to be 28) Member States

finding an appropriate set of rules that will be suitable

for any Member State will be quite difficult.

In order to even start making rules on transfer of

ownership, one should debate on a few questions:

A general issue that needs to be taken into consideration

before we start discussing more specific topics is

consumer protection. One of the objectives of CESL is to

secure a high level of consumer protection. In relation

to this we have to address the passing of risk. If we opt

for a high level of consumer protection, at what point

should the risk transfer?


34

More specifically; what system of transfer would be best

suited for all Member States , a unitary transfer

approach preferred by ‘continental Europe’ or a

functional transfer approach favoured by the Nordic

countries. Or is it possible to not decide on a system of

transfer and let this be a gap that can filled with the

national laws of the Member states.

Secondly, should we include a uniform definition of

ownership in the proposal? Ownership has a different

meaning and relates to other aspects of property in

different Member States, in some countries, like the UK,

the right of ownership is not even defined. Therefore

maybe this is another issue that should stay undefined,

and can be determined by the national law of the Member

State. Another related issue to think about is whether it

would be best to separate ownership from transfer of

ownership. Also when considering if a definition of

ownership is needed, we have to take into consideration

limitations to ownership. Therefore we have to take into

account if rules on the passing of risk are needed and

are there going to be rules on retention of title.

Thirdly, should the proposal opt for a consensual

transfer system or a delivery system? If in the proposal

we do opt for a delivery system, another question that

should be answered is whether to include a rule on third

party involvement, e.g. when a carrier is involved.

Moreover, another big difference between European legal

systems is the causal versus the abstract transfer.

35

Should we opt for a system, which requires a transfer to

be based on a valid obligation or entitlement (causal) or

should we opt for the more German approach where the

transfer is based on the ‘real agreement’ (abstract).

Most of the European legal systems have some form of

party autonomy, varying on whether they have a delivery

or consensual transfer system. In that regard we need to

establish if we need to put it in the proposal or would

this be another issue left open for Member States to use

their national laws especially because so many countries

already have it in their national laws. If we do opt for

party autonomy, we need to decide to what extend it

should go especially of we opt for a delivery system. If

party autonomy would prevail in all/most situations, than

transfer of ownership would be left in the hands of the

transferor and the transferee and that would defeat the

purpose of a delivery system.

VI. Member state Positions

MEMBER STATE POSITION: GERMANY (1029 words) – Hannah

Mangel I6005839

The German Government’s position towards the CESL can be

looked at under 3 different aspects. Firstly, the

position towards the CESL as a whole, secondly, with

regards to the focus of this paper, whether Germany would

be in favor of inserting a transfer system and/or a

36

definition of ownership into the CESL and lastly, what

these would look like in their substantive nature.

Position towards the CESL as a whole

With regards to the overall attitude towards the CESL, it

can be said that especially the German Bundestag is not

in favor.84 The institution has issued a subsidiarity

complaint in line with Protocol 2, Art. 6 on

Subsidiarity. It holds that the Proposal for the CESL

violated the Principles of Subsidiarity on 1st December

2011.85 The German Bundestag argues that there is no

separate legal basis to introduce such a Sales law and

that the Commission is violating the principle of

conferral. The correct legal basis should be Art. 352

TFEU instead of Art. 114 TFEU.86 There has, since the

Solange I and II judgments of the BVerfG, been scepticism

with regards to the legitimacy of the exercise of the

competences of the EU institutions, and their supremacy

in the light of democratic legitimacy.87 With regards to

the substantive nature of the CESL, the Bundestag is

sceptical that the CESL will be of enough flexibility to

react to needed factual and legal amendments.88 Further,

the Parliament submits that from the German experiences

with the CISG, the most important barriers to trade are

huge physical differences and language barriers, much

84 Sensburg, 2012, page189.85 Sensburg, 2012, page 198.86 Rüfner, 2012. page 478.87 Halberstam & Möllers, 2009, p. 1243, p. 1247.88 Sensburg, 2012, page 201.

