Учебный год 22-23 / Mistake, Fraud and Duties to Inform in European Contract Law (The Common Core of European Private Law)-1
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As the mistake regards a party’s name, the doctrine of falsa demonstratio may be considered. However, this doctrine gives a remedy if the wrong declaration has been made but not when the wrong idea is behind the declaration as is the case here. As Lady Windermere wanted to give the fan to Angela and not to Angel, this does not constitute a falsa demonstratio. There is no remedy for mistake.
However in Austria the validity of a gift depends on two formal conditions: the execution of a deed of gift and the physical transfer of property (if movable property). Since Angel has not actually received the fan, the gift is not valid anyway.
Belgium
Assuming the formalities have been complied with the gift is a valid contract. Lady Windermere can therefore invoke two remedies.
(i)As a donation is an intuitu personae contract (see Case 11), mistake as to the person of the donee is admissible in order to annul the gift.2 The mistake will however have to be excusable and the fact that Lady Windermere acted in quite an off-hand manner when entering into such an important contract is certainly not in her favour.
(ii)Lady Windermere could allege that the contract is void for absence of cause (arts. 1108 and 1131 of the Civil Code), if she could prove that she only gave the fan away because she wanted to give it to her daughter and that there is an absence of this decisive reason inducing her to contract.3
Lady Windermere will probably not have too much trouble in obtaining the annulment of the donation.
England
Lady Windermere is entitled to ask the court to rectify the deed so as to confer the gift on Angela, or to rescind the deed altogether. In either case, the gift conferred on Angel by the deed is revoked.
A deed is a formal document, which must make clear on its face that it is intended to be a deed, and must be signed and the signature witnessed.4 If a promise is contained in a deed, it obtains its
2E. De Wilde d’Estmael, Les donations, Repertoire notarial (Brussels, 1995), vol. III, book VII no. 56.
3 Ibid., at nos. 56 and 108.
4Law of Property (Miscellaneous Provisions) Act 1989, s. 1. No publicity or registration is necessary, and the beneficiary of the deed need not accept its benefit, nor even know of its existence, for it to create the obligation. A deed can also be used to effect a transfer of property rights.
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binding force by virtue of the deed, rather than the general rules for contract: consideration is not required (and so a deed can create a wholly gratuitous obligation, as here, where a simple contract cannot).
Rectification will be granted in the discretion of the court if the deed did not reflect the donor’s true intention, and as long as the donee cannot show a reasonable objection to the order.5
As for the claim to rescission: whilst the courts start from a position of assuming that the deed is valid and binding, it is possible to seek rescission where the mistake is sufficiently serious.6 A recent case spoke in terms that ‘wherever there is a voluntary transaction by which one party intends to confer a bounty on another, the deed will be set aside if the court is satisfied that the disponor did not intend the transaction to have the effect which it did. It will be set aside for mistake whether the mistake is a mistake of law or of fact, so long as the mistake is as to the effect of the transaction itself, and not merely as to its consequences or the advantages to be gained by entering into it.’7
This case involves a voluntary transaction, rather than a contract: a deed of gift where the mistake is as to the person to whom the gift is to be made. It is an error of drafting in the deed; and it is easily remedied. If, however, the transaction had been not voluntary, but in a contract under which Angel had given consideration, the approach to both rectification and rescission would have been different. Although the courts are not disposed to overturn a voluntary transaction easily, and so require evidence of a serious mistake affecting the nature of the transaction, the approach is certainly much more restrictive where a contract is to be set aside. The doctrine of non est factum is available to make a contract (and a deed) void for mistake, but only under much more stringent conditions, requiring the claimant to show a misunderstanding of the nature of the transaction and an absence of negligence on his or her part.
5It is not entirely clear what will constitute a ‘reasonable objection’. In Re Butlin’s Settlement Trust [1976] Ch 251 it was said that rectification of a voluntary settlement might be refused in the court’s discretion if there was a reasonable objection by the trustees of the settlement. Perhaps a court would refuse rectification if Angel had acted to his detriment in reliance on the undertakings in the deed being carried out; but there is no evidence of this anyway. The courts are much more reluctant to rectify a written contract, or a deed which contains a bargain, since the defendant’s position merits greater protection by virtue of his having given consideration.
