fail to coalesce and thus prevent consensus being reached. These matters are of a quite different nature, and sit together very uneasily in a single taxonomy. What the Common law’s classification does not do is to distinguish clearly issues of motivation from the substance of the contract, or to make it obvious why some types of relevant error have to relate to contract terms (unilateral and mutual error), others to fundamental matters (common error), and others yet simply to any matter which persuaded a party to contract (misrepresentation). The strong impression is conveyed of a law of contractual error which has been cobbled together from disparate considerations and cases, and added to over time in a not especially systematic way. That characterisation, if true, would suggest that rationalisation of the law of mistake would be desirable in the interests of legal science.

(iii)  The mixed legal systems

As mentioned above, Scots law has since the late nineteenth century followed a similar classification of errors as that utilised in English law, having grafted on to an earlier concept of ‘substantial’229 or ­‘essential’230 error largely derived from Roman law, the Common law’s stress on induced errors, as well as a stress on the commercial importance of upholding objectively manifested consent rather than the internal workings of the human mind. Recently, however, it has been suggested that the traditional scheme should be abandoned in favour of a taxonomy based upon the Germanic division between errors in motive and errors in transaction.231 The basic justification for such a division is that motive is generally not relevant to assessing what someone has done in law (including what someone has promised), and it is precisely the matter of what someone has promised (or should be taken to have promised) which is argued to be the proper enquiry for the law. In that enquiry, the question of what constitutes the transaction takes on a ­primary importance.232

229Stair I.x.13.

230Erskine, Institute, III.i.16; Bell, Principles, s. 11 (Bell saw an error in the substantials as one relating to the subject of the contract, the parties, the price, the quality of the thing in question, or the nature of the contract. The similarities with the Louisiana law, discussed next in the main text, are notable).

231See Law Society of Scotland, The Laws of Scotland, vol. 15, para. 686; MacQueen and Thomson, Contract Law in Scotland, paras. 4.45–66; Cameron et al., The Law of Scotland, paras. 6.21–34. The Germanic classification is discussed further below at pp. 251–4.

232The fullest explanation of what that means can be provided by considering the approach to error of German law, discussed below.

In Louisiana,233 the Civil Code (whose provisions on error are, like much else, based on French law) provides that error ‘vitiates consent only when it concernsacausewithoutwhichtheobligationwouldnothavebeenincurred and that cause was known or should have been known to the other party’,234 it being further provided that error concerns a cause when ‘it bears on the nature of the contract, or the thing that is the contractual object or a substantial quality of that thing, or the person or the qualities of the other party, or the law, or any other circumstance that the parties regarded, or should in good faith have regarded, as a cause of the obligation’.235 There are overtones in these provisions of Scot’s law’s ‘essential error’, both in its original form as relating to certain fundamental aspects of the contract (the substantia, a concern which perpetuates the earlier concern of the Roman law with the substance of the contract), as well as in the form as reinterpreted by the nineteenth-century courts to mean an error without which the contracting party would not have contracted. There are also some similarities to the approach of the DCFR (discussed below). The overall effect is that there is an attempt to meld both the idea of a list of essential qualities relating to contracts (the Justinianic Roman law approach) with the further idea that the error must have a causal effect upon the transaction. Operative error is clearly more than the merely private ‘error in motive’236 of German law discussed below, but must be an error which is either shared by both parties237 or else an error of A known of (or which ought to have been known of) by B.238 The Louisiana provisions pack a mixture of concerns into very terse provisions, and the effect is something of a muddle of different types of con - sideration. In addition, as in other systems, some cases of what can be styled error are treated as evidencing a lack of agreement and thus as disclosing no concluded contract between the parties.239 The overall approach to error is broadly similar to that of Scots law.

233See Hoff, ‘Error in the Formation of Contracts’. This article considers the provisions of the former Louisiana Code; the error provisions in the new Code are a much slimmed down version of the former, more complex, provisions.

234 CC Art. 1949. 235 CC Art .1950.

236Thus, in a contract for the purchase of a house, a private motive not disclosed by buyers to sellers was held irrelevant as a basis for challenging the contract: Bordelon v. Kopicki 524 So 2d 847 (La App 3 Cir 1988).

237Referred to in the Louisiana textbooks as ‘mutual error’, though it is what would be called ‘common error’ by the Common law. For an example, see Calhoul v. Teal 106 La 47, 30 So 288 (1901).

