Bent Iversen, Lars Lindencrone Petersen & Morten Wegener. Danish. Business Law. DJØF Publishing

Bent Iversen, Lars Lindencrone Petersen & Morten Wegener Danish Business Law DJØF Publishing

Bent Iversen Lars Lindencrone Petersen & Morten Wegener Danish Business Law Jurist- og Økonomforbundets Forlag 2010

Danish Business Law 4 th Edition 2010 2010 DJØF Publishing, Copenhagen Jurist- og Økonomforbundets Forlag DJØF Publishing is a company of the Association of Danish Lawyers and Economists All rights reserved. No parts of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the Publisher. Cover: Bo Helsted Print: Narayana Press, Gylling Binding: Damm s Forlagsbogbinderi, Randers Printed in Denmark 2010 ISBN 978-87-574-2132-3 Published with support from Margot and Thorvald Dreyers Fond DJØF Publishing 17, Lyngbyvej P.O. Box 2702 DK-2100 Copenhagen Denmark Phone: +45 39 13 55 00 Fax: +45 39 13 55 55 e-mail: forlag@djoef.dk www.djoef-forlag.dk

Contents Preface... 29 Chapter 1. Introduction... 33 by Morten Wegener 1. Business law as a branch of law... 33 2. The concept of legal rule... 35 2.1. General substantive content... 35 2.2. The legal system... 36 3. Various types of legal rule... 37 3.1. Introduction... 37 3.2. Obligation rules and competence rules... 38 3.3. Written and unwritten law... 38 3.4. The hierarchy of rules... 39 3.5. Non-mandatory and mandatory rules... 40 3.6. Precise and imprecise rules... 41 4. Sources of law and law source factors... 42 5. The legal decision... 43 Chapter 2. National source of law factors... 45 by Morten Wegener 1. Introduction... 45 2. The Constitution... 45 3. Legislation... 46 3.1. The statutory process and the importance of legislation as a source of law... 46 3.2. Reference places... 47 3.3. Travaux preparatoires... 48 4. Ministerial orders and other statutory instruments... 48 4.1. Origin and importance as a source of law... 48 4.2. Reference places... 49 5. Case law... 49 5

5.1. Origin and importance as a source of law... 49 5.2. Reference places... 51 6. Other forms of unwritten practice... 52 6.1. Legal customs and usage... 52 6.2. Codes and practices of specific lines of trade etc... 53 6.3. Administrative practice... 53 6.4. Practice from private dispute resolution boards... 54 6.5. Ombudsman s practice... 54 7. The circumstances of the case... 55 7.1. General on the concept of circumstances of the case... 55 7.2. The possible importance of law and economics... 56 8. Legislative interpretation... 57 8.1. The need to interpret legislation and the basis of interpretation... 57 8.2. Aids to interpretation... 59 8.2.1. Introduction... 59 8.2.2. Linguistic analysis... 59 8.2.3. The importance of travaux preparatoires... 59 8.2.4. The object of a legislative measure... 61 8.3. When statutory provisions are contradictory... 61 8.4. Various types of interpretation results... 62 8.4.1. Introduction... 62 8.4.2. Narrow interpretation... 62 8.4.3. Wide interpretation... 63 8.4.4. Contrary inference... 63 Chapter 3. EU law and other international source of law factors... 65 by Morten Wegener 1. The EU law. Nature of legal basis... 65 2. Some fundamental EU law principles... 68 3. The central EU institutions and their competence... 69 3.1. The Community institutions: General... 69 3.2. The European Council... 69 3.3. The Council of the European Union... 70 3.4. The European Commission... 71 3.5. The European Parliament... 72 3.6. The European Court of Justice... 72 4. EU law as a source of law factor... 74 4.1. Introduction... 74 4.2. Written sources... 74 6