6Lady Hood of Avalon v. Mackinnon [1909] 1 Ch 476: deed executed in favour of X, ‘in utter forgetfulness’ of the fact that the gift had already been made by an earlier deed:
second deed set aside.
7 Gibbon v. Mitchell [1990] 3 All ER 338 at p. 343 (Millett J).
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France
Under French law, Lady Windermere’s remedy would lie in asking the courts to annul her settlement either for mistake (erreur) or for absence of cause.
(i) As already seen, the likelihood of an action based on a mistake as to the person is subject to two conditions: the situation must fit within the framework of such a mistake and must be excusable. Mistakes as to the person are generally considered inoperative8 by French law. However, such mistakes are essential when contracts are intuitu personae, which is generally the case for gifts.9 A mistake relating to the person will justify annulment if the donor’s belief that she contracted in favour of a specific person induced her consent and the mistake related to a substantial quality of the donee.10 The courts examine the first element in concreto,11 and the second in abstracto.12 Thus Lady Windermere could annul her gift since these two requirements are fulfilled. Indeed, the fact that she believed she was giving the fan to her daughter Angela induced her to sign the deed.13 Secondly, the substantial quality of the donee inducing her to contract consists in Angela’s success in passing the bar exam.
On the other hand, the requirements that the mistake must be excusable render the chance of success of this action less certain. In certain circumstances the mistake is considered to be so gross that it will bar the
8Terré, Simler and Lequette, Les obligations, no. 220, p. 223, ‘mistakes which are not a source of annulment are considered ineffective, i.e. mistakes as to a non substantial
quality of the obligation, the person in non intuitu personae contracts, the economic evaluation of the object of a contract and the motives having led a person to enter a contract’.
9P. Voirin, Droit Civil (26th edn, Paris, 1997), vol. I no. 727, ‘Intuitu personae contracts are either motivated by benevolence, such as settlements, deposit, gratuitous agency, suretyship and free loans, or are based on a fiduciary relationship, for example
partnerships, contracts with doctors, solicitors, artists, etc.’; Talleur, L’intuitu personae dans les contrats (diss., Paris, 1938); M. Contamine, L’intuitu personae dans les contrats
(diss., Paris, 1974).
10Such a substantial quality can be the donee’s talent, skill, reputation.
11Judges will analyse what induced Lady Windermere’s consent at the moment the contract was formed; Civ 1, 26 October 1983, Bull civ I, no. 249; but evidence of the mistake when the contract was formed can be proved by elements subsequent and prior to the formation of the contract, Civ 1, 13 December 1983, D 1984. 340, note Aubert.
12Judges analyse the qualities that have been considered as substantial by the parties, Civ 1, 26 February 1980, Bull civ I, no. 66.
13It induced her all the more since she had no justification for giving the fan to her brother with whom she does not have a friendly relationship.
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annulment.14 It is arguable that in this case Lady Windermere behaved so rashly -- by not verifying that the document she signed did not conform to her wishes -- that she might not be excused by the judges.15 However, it is important to note that the mistake was due to a typographical error outside Lady Windermere’s control. It is thus submitted that the fact that Lady Windermere’s mistake was induced by the notary’s mistake, whom she could legitimately trust, may diminish the allegation of her negligence. Indeed the judges could well take this factor into account.
(ii) In the alternative, Lady Windermere may be able to plead absence of cause. Under French law the cause of a gift has long been identified as the intention to give. As far as gifts (gratuitous contracts) are concerned, this intention has been interpreted subjectively by the courts, that is, by looking at the reasons for making the gift.
In this case the reason why Lady Windermere intended to give a fan to her daughter was presumably because she had successfully passed the bar exam. Traditionally, it may have sufficed to plead that she had the intention of giving the fan, thereafter the mere fact that she did not give it to the right person would not have been a cause of action. Nowadays, however, it is admitted that the reasons that motivated Lady Windermere should be examined more closely. Therefore it seems that the fact that the fan was to be given specifically to Angela, and not Angel -- Lady Windermere’s estranged brother -- is sufficient to ascertain that there is an obligation without cause. The burden of proof lies on Lady Windermere to prove absence of cause.
