Debates over European private law frequently concern matters of ideology – how social or how liberal should it be – or of form – code versus common law – or of level of regulation – European level versus member state level. Underlying all these debates is a deeper one that is insufficiently recognized, that about the rationality of European private law. Historically, private law has always been characterized by two rationalities that can be called compensatory and competitive. I show how these two rationalities still characterize European private law in both form and substance, and how it is unlikely that one will ever win over the other, because both are complementary to each other. More importantly, I demonstrate how both rationalities have traditionally been represented in different forms and at different levels. The current bifurcation in European private law between the compensatory Draft Common Frame of Reference and the competitive regulatory directives is a fruit of this history, and not necessarily an undesirable state of affairs.