4.2.1. The Treaties... 74 4.2.2. Regulations... 75 4.2.3. Directives... 75 4.2.4. Decisions... 76 4.2.5. Recommendations and opinions... 76 4.2.6. Other types... 76 4.2.7. The hierarchy of rules. The language... 77 4.3. Unwritten sources... 77 4.3.1. Decisions by the European Court of Justice... 77 4.3.2. Other unwritten source of law factors... 78 4.4. Interpretation of EU law... 78 4.5. Reference places for EU law... 79 4.6. The supremacy of Community law and direct effect... 80 4.6.1. The concepts of direct applicability and direct effect... 80 4.6.2. Which EU rules are directly applicable?... 80 4.6.3. Which parts of Community law have direct effects?.. 81 4.6.4. Supremacy of EU law... 82 4.6.5. The duty to apply EU interpretational practice to national law interpretation... 83 5. Co-operation outside the EU scope... 83 6. Other international source of law factors... 84 6.1. Introduction... 84 6.2. Ordinary public international law... 85 6.2.1. Subject-matter and nature of ordinary public international law... 85 6.2.2. The incorporation of public international rules in Danish law... 86 6.2.3. Source of law importance of non-incorporated public international law... 87 6.2.4. Other conflicts between public international law and national law... 88 6.2.5. Interpretation of rules of a public international law background... 88 6.3. International customs... 89 6.4. Other international materials... 90 6.4.1. Foreign court decisions... 90 6.4.2. Nordic legislative co-operation... 91 6.5. Reference places for international source of law factors... 91 7

Chapter 4. Survey of the Danish court system... 93 by Morten Wegener 1. Introduction... 93 2. Organisation of the courts... 93 3. Procedure in civil cases... 95 3.1. Parties and their claims... 95 3.2. Procedural principles... 96 3.3. The question of venue... 96 3.4. Procedural steps in first instance cases... 97 4. Appeals... 98 5. Legal assistance and free legal aid... 99 6. Arbitration... 101 7. Complaints boards hearings of consumer cases... 102 Chapter 5. The law of non-contractual damages... 105 by Bent Iversen 1. Introduction... 105 2. Non-contractual damages... 106 2.1. The basis of liability... 107 2.1.1. Fault liability (culpa liability)... 107 2.1.2. Vicarious liability... 108 2.1.3. Strict liability... 110 2.1.4. Presumption of negligence... 113 2.1.5. Children s liability and mentally disordered persons liability... 113 2.1.6. General justification defence... 114 2.2. The injured party s loss... 114 2.2.1. Which losses will be recovered?... 115 2.2.2. Limitation of plaintiff group... 116 2.2.3. May the injured party recover both from the insurance company and from the tortfeasor?... 116 2.3. Contributory negligence... 118 2.4. Joint tortfeasors... 118 3. Product liability... 119 3.1. The product liability developed in case law... 120 3.2. The Products Liability Act... 121 3.2.1. The concept of damage... 121 3.2.2. The concept of product... 122 3.2.3. The concepts of producer and intermediary... 122 3.2.4. The concept of defect... 123 8

3.2.5. The liability... 123 3.2.5.1. Producer s liability... 123 3.2.5.2. Intermediaries liability... 124 3.2.6. Joint liability and recourse... 124 3.2.7. Limitation... 125 3.2.8. Choice of law... 125 Chapter 6. Insurance... 127 by Lars Lindencrone Petersen 1. Introduction... 127 2. What is insurance?... 127 3. Various types of insurance terminology of the Insurance Contracts Act... 128 4. The contract of insurance... 128 5. The duties of the parties... 129 5.1. The duties of the insurer... 129 5.2. The duties of the insured and of the beneficiary... 130 5.2.1. The duty to pay premiums... 130 5.2.2. The duty of disclosure at the taking out of insurance.. 130 5.2.3. Duty to disclose increased risks... 131 5.2.4. The duty to observe safety regulations... 132 5.2.5. The duty to refrain from causing the occurrence of the insured event... 132 5.2.6. The duty to mitigate the loss/avert the damage... 133 5.2.7. The duty to notify the insured event... 134 6. The insurance compensation... 134 6.1. The amount of the insurance compensation... 135 6.1.1. Total loss... 135 6.1.2. Partial loss... 136 6.2. Overinsurance... 136 6.3. Underinsurance... 137 6.4. Double insurance... 137 6.5. Deductible... 137 7. Special rules in respect of life assurance and accident insurance... 137 8. Choice of law issues... 138 9