Germany
In Germany, a notarised instrument is necessary to make a promise of a gift valid (§ 518 I). Apart from this, then according to German law there is no mistake relating to the identity of a person: that is to say, Lady Windermere does not make a mistake concerning the person to whom she wishes to give the present but rather what she states in the contract of donation. The question whether the signature made under a text that has not been read is voidable where the text diverges from the signatory’s
14Terré, Simler and Lequette, Les obligations no. 223, p. 225 ‘by not taking the elementary precautions before entering into the contract, (Lady Windermere) [. . .] was negligent. (Her) negligence will be punished by the court refusing to annul the contract: de non vigilantibus curat praetor.’
15The excusable character of the mistake is analysed in concreto, i.e. according to the circumstances of the case, the age, experience and profession of the errans.
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intention in making a declaration is a situation also discussed in relation to a notarised instrument.16 Thus, Lady Windermere’s mistake can also be framed as a mistake according to German law.
In any event, the contract (or the notarised instrument) is not automatically voidable: Lady Windermere signed a contract that was presented to her without even reading it through once. In so doing, she -- as it later turned out -- made a declaration that she had not intended to make; yet could she have assumed the risk of making such a mistake due to the fact that she gave up reading through the contract on account of her haste? The Reichsgericht itself had already limited the possibilities of annulment in the case where a signature was made under a declaration that had not been read. Since then, a distinction has been made between situations where the declarer made a certain assumption relating to the content of the instrument he signed and where he did not.17 When drawing this distinction, it is correct to say that the person who does not consider the contents of the text and signs under the text without hesitation normally also assumes the risk of making an incorrect assumption about the contents of the text. However, in every case exactly which risk it was that the declarer actually intended to assume must be examined.18
Because Lady Windermere was under the understanding that she had signed a contract of donation for the benefit of ‘Angela’, annulment of the contract in ‘Angel’s’ benefit would be allowed. Flume has nevertheless pointed to the fact that this rule is violated in cases where someone has entrusted someone with the preparation of text of a contract: if the person relied upon was authorised to this end, then the principal is forbidden from relying on a mistake made in respect of third parties. On the contrary, he must hold to the actions of the person relied upon.19 Only if, as in our case, the person relied upon (the lawyer) made a mistake himself is the principal (Lady Windermere) able to annul the declaration (§§ 119 I, 166 I). Because the lawyer obviously confused ‘Angela’ with ‘Angel’ then, according to this view, Lady Windermere could annul the gift. Certainly, she has to indemnify Angel if he suffered damage by relying on the gift (§ 122 I).
16 Cf. BGHZ 71, 260, 263. 17 Cf. above in Case 9.
18Even if he thought that the text reflected his belief he may assume a risk relating to the declaration if he gave his signature under the unread text; for example, where he was bound to take into account that a mistake occurred in the writing down of the document.
19Flume, AT II 454; following his opinion Soergel/Hefermehl, § 119 para. 16; MüKo/Kramer, § 119 para. 53.
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Greece
The contract of donation can be annulled for mistake. When Lady Windermere promises to give the fan without any quid pro quo to Angel, she has made a mistake as to declaration (art. 140 AK). According to art. 141 AK, such a mistake is fundamental when it affects a point of such importance for the contract that the party making the declaration would not have made it, had he known the true state of affairs. As already seen, the mistake must fulfil subjective and objective conditions both of which are met here. It is clear that subjectively Lady Windermere would not have made the donation had she known the true state of affairs. The objective criterion is that the identity of the person is important for the donation according to good faith and other generally accepted usage. It is accepted20 that in the case of a donation, a mistake will be more easily admitted than in the case of a synallagmatic contract. Lady Windermere’s fundamental mistake will enable her to ask the court to annul the donation.
Ireland
This is a case where Irish law is quick to provide a remedy for Lady Windermere. In this case, Lady Windermere may seek rectification of the deed so as to give effect to her original intention that the fan should be gifted to her daughter Angela rather than her brother Angel. Alternatively, she can annul the contract.