37

more that the different contract laws.89 A CESL must

therefore not be seen as first priority to enhance the

internal market.

Position on inserting rules on (transfer of) ownership

In line with Germany’s approach to property and contract

law, one can deduce its attitude towards introducing a

definition of ownership and a transfer system into the

Common European Sales Law in general. Due to the

principle of separation of abstraction inherent to German

law, two assumptions can be deduced: Firstly, the German

government is, as far as the German experiences with the

principle of separation (see above, question 2) are

concerned, of the opinion that a separation between

contract law and property law does function well. It is

however questionable whether this is the best solution

for a European instrument, which must take into account

the systems of all other member states as well in order

to properly function. There are German legal scholars,

which are of the opinion that the CESL will function well

as a supra-national instrument, albeit its differences to

the national law.90 Secondly, an assumption can be made

with regards to the functioning of the CESL within the

framework of the already existing German legal landscape

in this regard. This is due to the fact that the CESL is

not a standalone code (see Recital 27). It has gaps,

especially with regards to property law issues, which

89 Sensburg, 2012, page 200.90 Leible, 2012, page 5.

38

need to be filled with the national law that has been

determined to be the applicable law. If German law was

chosen to be the applicable law in line with the Rome I

regulation, one must deduce, that in order for the CESL

to function well within the German legal order, it would

actually be better to not insert a definition of

ownership and a transfer system into the Regulation. As

German law already adheres to the Principle of

Separation, the practical consequence of this would be

that only the German contract law will be replaced with

the CESL, and the German property law remains untouched,

which in the German case will actually ensure a better

functioning than a different solution. This would mean

that the German transfer system, due to its abstract

nature, could easily be applied to the CESL.

Position on a concrete system of transfer

Lastly, when one considers a concrete transfer system the

German legal culture would be able to accept, if this

became necessary, it makes sense to take the transfer

system of the DCFR as a reference. Here, the drafters

have chosen for a causal tradition system (see above,

Question 4). The German system can be characterized as an

abstract tradition system due to the fact that the

manifestation of the transfer of ownership is the

transfer of possession. Germany would, if this was chosen

as an example for a transfer system in CESL accept the

delivery default rule, however probably not the causal

39

nature of the system. Although causal does not mean

consensual, German academia will have problems accepting

the contract as legal base of the transfer. With regards

to legal certainty, a delivery system is the safer

solution in the eyes of the German delegation. A causal

system will also render gap-filling more difficult under

the German system. Especially with regards to the

objective (outward) approach to intention in the Common

European Sales law, which can be derived from Article 30

CESL German legal scholars, such as Prof. Dr. Rüfner have

voiced concerns.91 German law adheres to a rather

subjective approach to intention. Academia is therefore

worried about the application of the CESL to German law

and German law concepts. Therefore, the German legal

culture will not accept a consensual approach to the

transfer of ownership. It must be added that this would

also not be consolable with the German remedies

applicable to the real agreement.

As German law adheres to a unitary concept of

ownership, this would also be the one chosen for the CESL

by the German scholars. However, it must be debated

whether it is actually necessary to decide on a

definition (see Question 7 and 8). With regards to the

passing of risk, which is seen as a limitation to the

unitary concept if it does not pass with the transfer of

ownership, Article 142 CESL is in conflict with §447 BGB,

which regulates the passing of risk when carriers are

91 Rüfner 2012, page 481.

40

involved (Versendungskauf). According to German law, the

risk already passes where the seller has given up the

good to the first carrier, whereas ownership passes when

the buyer has possession of the goods. This is a

limitation to the unitary nature of ownership in German

law.

MEMBER STATE POSITION: FRANCE (1009 words) - Zoé Perret

In the sub-paragraph, the position of France regarding

the CESL will be discussed. France has clearly expressed

its general viewpoint concerning the CESL in the report

from the Assemblée Nationale of the 7th December 201192.