Chapter 7. Formation of contract etc... 139 by Morten Wegener 1. Introduction... 139 2. Further to the conclusion of the contract... 143 2.1. The model of the Contracts Act for formation of contract... 143 2.1.1. Offer... 143 2.1.2. Acceptance... 144 2.1.2.1. What is an acceptance?... 144 2.1.2.2. The period for acceptance... 145 2.1.2.3. Delayed acceptance... 146 2.1.2.4. Rejection of offer... 147 2.1.2.5. Non-conforming acceptance... 147 2.1.2.6. Who is contract partner?... 148 2.2. Formation of contract patterns other than that of the Contracts Act... 148 2.2.1. Standard contracts the adoption problem... 149 2.2.2. Quasi contract... 150 2.2.3. Will a party be bound by passivity?... 150 2.2.4. EDI... 151 2.3. Formation of contract on an international level... 153 2.3.1. Introduction... 153 2.3.2. Dispute solving through conventions... 154 2.3.3. Solutions via choice of law... 156 2.4. The right to withdraw in valid contracts... 156 3. Interpretation and gap-filling in contract... 157 3.1. Interpretation... 158 3.1.1. Interpretation elements... 158 3.1.2. Principles of interpretation... 159 3.2. Gap-filling... 160 4. Invalidity of contract (promises)... 160 4.1. Introduction... 160 4.2. Operative and non-operative invalidating factors... 162 4.3. Forgery and fraud... 163 4.4. Incapacity... 163 4.5. Mental incapacity etc. unsoundness of mind... 165 4.6. Duress... 165 4.6.1. Duress with physical or threatened physical violence and mechanical duress... 165 4.6.2. Other constraint... 166 4.7. Fraud... 166 10

4.8. Undue influence... 167 4.9. Disagreement between the will of promisor and the declaration given... 167 4.9.1. The rule in s. 32(1) of the Contracts Act... 167 4.9.2. The rule in s. 32(2) of the Contracts Act... 168 4.9.3. Pro forma promises s. 34 of the Contracts Act... 168 4.10. Breach of basic assumptions the general clause in s. 36 of the Contracts Act... 169 4.10.1. S. 33 of the Contracts Act... 169 4.10.2. S. 36 of the Contracts Act the general clause of contract law... 170 4.10.3. The presumption principle... 171 4.11. Invalidity for contract contents the setting aside of standard terms in particular... 172 4.12. Competition clauses... 173 4.13. Legal effects of the invalidity... 173 4.14. The Consumer Contracts Act... 174 4.14.1. Scope of the Act... 174 4.14.2. Ban against door-to-door selling... 174 4.14.3. Duty of disclosure in relation to distance selling etc... 175 4.14.4. Right of cancellation... 176 4.14.5. Other provisions under the Consumer Contracts Act.. 179 4.14.6. Withdrawal rules outside the Consumer Contracts Act... 179 5. Third party promises... 180 6. Formation of contracts via agents... 180 6.1. Introduction... 180 6.2. Agency general... 181 6.2.1. Agency without special identification... 181 6.2.2. Agency of special identification... 182 6.2.3. The agent s scope of authority... 183 6.2.3.1. Agency without special identification... 184 6.2.3.2. Agency of special identification... 184 6.2.4. Revocation of authority... 185 6.2.5. The legal relationship between agent and third party.. 185 6.2.6. The legal relationship between principal and agent... 185 6.3. Commission... 185 6.3.1. The legal position towards third parties... 186 6.3.1.1. Who becomes liable towards third parties?... 186 11