Italy
Article 1376 of the Civil Code provides that a gift is a contract but in order to be valid, a gift must fulfill certain formalities. Not only must the gift be made by a notarised act, which is the case here, but the donee must also accept the gift using the same formalities. If the gift has not been accepted by Angel it is therefore void. Moreover, even if the gift has been accepted, it is not perfect until the donor is notified of the donor’s acceptance and the donor may revoke the gift up until the moment when the gift is perfected (art. 782 of the Civil Code). Lady Windermere might still have time to revoke the gift or it might not be valid as Angel has not yet accepted it. If the gift has been perfected and Lady Windermere can no longer revoke the gift, she will have to try another legal ground. As a donation is a contract in which the motive must be taken into account, mistake as to the person of the donee is admissible
20 Stathopoulos, ‘Mistake Crucial for the Annulment of the Juridical Act’, p. 726.
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in order to annul the gift. In this case a mistake in the declaration might also be raised as an argument (also art. 1433 of the Civil Code). The Code’s provisions on mistake apply both in cases where there is a mistake in the declaration or where the declaration has been incorrectly transmitted.
The Netherlands
In principle, Angela has no remedy against Angel. Lady Windermere signed a deed in which she expresses the gift of her own diamondstudded fan to her brother, Angel, and if the deed was signed by her brother, before or afterwards, she is bound to the contract (art. 7A:1719 BW). From art. 184 Rv jo. 183 jo. 178 Rv it follows that proof by a notarised deed is binding. This is consistent with the character and purpose of a deed. If a notarised instrument were challengeable it would be useless in addition to any other written document. However, she may be able to rectify the deed. Since the statement of facts does not say that she has done so, for the time being the deed is binding. However, she may have a remedy against the notary if she establishes that she had properly instructed him and that it therefore was his fault that the wrong name was on the document.
Norway
For a start, a promise of a gift is as binding as other promises. In Scandinavian law, there are no requirements as to form that apply to such promises.21 A consensus exists that this is the general understanding, though with certain modifications. For instance, it is assumed that the donor, to a greater extent than with synallagmatic promises, can plead a mistake.22 In line with this, a mistake in the transaction23 as in the present case to a large extent could be pleaded even when the recipient has no knowledge of the situation.24
21As far as gifts between spouses are concerned there are however strict regulations as to form.
22See, for instance, R. Knoph, Knophs oversikt over Norges rett (10th edn, Oslo, 1993), p. 533; Ussing, Aftaler, pp. 476--7; B. Gomard, Almindelig kontraktsret (2nd edn, Copenhagen, 1996), pp. 53--4; and L. L. Andersen et al., Aftaler og mellemmænd (2nd edn, Copenhagen, 1991), p. 175.
23See the Norwegian report on Case 1 for an explanation of the term.
24From the drafts for the Danish, Norwegian and Swedish Contract Acts, which have been put together by Scandinavian cooperation, it appears that the wording in the chapter on invalidity has been chosen, among other things, not to obstruct such a solution.
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There is little doubt that, in Scandinavian law, one would consider Lady Windermere not bound by the declaration she had signed since Angel had not acted in reliance on the promise. Angel’s acceptance of the gift has no bearing in Scandinavian law since a non-synallagmatic promise binds regardless of acceptance. Angel has not actually relied on the promise and in addition, it could be reasonably asked if he should not have realised that this was a mistake.
Portugal
This is a case of mistake in the declaration. Therefore, according to art. 247◦ of the Civil Code Lady Windermere can demand the annulment of the contract if the other party (Angel) knows or should not be unaware that the element in which the mistake occurred was essential for her. It was obvious for Angel that the gift could not have been made in his favour. Therefore, the gift can be annulled.
Scotland
Lady Windermere’s mistake has not been on her intention but in the expression of it. This problem is also known as ‘defective expression’. There is no general remedy at common law under which the document can be rectified. However, the courts can use their equitable jurisdiction to achieve this result. An example of the courts using their equitable jurisdiction is North British Insurance Company v. Tunnock.25
To produce greater certainty in the courts’ use of their equitable powers, the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 was enacted. Under s. 8 a document transferring a right, here the right of ownership of the gifted item, which fails accurately to express the intention of the granter can be rectified so that it does so conform. On doing so the document is treated as if it was always so expressed.26 In ascertaining the true intent the court will refer to all relevant written and verbal evidence.27 However, the court will not alter the deed if it would adversely affect the interests, to a material extent, of one who was in ignorance of the defect but has had their position materially affected due to reliance on the deed.28 Therefore if Angel has acted, or omitted to act, in some way due to his belief that he is the owner of the gift and his position has altered as a result, the court will not intervene. Before
25 (1864) 3 M 1. 26 Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 s 8(3).
27Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 s 8(2).
28Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 s 9(1).
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refusing to so act, the courts would have to be satisfied that Angel’s reliance was reasonable.29
Alternatively, Lady Windermere could rely on Hunter v. Bradford Property Trust Limited.30 This held that in a gratuitous obligation the grantor’s error as to the legal effect of the contract was sufficient grounds for annulment. While the mistake must be essential, as the contract is gratuitous it is a recognised exception to the general rule against a party relying on her own uninduced mistake.31
Therefore, Lady Windermere could either seek the rectification of the deed under statute or have it rescinded at common law. The success of both is reliant on Angel’s behaviour; in statute his consent may be required if he has acted upon the gift and the common law rescission will be thwarted if he has acted in a way that prevents restitutio in integrum.
Spain
According to art. 623 ff. of the Civil Code, donations are only valid if the donee accepts the donation, if chattels are transferred in writing, the donee must accept the gift in writing. As Angel has not accepted the gift, it is invalid. In addition, art. 1274 of the Civil Code concerning the cause of contracts states that the cause of a gratuitous contract is the will of the donor. It would also seem that the contract could be annulled for lack of cause as Lady Windermere did not want to give the fan to Angel.
Comparative observations
This case concerns a mistake made by a donor about identity of the beneficiary upon making a gift. The first comparative question that comes to mind is whether a gift is a contract. It is worth mentioning that in England and Ireland a promise of a gift is not classified as a contract, it is a voluntary transaction. If a gift is made by deed, it does however have binding force. In all other countries a gift is classified as a contract. However, in a sense the different legal classifications of a gift are irrelevant for the outcome of the case. This is significant as it would suggest that there may be a common underlying rationale that helps explain
29Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 s 9(3)(a).
301970 SLT 173. 31 See Cases 1 and 2.
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the solution, even though legal categories differ. Secondly, however, the fact that a gift has been made raises the question of formalities. In some legal systems it has been emphasised that formalities prevail over issues of defective consent. Thus under Austrian and Spanish law, for example, the gift will be invalid because the donee has not accepted it in accordance with formal requirements. The third feature of this case relates to the type of mistake made -- is the legal categorisation significant? -- and the suitability of the remedy. The mistake here is entirely unilateral, the other party has not caused the mistake in any way, however in some countries the wrongly named beneficiary’s knowledge that he should not and could not be intended as the true beneficiary may have a bearing on the mistake. This is an example of how the term ‘unilateral’ can be somewhat ambiguous, only one party -- the donor -- has made a mistake, yet the donee may be, or even should have been aware of it.
France, Belgium, England, Germany, Italy, Ireland, Norway, Portugal and Scotland will allow the donor Lady Windermere to annul the gift on the grounds of mistake. In Germany, Greece and Italy the mistake is classified as a mistake in the declaration. Scots law refers to ‘defective expression’, Norway to a mistake in the transaction. It is interesting to note that German law could have come to the opposite solution, concentrating on the fact that the donor could have assumed the risk of the mistake, but each case is assessed on its facts, and the question of risk was considered inapplicable on these facts. Portuguese and Norwegian law stressed the fact that the donee should have known that the donor made a mistake. Belgian and French law have analysed the mistake as a mistake as to the identity of the person, which is essential when making a gift. Under English and Irish law, two remedies are available. The deed of gift can be rectified so as to substitute the material mistake (Angel) with the intended beneficiary, Angela. Alternatively, the gift may be annulled for mistake, since the mistake is sufficiently serious and affects the nature of the transaction. This formulation (that the nature of the transaction is affected) appears to be similar to the explanation offered by Belgian, French and Spanish law, that the contract may be annulled for absence de cause. Rectification may also be possible under Dutch law. Scots law offers the same two remedies of rectification or annulment (properly called reduction). However the legal formants are different from English and Irish law, since a statutory provision exists,32 giving
32 Section 8, Law Reform (Miscellaneous Provisions) Scotland Act 1985.