However, no specific substantive position could be found

regarding the transfer of ownership due to the fact that

this topic is not covered by the proposed regulation. The

report, deductions drawn from French policies and its

position regarding the optional instrument will be

studied in order to portray France position to the CESL

and transfer of ownership. Depicting and analysing

France’s perspective regarding CESL will aid in assessing

the legal changes to be made in order to adopt such a

ground breaking legal instrument of European law.

92 No 4061, Assemblée Nationale, Constitution du 4 Octobre 1958,Treizieme Legislature, Enregistré a la Presidence de L’Assemblénationale le 7 Décembre 2011. Rapport d’information depose par laCommission des Affaires Européennes sur le droit commun européen dela vente, présenté par Mme Marietta Karamanli. Retrieved viahttp://www.assemblee-nationale.fr/13/europe/rap-info/i4061.asp#P26_252, last visited 30/05/2013.

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http://www.assemblee-nationale.fr/13/europe/rap-info/i4061.asp#P26_252


France’s general position regarding the CESL will be

assessed as a means to provide an overview and complete

understanding of France position regarding the CESL;

generally and specifically regarding substantial issues

relating to the transfer of ownership. The more specific

topics relating to France’s position concerning the

transfer of ownership and the CESL have been identified

and limited to; the willingness of France States to

include a transfer system and/or a definition of

ownership. France’s willingness to adopt a causal or

abstract system especially with regards to 3rd party

protection will be discussed. Whether a consensual or

delivery/tradition system will be opted for especially

with the effects it has on transfers out of a bulk.

Lastly, it will be assessed whether the approach to

transfer of risk in the CESL have to be adjusted?

France’s general position regarding the CESL as a whole

France has expressly made its position clear regarding

the proposed regulation as a whole. France has voiced a

number of issues regarding the CESL. For the purpose of

this paper, only the main issues will be discussed;

merely to provide the reader with an overview.

France stressed that the ‘optional’ aspect of the

instrument only applies to the trader93. Hence, consumers93 No 4061, Assemblée Nationale, Constitution du 4 Octobre 1958,Treizieme Legislature, Enregistré a la Presidence de L’Assemblénationale le 7 Décembre 2011. Rapport d’information depose par laCommission des Affaires Européennes sur le droit commun européen dela vente, présenté par Mme Marietta Karamanli. Retrieved viahttp://www.assemblee-nationale.fr/13/europe/rap-info/i4061.asp#P26_2

42





do not have a choice of law once the trader has decided

to make use of the CESL94. Consequently the ‘optional’

nature of this instrument is only one folded.

Moreover, the Regulation provides the possibility for

Member States to also apply the CESL to domestic internal

trade and trade amongst companies. This is a clear step

towards the replacement of national law with the CESL95.

France is opposed to this.

Moreover, one of the main defects of the Regulation in

France’s viewpoint is the choice of Legal basis; art.

114TFEU. France has stressed that the CESL creates

further legal diversity by introducing yet another legal

system in the EU. Hence, the CESL does not harmonize or

approximates law; article 114 TFEU is not the suitable

legal basis for this regulation96. France has also

expressed the issues relating to the proportionality and

subsidiary principle.

52, last visited 30/05/2013. See also Austrian Federal Chamber ofLabour (Brussels Office), ‘EU Sales Law: Disappointment about draft report of theEuropean Parliament. Retrieved via, http://akeuropa.eu/en/eu-sales-law-disappointment-about-draft-report-of-the-european-parliament.html?cmp_id=7&news_id=1586, last visited 30/05/2013.94 Austrian Federal Chamber of Labour (Brussels Office), ‘EU Sales Law:Disappointment about draft report of the European Parliament. Retrieved via,http://akeuropa.eu/en/eu-sales-law-disappointment-about-draft-report-of-the-european-parliament.html?cmp_id=7&news_id=1586, lastvisited 30/05/2013.95 Proposal for a Regulation of the European Parliament and of theCouncil on a Common European Sales Law. Retrieved via, http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0635:FIN:en:PDF,last visited 30/05/2013.96 Proposal for a Regulation of the European Parliament and of theCouncil on a Common European Sales Law. Retrieved via, http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0635:FIN:en:PDF,last visited 30/05/2013.