6.3.1.2. The property in goods in the commission agent s possession... 186 6.3.1.3. The property in the claim against the third party... 187 6.3.1.4. The property in the money paid by the third party... 187 6.3.1.5. The commission agent s unauthorized resale of the principal s goods... 188 6.3.2. The legal relationship between the principal and the commission agent... 188 6.4. Commercial agents... 189 6.4.1. Introduction... 189 6.4.2. Will a commercial agent have authority?... 191 6.4.3. The parties duty of fidelity... 191 6.4.4. The commercial agent s right to commission... 191 6.4.5. Competition clauses... 192 6.4.6. Termination of the agency contract... 192 6.4.7. How far may the rules of the Commercial Agents Act be deviated from?... 193 6.4.8. The legal relationship between the commercial agent and the third party... 193 6.5. Commercial travellers... 193 6.6. Other intermediaries... 194 Chapter 8. Sale of goods... 197 by Bent Iversen 1. Introduction... 197 1.1. The rules on sale... 197 1.2. The Sale of Goods Act... 198 1.2.1. Non-mandatory and mandatory rules... 198 1.2.2. Sale of specific goods and generic goods... 199 1.2.3. Contracts for the supply of goods to be manufactured or produced... 200 1.2.4. Commercial sale and other sale... 200 2. Duties of the parties... 201 2.1. Duties of the seller (delivery)... 201 2.1.1. Place of delivery... 201 2.1.2. Transport terms... 203 2.1.3. Time of delivery... 205 2.1.4. The seller s performance... 205 2.1.5. Passing of risk... 206 2.2. Duties of the buyer... 209 12

2.3. Temporal context between the duties of the parties... 210 2.3.1. Cash sales... 210 2.3.2. Special note on documentary credits... 212 3. Seller s breach... 212 3.1. Delay... 213 3.1.1. Affirming the contract... 213 3.1.2. Avoiding the contract of sale... 214 3.1.3. The remedy of damages... 215 3.1.4. The buyer s duty to give notice... 217 3.2. Defects... 217 3.2.1. Proportionate price reduction... 220 3.2.2. The remedy of avoiding the sale... 221 3.2.3. The right to claim non-defective performance... 222 3.2.4. The right to claim damages... 222 3.2.5. The seller s right to remedy a defect... 224 3.2.6. Notice requirements... 224 3.3. Defective title... 226 4. Buyer s breach... 227 4.1. Delay... 227 4.1.1. The remedy of affirming the sale... 228 4.1.2. The remedy of cancelling the contract of sale... 228 4.1.3. The right to claim damages... 229 4.2. Buyer s inability to pay... 229 4.2.1. Right of stoppage... 230 4.2.2. Anticipatory stoppage... 231 4.2.3. Retaining possession... 231 4.2.4. Notice requirements... 231 5. Claimant s default... 232 5.1. Claimant s default by seller... 232 5.2. Claimant s default by buyer... 232 6. Special note on avoidance... 234 7. The passing of property... 235 7.1. The relationship between the buyer and the seller s creditors.. 235 7.2. The relationship between the seller and the buyer s creditors.. 237 7.2.1. Cash sales... 237 7.2.2. Sales with reservation of title... 237 7.2.3. Consignment... 238 8. Restitution in sale of goods... 238 8.1. Where possession is not based on contract... 239 8.1.1. Theft... 239 13