238Deutschmann v. Standard Fur Co. Inc. 331 So 2d 219 (La App 4 Cir 1976); Marcello v. Bussiere 284 So 2d 892 (La 1973); Universal Iron Works Inc. v. Falgout Refrigeration Inc. 419 So 2d 1272 (La App 1 Cir 1982).

239LaBorde v. Aymond 172 La 905, 135 So 913 (1931); Paterson v. Koops 10 Teiss 266 (La App Orl Cir 1913).

In South African law, there has been a traditional tendency in favour of focusing on the subjective meeting of the parties’ minds in deciding whether a contract has been formed.240 However, a doctrine of what is called justus error has been developed to inject an objective element in to the exercise, this doctrine allowing A to plead that it made a justifiable error in assuming that B appeared objectively to consent to the contract even though A later claims that it did not subjectively so assent. The effect of the doctrine is to protect A’s reasonable reliance upon the objectively manifested consent of B.241 The enquiry relevant to the doctrine of justus error has been stated as being whether

the first party – the one who is trying to resile – [has] been to blame in the sense that by his conduct he has led the other party, as a reasonable man, to believe that he was binding himself.242

There is thus, in South African law, a role for objectivity in preventing a contracting party through its conduct from misleading its negotiating partner.243 As in the other systems, there are also cases which are viewed as evincing dissensus and thus no concluded contract.244

All three mixed systems, though they adopt differing analyses and ­terminology in their attempts to separate relevant from irrelevant errors concerning the formation of contract, reach similar positions in practice: each holds that if parties are genuinely and reasonably in disagreement on essential aspects of the contract, then there will be a lack of consensus and no agreement; each holds that if A creates a reasonable impression in B’s mind that consensus has been reached, A cannot seek to have the contract annulled; and each stresses that such impression in B’s mind must be reasonable, disallowing B from taking advantage of a mistake by A if that error was known of by B. While the results may be similar, the analysis of each of the mixed systems has developed in a somewhat haphazard fashion. They would each benefit from a fresh look at the subject of error in order to adopt a more coherent taxonomy, perhaps along the lines of the Germanic analysis now to be considered.

240See Hogg and Lubbe, ‘Formation of Contract’, pp. 40–1.

241Such reliance must be reasonable. Taking advantage of a known error is unreasonable, and will not found the basis of a valid claim: see Horty Investments (Pty) Ltd v. Interior Acoustics (Pty) Ltd 1984 (3) SA 537 (W).

242George v. Fairmead (Pty) Ltd 1958 (2) SA 465 (A), 471.

243As occurred in National & Overseas Distributors Corp. (Pty) Ltd v. Potato Board 1958 (2) SA 473 (A).

244Maritz v. Pratley (1894) 11 SC 345.

(iv)  German law

The provisions on error in the BGB, found at §§119–24, are relatively succinct, and set out simply and clearly. As in most systems, the rules adopted represent a compromise between subjectivity and objectivity, between a declaration of consent and actual consent.

The background to the form and content of the German rules is that they represent, by and large, the view of Savigny (and later Windscheid) that those errors which matter are errors which result in a party’s will not being properly reflected in its declaration of intent: they are errors in the expression of the will. By contrast, Savigny saw errors of motive – the reasons why a party wants to enter into a contract – as largely irrelevant (except in cases of deception by the other contracting party).245 These two categories of error indicate that it is the will, and the expression of that will, which is the crucial concept in the German law of error. The traditional Roman analysis of error into errors in negotio, in persona, and in substantia, thus finds only a very limited place in the BGB.246

Savingy’s simple approach was adopted by the drafters of the BGB. In the adopted regime it is, note, irrelevant to whether or not a contract can be avoided for mistake that one party knew of another’s mistake,247 whether the mistake was a ‘common’ or shared one, or whether an error was self-induced (unilateral) or induced by another party (for instance, by a misrepresentation).

The primary BGB provision, §119(1), may be paraphrased as providing that a party who, when making a declaration of intent, was (i) mistaken about its contents, or (ii) had no intention whatsoever of making a declaration with the content in question, may avoid the declaration if it can be shown that he would not have made the declaration had he been properly appraised of the circumstances. The result of voidability, rather than voidness, supports the prima facie value of the promises as made by the parties, even if such promises are susceptible to avoidance at the instance of one of the parties if the terms of §119 are met. Where avoidance occurs, the parties must be restored to their original positions, and this is achieved, if compulsion is required, using an unjustified enrichment remedy (the Leistungskondiktion).