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http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0635:FIN:en:PDF




http://akeuropa.eu/en/eu-sales-law-disappointment-about-draft-report-of-the-european-parliament.html?cmp_id=7&news_id=1586






In the report from the Assemblée Nationale97, France has

made clear that it rejects the instrument as a whole.

Nevertheless, substantial issues relating to the specific

topic of transfer of ownership will be discussed.

France’s position on transfer of ownership and the CESL;

answering the four identified issues

Firstly, assessing France’s position regarding the

inclusion of a transfer system or definition of ownership

within the CESL. France has a causal system; contract and

property are undivided in comparison with German property

law. The causal system requires a valid transaction for

the transfer of ownership. Under such conditions, a

definition of transfer of ownership and ownership are

needed to comprehend whether the transfer was valid. In

light of this, France would opt for a transfer system and

a definition of ownership in the CESL. The definitions

would allow for the CESL to operate as a ‘stand-alone’

code in line with France’s conception of property and

contract law.

Secondly, the choice of transfer system (causal or

abstract) is important to discuss due to the fact that it

influences policy choices extending to other fields of

property law, such as third-party protection. As

previously, mentioned, France operates under a causal

97 No 4061, Assemblée Nationale, Constitution du 4 Octobre 1958, Treizieme Legislature, Enregistré a la Presidence de L’Assemblé nationale le 7 Décembre 2011. Rapport d’information depose par la Commission des Affaires Européennes sur le droit commun européen de la vente, présenté par Mme Marietta Karamanli. Retrieved via http://www.assemblee-nationale.fr/13/europe/rap-info/i4061.asp#P26_252, last visited 30/05/2013.

44



system. Consequently, the original owner enjoys more

protection than bona fidei third parties who merely derive

their ownership from a non-owner party.

Hence, it would be implausible to opt for a causal

system without third-party protection. Nevertheless,

since France would most likely opt for this system of

transfer; the issue then to be resolved will be how more

far-reaching must be the third-party protection? With a

causal system, France’s logical position would be to opt

for extended third party protection. Consequently, the

author believes France would opt for a causal system with

an increased level of third-party protection. France

would not opt for the abstract system due to the fact

that it is not in line with French policy choices,

especially regarding the third party protection.

Thirdly, the issue whether France would opt for a

consensual or delivery/tradition system, especially with

the effects it has on transfers out of a bulk will be

assessed. France operates under a consensual system of

transfer of ownership, hence delivery is still existent,

but is achieve by means of mere consensus. A causal

delivery system would not be in line with the policies

opted for regarding transfer of ownership revolving

around consensus in France. Hence, France would opt for a

causal consensual system of ownership, regarding the

transfers out of bulk the delivery is also a mere

consensus; hence consensual system.

45

Lastly, for the purpose of the question regarding the

transfer of risk in the CESL, it is interesting to look

at the DCFR; like France the DCFR operated under a causal

system. The wording of article Article 2:202 Sub. 1(d) d

and 2 implies the causal tradition system98 of the DCFR.

Consequently, the approach to transfer of risk in the

DCFR would fit and be in line with France’s approach to

the transfer of risk. France would opt for a transfer of

risk system as provided in the DCFR. Hence, the CESL has

to be adjusted to a rule closer to the DCFR to be in line

with France’s position.

MEMBER STATE POSITION: REPUBLIC OF IRELAND (990 words)

Anne Konings

Ireland has not expressly stated their position on the

CESL, so far their consensus seem to be that it could be

both a challenge and an opportunity. Not surprisingly the

government of their neighbors in the UK have called for

evidence and opinion on the CESL and got a huge response.

In this part of the paper I will try and give a viewpoint

of Ireland’s position in regards to CESL in a general way

and based on the 4 topics we have specified.