8.1.2. Lost property... 239 8.2. Where possession is based on a void or voidable contract relationship... 239 8.2.1. Operative invalidating factors... 239 8.2.2. Non-operative invalidating factors... 239 8.2.3. Agency... 239 8.2.4. Invalidation in bankruptcy... 239 8.3. Where possession is based on a valid contract with conditional or unconditional duty to return... 239 8.3.1. Bailment... 239 8.3.2. Pledge... 240 8.3.3. Commission... 240 8.3.4. Reservation of title... 240 8.3.5. Cash sales... 240 8.4. Double transfer... 240 Chapter 9. International sales... 241 by Bent Iversen 1. Introduction... 241 2. Scope etc. of the Convention... 242 3. Part III of the CISG Convention: Sale of Goods... 244 3.1. General provisions... 244 3.2. The seller s obligations... 245 3.2.1. Delivery of the goods and handing over of documents... 245 3.2.2. Defects and third party claims... 246 4. The buyer s remedies in the event of the seller s breach of contract. 248 4.1. The right to claim specific performance... 249 4.2. The right to avoid the contract of sale... 250 4.3. The right to claim damages... 250 5. Obligations of the buyer... 250 5.1. Payment of the purchase price... 251 5.2. Taking delivery... 252 6. The seller s remedies for breach of contract by the buyer... 252 6.1. The right to affirm the contract... 252 6.2. The right to avoid the contract... 253 7. Passing of risk... 253 8. Common rules on the seller s and the buyer s obligations... 255 8.1. Anticipatory breach and instalment contracts... 255 8.2. The right to claim damages... 256 14

8.3. Interest... 257 8.4. Exemption from liability... 257 8.5. Effects of avoidance of the contract... 259 8.6. The preservation duty of the parties... 260 9. Documentary credit... 261 9.1. The concept... 261 9.2. Various types of documentary credit... 264 9.2.1. Revocable v. irrevocable credits... 264 9.2.2. Confirmed v. unconfirmed credits... 264 9.2.3. Payment documentary credit v. negotiation credit... 264 9.2.4. Sight v. long-term credits... 265 9.3. The credit documents... 265 10. Export credit schemes... 267 11. Incoterms... 269 11.1. Introduction... 269 11.2. The structure of Incoterms... 269 11.2.1. E terms... 270 11.2.2. F terms... 271 11.2.3. C terms... 272 11.2.4. D terms... 273 12. The carrier s liability... 275 13. Insurance of goods in international trade... 278 13.1. Choice of insurance form... 279 13.2. Insurance terms... 279 Chapter 10. Credit agreements... 281 by Bent Iversen 1. The Credit Agreements Act... 281 1.1. Validity of the reservation of title... 282 1.2. Satisfaction of the creditor... 284 1.3. Requirements for recovery... 284 1.4. Computation of the claim... 284 1.5. Valuation of the goods sold... 285 1.6. The consumer s redemption and exemption rights... 286 1.7. Recovery proceedings... 286 2. Commercial sales... 287 2.1. Common rules: S. 49 of the Credit Agreements Act... 287 2.2. Special note on reservation of title... 287 2.3. Special note on s. 2 of the Credit Agreements Act and credit consignment... 289 15

Chapter 11. Intellectual property rights... 291 by Morten Wegener 1. Introduction... 291 2. Copyright... 293 2.1. What qualifies for protection?... 293 2.2. Creation... 294 2.3. Who qualifies for protection?... 295 2.4. Copyright powers... 296 2.4.1. General substance of the copyright... 296 2.4.2. Exhaustion of copyright... 297 2.4.3. Special note on the right of performance... 299 2.4.4. Special note on moral rights... 300 2.5. Other limitations of the exclusive right... 300 2.5.1. The copying right... 301 2.5.2. The right to quote... 303 2.5.3. Other limitations... 304 2.6. Infringement of the exclusive right by copying... 304 2.7. Duration of copyright... 305 2.8. Related rights... 305 3. Patents... 306 3.1. What qualifies for protection?... 306 3.1.1. The invention concept... 306 3.1.2. Exempt areas... 307 3.1.3. The requirements of novelty and inventive step... 308 3.2. Acquisition of right... 309 3.3. Who qualifies for protection?... 310 3.4. Patent rights... 310 3.5. Special limitations of patents... 311 3.6. Duration of patents... 312 3.7. Revocation of patents... 313 3.8. Cross-border patents... 313 4. Utility models... 314 4.1. The concept... 314 4.2. Acquisition of right... 315 4.3. Scope of the exclusive right... 316 4.4. Duration of the exclusive right... 316 5. Design... 317 5.1. What qualifies for protection?... 317 5.1.1. The design concept... 317 5.1.2. Exempt areas... 317 16

