The (ir)relevance of harmonization and legal diversity to European Contract Law - A perspective from Psychology

Gary LOW


Differences between contract laws of Member States are often said to impose costs on and deter cross-border trade, and in order to increase cross-border trade, these contract laws ought to be harmonized. This article promises a paradigm shift in considering whether there is a need for harmonization; and if so, what form it ought to take. A behavioural approach is adopted to answer two underlying questions: how do actors think about these differences when they decide to contract? How does the form of harmonization influence such decisions? Insights from disciplines like cognitive and social psychology are identified and applied to find out how actors think and what motivates them to make the decisions they do. Psychology reveals that most actors do not think about differences between contract laws, a point which questions the need for harmonization. Furthermore, most actors prefer the status quo, strongly suggesting that harmonization by way of optional rules may not achieve the desired result.