General disposition on CESL

A big concern in the common law systems, the UK and

Ireland, is that the CESL is too different from their

system. The main argument in Ireland is that CESL is


46

based on different principles. Therefore, for established

businesses, who have been working with the traditional

contract and sales law, CESL won’t be beneficial. Also,

Paul Keane mentioned in an article that suppliers and

businesses will probably not opt for a new instrument in

markets where they have been actively involved with,

however, for new markets with which they haven’t

established a link with, CESL may be an attractive base

to find new businesses99.

Another viewpoint is that it will be a major challenge to

come to a consensus on the different views in relation to

CESL. Another opinion is that maybe instead of focusing

on making a new set of rules, we should firstly

strengthen the already existing directives.

The Law Society’s100 point of view of the CESL was

that for a stand alone code of contract rules, a lot of

things were missing. They mention the lack of property

law (including matters of title), especially regarding

transfer of ownership. They claim that the draft law does

not cover the transfer of title and is therefore not a

complete law on the sale of goods. Another problem they

had is that advice might still be needed on issues

outside the scope of CESL for example on different

99 CESL represents both a challange and an opportunity. Retrieved via:http://www.reddycharlton.ie/fileadmin/user_upload/documents/Article_-_CESL_REPRESENTS_BOTH_A_CHALLENGE_AND_AN_OPPORTUNITY_-_PK.pdf last visited 2-6-2013100 The Law Society Response to CESL Consultation. Retrieved via:http://international.lawsociety.org.uk/files/The%20Law%20Society_Response%20to%20CESL%20consultation_0512_Final.pdf last visited: 2-6-2013

47

http://international.lawsociety.org.uk/files/The%20Law%20Society_Response%20to%20CESL%20consultation_0512_Final.pdf


http://www.reddycharlton.ie/fileadmin/user_upload/documents/Article_-_CESL_REPRESENTS_BOTH_A_CHALLENGE_AND_AN_OPPORTUNITY_-_PK.pdf



approaches to stolen goods and if title can pass or on

the validity and nature of title retention clauses.

Member state position in regards to 4 specified topics

Firstly as regards to whether Ireland would opt for a

transfer system and a definition of ownership. Ireland,

as France, operates under a causal system in contrast to

the German abstract system. But in practice, there is no

legal debate in the UK or Ireland about causal v abstract

or even case law on this issue. Therefore just because

its transfer system is recognized as such by

‘continental’ academics, doesn’t mean that in Irish law

there is a notion of abstract or causal. Ireland might be

comprehensive on actually agreeing to a transfer system

unless it is the one they operate under. In relation to

that, they don’t have a definition of ownership in

itself; they operate under the term ’title’. Therefore it

is highly unlikely that they will approve of a definition

of something they themselves don’t have incorporated in

their laws. However, as we will discuss later, maybe it

is not even necessary to opt for transfer system and let

the national laws of the country fill the gap which would

be in conformity with Ireland’s wishes to maintain their

own identity.

As regards to third party protection or bona fide

parties, common law systems don’t offer any protection.

When a contract is void or avoided, the main consensus in

case law is that transfer of title never happened and

48

that therefore the third party has never been the owner

of the good. As there are no laws specifying third party

protection, it is difficult to say if Ireland would adopt

a set of rules, which does offer it. In case of a high

level of protection they will most likely not agree.

Secondly, the issue of choosing a delivery/tradition

or a consensual system especially in relation to the

effects it has on transfers out of a bulk. Ireland, as

mentioned before, operates mostly under a delivery

system. However, two deviations of the delivery rule have

been established in Ireland; one of them being linked to

sales contracts. In case of sale contracts, parties are

free to choose on when transfer occurs. In those

particular cases it could be said that Ireland operates

under a consensual transfer system. As CESL ultimately

wants to deal with sales law one could say that Ireland

could go either way. In relation to bulk buy, as already

mentioned in the previous part on transfer of ownership

in Ireland, it was established in case law101 that when

one buys a unascertained good in bulk, transfer of

ownership will occur at delivery which is more in

conformity with the delivery system.