5.1.3. The fundamental requirements for design protection.. 318 5.2. Acquisition of right... 319 5.3. Scope of exclusive right... 320 5.4. Duration of protection... 320 5.5. EU design and international design... 321 6. Semiconductors... 321 7. Trade marks... 322 7.1. What qualifies for protection?... 322 7.1.1. The trade mark concept... 322 7.1.2. The distinctive mark requirement etc.... 323 7.2. Acquisition of right... 323 7.3. Who qualifies for protection?... 324 7.4. Trade mark rights... 325 7.5. Special limitations of trade mark rights... 326 7.6. Infringement of trade mark rights... 327 7.7. Duration... 328 7.8. Details on EU trade marks etc.... 328 7.9. Special note on domain names... 329 8. Special note on know-how... 334 9. Remedies for intellectual property infringement... 335 Chapter 12. Marketing and competition law... 337 by Morten Wegener 1. Introduction... 337 2. The Marketing Practices Act... 338 2.1. Scope of the Act... 338 2.2. The Consumer Ombudsman... 339 2.3. The general clause. General provisions... 340 2.4. The general clause. Application in practice... 342 2.4.1. Disloyal market displacement... 342 2.4.2. Indecent etc. marketing means... 343 2.4.3. Pyramid selling etc.... 345 2.4.4. Unfair contract terms... 345 2.4.5. Hidden advertising... 346 2.5. Misleading and indecent marketing... 347 2.6. Duty to provide directions for use etc.... 349 2.7. Warranties... 350 2.8. Distinctive marks... 351 2.9. Trade secrets... 352 2.10. Marketing prohibition... 354 17

2.10.1. Direct marketing... 354 2.10.2. So-called sales promotion... 355 2.10.3. Trading stamps etc... 356 2.10.4. Draws and prize competitions... 356 2.10.5. Invitations to purchase... 357 2.11. Labelling and packaging regulations. Price labelling... 358 2.12. Special note on e-commerce... 359 2.12.1. Scope... 359 2.12.2. The marketing practices requirements posed on the provider... 361 2.12.3. Other rules... 364 2.13. Enforcement... 364 2.13.1. Sanctions... 364 2.13.2. Injunctions and orders... 365 2.13.3. Damages. Invalidity. Remedies for breach of contract... 366 3. The Competition Act... 368 3.1. Introduction. Purpose of the Act... 368 3.2. Scope of the Act... 370 3.2.1. Principal rule on activities covered... 370 3.2.2. Exemption in respect of certain effects of public regulation... 370 3.2.3. Exemption in respect of pay and working conditions. 372 3.2.4. Delimitation as towards EU law... 372 3.2.5. Special note on groups of companies... 374 3.3. Administration of the Act... 375 3.3.1. The Competition Council and the Competition Agency... 375 3.3.2. Appeals rules and judicial review... 376 3.4. General meaning and nature of market definition... 377 3.5. The prohibition against anti-competitive agreements etc.... 379 3.5.1. The principal rule contained in s. 6... 379 3.5.1.1. Definition of agreement etc... 379 3.5.1.2. The restriction-of-competition requirement... 381 3.5.1.3. Examples of prohibited agreements/terms... 381 3.5.1.4. Orders... 384 3.5.1.5. Invalidating factors... 384 3.5.2. The de minimis thresholds contained in s. 7... 384 3.5.2.1. The exclusions in s. 7(1)... 384 3.5.2.2. The modification in s. 7(2)-(3)... 386 18