Commercial law

 
1. Introduction

 

In Denmark, there is generally little bureaucracy and the government continues to focus on easing the administrative burdens imposed on businesses. Therefore, Denmark is not considered to be a complicated place to do business and the business environment is positive and competitive.

 

However, companies considering doing business within the jurisdiction of Denmark will have to be familiar with the relevant laws governing the particular area of business within which they wish to do business.

 

2. Freedom of contract

 

The overriding principle which governs Danish contract law is the principle of freedom of contract. This means that the Danish Contracts Act and the Danish Sale of Goods Act provide very few mandatory rules applying to business-to-business relations as regards the formation and content of contracts. Therefore, the individual parties can negotiate, enter into a contract, and draft the contract almost in the way the parties decide, as long as there is no violation of third-party rights or public law such as competition law.

 

Each area of business will, of course, be governed by different sets of rules and regulations, which the parties will also have to abide by.

 

3. Interpretation

 

When interpreting a contract, a Danish judge or arbitrator will try to find out what the original intentions of the parties were when they entered into the contract and, on that basis, imply the necessary terms into the contract in order for the contract to give effect to these intentions.

 

If the intentions of the parties are not clear, an objective interpretation of the wording of the contract will be applied. Normally, it is assumed that the wording of the contract reflects the parties’ intention and thus the objective interpretation normally prevails.

 

If the intention of the parties cannot be established or the matter is not governed in the contract, the contract will be interpreted in accordance with the background law, consisting of the rules and regulations governing the area of business, customs, or previous market practice between the parties. It is assumed that the parties have not derogated from non-mandatory rules unless it is expressly stated.

 

Another fundamental principle of interpretation in Danish commercial law is that of contra proferentem or the draftsman’s rule. According to this principle, an ambiguous contract is construed against the party to the contract who drafted the contract and selected the wording. The principle applies in particular in connection with standard terms and contracts.

 

4. The Sale of Goods Act

 

The Sale of Goods Act dates back to 1906. Where the two parties have their places of business in Denmark, the Act applies to all contracts of sale other than contracts for the sale of immovable property. Consumer sales are also covered by the Act. Thus, some of the provisions apply exclusively to consumer sales and some provisions have excluded consumer sales from their scope of application. Contracts to which one party is a consumer are also covered by the Danish Consumer Contracts Act.

The Sale of Goods Act consists of mandatory provisions relating to consumer sales.

 

As stated above and indicated by the name - the Sale of Goods Act - the direct scope of application is limited to the purchase of movables. However, the Act is also to a large extent assumed to reflect the non-statutory, general principles of contractual obligations. Therefore, the provisions of the Act will apply unless otherwise agreed, expressly or by implication, in a contract or required by trade usage or any other custom.

 

5. The UN Convention on Contracts for the International Sale of Goods

 

Denmark has signed the UN Convention on Contracts for the International Sale of Goods (CISG). The Convention was incorporated into Danish law by the Danish International Sale of Goods Act, which entered into force in 1990. Thus, the rules of the CISG set aside the Sale of Goods Act with respect to international sales.

 

However, in connection with the ratification Denmark has declared that it will not be bound by part II of the Convention concerning the Formation of Contracts. This means that the Danish Contracts Act will apply if the contract is governed by Danish law or choice-of-law provisions refer to Danish law.

 

The Convention applies to contracts on the sale of goods between parties whose places of business are in different states

 

when the states are contracting states; or

when the rules of private international law lead to the application of the law of a Contracting State.

 

Sales between parties whose places of business are in the Nordic countries are not governed by the Convention due to a "neighbouring country reservation". Furthermore, consumer sales are not governed by the Convention. This means that the Danish Sale of Goods Act applies where the rules of private international law lead to the application of material Danish law. Furthermore, Danish businesses often explicitly choose to apply the CISG rules when contracting with non-Danish businesses.

 

6. Limitation of liability

 

The freedom of contract with regard to commercial contracts also applies in relation to the possibility of limiting or excluding liability between the parties to a contract. Provisions limiting the liability of one party to a contract will be interpreted in a restrictive manner to ensure that the limitation is not to the detriment of one party.

 

Limitations of liability may not be adopted in any unfair manner. Therefore, it is not possible to limit liability for damages caused by gross negligence or wilful misconduct and provisions limiting the liability in such situations will be set aside by the courts according to the general rule in the Contracts Act.

 

In accordance with the general rule, a contract or a specific provision in a contract which is unreasonable may be declared void. The invalidity of one provision in a contract will not automatically affect the rest of the contract. Provisions in a contract limiting liability with regard to personal injury will normally be declared void.

 

7. Standard terms and conditions

 

In various kinds of businesses, the normal course of business is to rely on standard terms and conditions. In relation to standard terms and conditions, it is important to distinguish between agreed documents and unilaterally worded documents, such as terms of business and conditions of sale.

 

Often applied agreed documents are the Nordic sale and delivery terms NL 01 and NLM 94, which correspond to Orgalime S 2000 and SE 94.

 

Agreed documents are generally accepted as expressing the intentions of both parties, whereas unilaterally worded documents often will be interpreted in accordance with the draftsman’s rule. However, if unilaterally worded documents express normal trade usage, custom or the normal course of business between the parties, it is more likely that such provisions will be upheld by the courts.

 

8. Consumer protection and the Danish Marketing Practices Act

 

The protection of consumers under Danish law is implemented through several acts of legislation, such as the Sale of Goods Act, the Consumer Contracts Act, the Danish Act on Consumer Complaints and the Danish Credit Agreements Act. These Acts form an extensive consumer protection scheme, which consists of mandatory legislation in favour of the consumer.

 

The Marketing Practices Act is also an important statute to be observed by?Danish businesses when planning the contents of their marketing activities.

 

The Act applies to private business activity and to public activity to the extent that products and services are offered to consumers. The general rule of the Act states that traders who are subject to the Act are to exercise good marketing practices with reference to consumers, other traders and public interests. The term marketing is a legal and not a technical term, which also encompasses competitive and market-related business activities. Good marketing practices are not a static term but a term which follows the development of the market and the society in general.

 

The general rule is supplemented by special provisions regarding amongst other things misleading advertising, protection of various intellectual property rights and consumer protection.

 

To supervise compliance with the Act and the principles of fair marketing practices in general, the Act introduces a Consumer Ombudsman, who enforces the provisions of the Act.