Another issue that we identified is party autonomy;

Ireland and the common law systems value party autonomy a

great deal. As was mentioned before, even though at heart

Ireland is a delivery system, it is up for the parties to

decide on the terms of the contract as it is also up to

101 Re Wait [1927] 1 Ch 606.

49

the parties to decide on when transfer occurs. This also

coincides with passing of risk. In the Irish legal

system, risk passes at the point of delivery unless it is

otherwise specified in a contract. In this respect one

could conclude that Ireland would opt more for a delivery

system with a high level of party autonomy.

To conclude, in my opinion Ireland will not go for

CESL as it is now. Most of the principles laid down are

not in conformity with the legal system they have.

Especially related to the topic of transfer of ownership,

which has not even been incorporated in CESL. It has been

mentioned that there is a need for transfer of ownership,

as they find it is detrimental to a set of rules

governing sales law. Optimally, Ireland would opt for a

causal delivery system with a high level of party

autonomy.

VII. New rule and explanation of new rule

QUESTION 7 & 8

THE MODEL RULE AND EXPLANATION OF THE RULE (1429 words)

Hannah Mangel

Delivery

50

(1) Delivery of the Goods takes place when the

transferor gives up and the transferee obtains

possession of the Goods.

(2) If the contract involves carriage of the goods

by a carrier or multiple carriers, delivery takes

place when the transferor gives the goods to the

first carrier.

Transfer of Ownership

(1) Ownership will pass upon delivery.

(2) When a carrier or multiple carriers are

involved, ownership passes upon delivery by the

last carrier.

With regards to the policy questions that have been

identified under Point 5 this group has opted to include

a provision on the transfer of ownership in the CESL.

When considering the consistency with the already

existing CESL, several considerations present themselves.

Firstly, one needs to consider the objective of the CESL,

the facilitation of cross-border trade and consumer

protection. Also, the guiding principle of the CESL,

party autonomy, which is laid down in Article 1 of the

Annex, needs to be taken into account. In recital 30,

this has been named as so important that it should only

be restricted where and to the extent that it is

indispensable, especially to the extent that it ensures

consumer protection. This working group is under the

impression that in the instance of a transfer system and

51

a definition of ownership, party autonomy should be

restricted. To this extent, it disagrees with the

drafting group of the DCFR, which made the transfer

system only a default rule subject to party autonomy.

Given that the CESL is an opt-in instrument, this has

been deemed disadvantageous. Opting in to the CESL is

done only by an explicit choice of the parties and via a

2-step approach. It therefore does not seem reasonable to

design an opt- instrument with such a limited scope, and

then subsequently making this provision subject to party

autonomy. This is also unreasonable with regards to the

fact that it is questionable that it will be practical or

even possible or wanted by the businesses to negotiate

with the consumer. This working group has therefore opted

for the option with the most consumer protection.

Otherwise, we fear that the business will adjust the rule

and the consumer will be forced to comply with this.

Next, the question needed to be answered whether a

transfer system will function without a definition of

ownership inherent to the CESL. This working group has,

for several reasons decided not to include a definition

of ownership. Firstly, the separation between property

and contract law has to be taken into account. The

proposal itself states at Recital 27 that it is not

desirable to deal with issues of property law under the

CESL. These gaps are required to be filled by the law of

the national legislations. This working group has

considered this reasoning. It has found, however, that

52

the transfer of ownership is on the verge of being a

contract law issue, even if it is likely that there is no

consensus on this among the national legal systems.

The exclusion of property law, due to the huge

differences under national law, is deemed reasonable.

However, it is found that as the transfer of ownership

and the definition of ownership can be categorized as

being a crucial part for any sales contract, it is one of

the property law issues that should be considered under

the CESL. It was nevertheless questioned, whether it is

necessary to have a definition of ownership in the CESL.