245As to cases of deception, see §123, discussed in the main text below.

246Errors of substance are mentioned in §119(2): see discussion in the main text, immediately following.

247Though it is not irrelevant, as will be seen, to the question of damages under §122.

The nod to errors in substantia comes in §119(2), where it is added that mistakes about those matters commonly regarded as essential characteristics of a person or thing are to be treated as declaration mistakes. What this seems to mean is that if a party makes a mistake about such an essential characteristic then, even if he does not declare it, the error can be pled. §119(2) thus appears to be an exception to the general rule that errors in motive are irrelevant. The provision is, for that reason, controversial, though the courts have restricted its application by holding that it does not extend to the price of an object, nor to cases where the claim in question is of a type covered by the regime of seller’s liability for breach of contract, nor to the creditworthiness of the other party.248

Overall, where there is a discrepancy between objectively declared intent and actual subjective consent, §119 shows a preference for the latter, so long as the disparity between the two manifests itself in what a party declared (rather than in its motives). It thus becomes crucial to see what was stated by a party in its declaration of intent, what the party expressed itself as intending to do.

The concession to objectivism comes in §122, which provides that a party seeking to avoid its declaration of intent must pay damages to the other party (or, failing this, to a third party) for losses caused in reliance on the validity of the declaration. Such liability is avoided if the party suffering the losses knew, or ought to have known, about the factor justifying the avoidance. This provision might at first look odd to non-German lawyers­ – why should the party who has suffered the error be the one to pay damages? – but it must be remembered that it excludes such a duty to pay damages where the other party was at fault. So, it is only in cases where a party wants to avoid a contract with a party who was not in fault, that the disturbance of the settled transaction triggers the duty to pay damages.

An example often given in German law to exemplify the distinction between relevant and irrelevant errors is a mistake in the price offered for a contract. If, for instance, A intends to bid €500, but mistakenly says he is bidding €5,000, this is a mistaken declaration which can be ­avoided.249 This is an example of a mistake as to content, the first of the two relevant types of error mentioned in §119(1). As seen earlier, this result would not prevail in the Common law, on the bare facts stated, given that such a

248See Markesinis et al., German Law of Contract, pp. 297–301.

249An example of this sort of case is seen in the decision of the Landgericht Hanau, NJW 1979, 721.

mistake would not be evident to the other party. Another type of declaration error is the second type mentioned in §119(2), that is one where a party had no intention at all of making a declaration of consent in the form expressed by the declaration, for instance where a party signs a contract of guarantee but is ignorant as to the nature of what it entails because he cannot understand the language it is written in.250 By contrast, if the mistake creeps in at the pre-offer preparation stage, during the offeror’s calculations, and eventually results in an offer being made which the offeror would not have wanted to make, this is said to be an error in motive and irrelevant. While that result would also be reached in Scotland and England, the view has been expressed by some authors that such a difference in result is hard to reconcile with the terms of §119(2).251

So-called (in English law) common errors are not specifically addressed in the German provisions. What is the position then if both parties share an error which is not reflected in objective reality? Some common errors are dealt with by means of interpretation: a shared mistake as to the meaning of a term may result in the courts applying the mistaken meaning to the contract, rather than the objectively correct meaning.252 If the shared mistake only affects motivation, however, (for instance, the mistaken belief that a certain transaction will exploit a perceived valuable need in the market), it will be irrelevant. Further cases may trigger application of the doctrine of the failure of the foundation of the transaction,253 thus giving a right to adjustment of the contract or termination.

There are questions of how §119 fits with §118, the latter providing that a declaration of intent not seriously intended, and made in the expectation that its lack of serious intention will not be misunderstood, is void. The point is that on some facts it may be unclear whether someone intended no obligation at all (in which case it is a §118 case of the apparent declaration being void) or whether some obligation was intended, but simply not one of this nature (in which case it is a §119 case of a voidable contract). The same act, from the view of the other party, may have the appearance of either of these two situations. So, for instance, a party might issue a letter intending it to be merely informal and not binding. This course of action might conceivably fall under §118 or alternatively be considered as a case of a declaration of intent intended to have one effect but in fact giving the appearance of another (and thus falling under §119). The BGH

250 An example is the decision in BGH NJW 1995, 190.

251  See Markesinis et al., German Law of Contract, p. 283.    252  RGZ 99, 147.

253 Markesinis et al., German Law of Contract, pp. 346ff.