This working group has opted for not including one. The

reason for this is the fear of the inconsistency of

national law remedies. It can, depending on the outcome

of the other working groups’ be argued that if remedies

will be inserted in the CESL, it might be possible to

include a definition of ownership, however in the light

of the information available to this group it is not

deemed reasonable, especially with regards to the

functionality of the gap-filling. This will make the CESL

compatible with definitions of ownership, whether unitary

or functional, in all member states.

It has been decided to opt for a transfer system,

albeit limited when compared to the distinctions made

under national law. With regards to a causal or abstract

transfer system, no decision has been made. This is due

to the fact that this group has considered this will

create problems with gap-filling under national law.

53

Where the German system would function better with an

abstract transfer system, this does not hold true for the

French system. Again, the main consideration has been the

functionality of the national remedies with the transfer

system. The feared outcome of making a decision of one or

the other is that it will influence the national contract

laws in a way that is inconsolable with national

definitions of exceptions to the regular transfer system

and definitions. This has been deemed a compromise to

make the CESL able to function with not only the Austrian

and German system of law. Consequently, it has been left

open whether delivery may be considered a legal/

juridical act or a consequence/result of the contract.

Where the advantages and disadvantages of delivery

and consensual systems have been considered, it has been

opted for what we would call a “limited delivery system”.

Generally, it is a delivery system, which is why a

provision on delivery was added, which has not been

included in the CESL proposal. The advantage of a

delivery system is that there is a specific point in time

where ownership passes and this is known and perceivable

to the outside world. This has also been considered the

favoured solution with regards to consistency with the

CESL. This is due to the rather objective approach to

intent in Article 30 (3) CESL. It reads, “Whether the

parties intend the agreement to have legal effect is to

be determined from their statements and conduct”. We can

deduce from this that the intention of the parties is

54

determined rather with regards to the outward appearance

of their conduct, which seems reasonable for the

provisions of a sales law. However, It did not seem

reasonable, to make the transfer system a consensual one,

when, due to the intention of the drafters the sales law

should master complicated situations with a cross border

dimension. A delivery system is therefore the safer

option. We feel that a delivery transfer system cannot

function without a separate provision for what delivery

constitutes. This is why a definition of delivery was

also developed. Inspiration was drawn from the national

legal systems.

However, the problem of delivery via one or more

carriers arises. Inspiration was drawn from the national

legal systems where delivery to the first carrier equals

delivery in the sense of the contractual obligation. This

seems fair, as posting an item to another country is

always a rather unpredictable situation. Therefore, it

cannot mean that the seller has only fulfilled his

obligation to transfer when the consumer has gained

control. For the instance of where there are one or more

carriers involved, this working group has therefore

decided to decouple the transfer of ownership from

delivery in the event of carriers involved. This ensures

a balance between the aim of consumer protection and

protection of the seller.

Returning for a second to a conception of ownership,

it has however appeared to the working group that

55

provisions in the CESL relating to the transfer of

ownership take a position with regards to a tendency

towards a conception of ownership. This has been further

adjusted by the model rule proposed by the group. In

concreto this is characterized by a provision on the

passing of risk in Article 142, which is present in the

proposal of the commission. When considering the DCFR as

a matter of reference, one can see that it has introduced

a unitary approach with limits, one of which is the

possibility to decide on the passing of risk and the

retention of ownership. This working group’s proposed

articles for the CESL in addition to the already existing

provision on the passing of risk, formulates a tendency

towards a unitary approach to ownership with limits,

however without expressly defining that the right to

ownership is unitary. This gives the member states leeway

in applying their own conception. We would like to think

of it as no set definition ownership but instead of

creating a limited amount of mandatory rules with regards

to ownership, whereas the rest is still up to the member

states. We would hope that this approach makes it

possible for the member states to operate their own

definition of ownership to the largest extent possible.

The fact that the definition will be contained in a

regulation leads to the fact that the notions “ownership”

and “delivery” will be subject to interpretation by the

CJEU. Therefore, provisions will need to be inserted into

56

the CESL, which require the interpretation of these

provisions in accordance with national law.

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