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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rise to the right to rectify errors failing to conform to the donor’s intention subject to the beneficiary’s lack of reliance on the deed. Otherwise, the right to annul exists as a result of case law33 and is a perfect example of Scotland as a mixed legal system. Since the mistake is essential, unilateral and uninduced (terms reminiscent of civil legal terminology) annulment may be granted as an exception to the general rule because the ‘contract is gratuitous’.

The mistake made in this case is distinct from the mistakes treated in all the other cases as the mistake relates to the terms of the contract. This kind of mistake is treated under art. 4:104 of the PECL as ‘inaccuracy in communication’ and assimilated to mistakes under art. 4:103. Arguably, since the PECL does not contain a consideration requirement, art. 4:104 could apply to gifts anyway.

Two salient features have been picked up by certain reporters. First, the question of the knowledge or constructive knowledge of Angel, the unintended beneficiary of the gift. If this approach is emphasised, it could be maintained that the mistake is not purely unilateral, since the other party knew about it.34 Secondly, the reliance (or lack of) made by Angel on the deed. This is mentioned indirectly under English law since it would affect the right to rectification (if the donee has a reasonable objection) whereas reliance has become a statutory requirement under Scots law. It is likewise taken into account in Scandinavian law. Why is reliance expressly invoked here? Normally protection is given to a contracting party who has given value and thus remedies for mistake are restrictive. Since the donee has given nothing and got something in return, the general reason is inapplicable. However, if the donee has relied on the gift, it will no longer be true to state that he has given nothing. In this case, the donee is not deprived of all protection, his reliance on the contract is an antidote. A similar approach is taken by Austrian, German and Greek law on mistake which constantly balances up the need to protect both parties by compensating the negative interest of the non-mistaken party or excluding annulment under Austrian law if reliance on the contract has actually occurred. Reliance apart, it could also be submitted that the protection of the donor and donee is based on moral considerations, i.e. that making donations should be encouraged -- or not discouraged -- and the will of the donor is paramount.

33Hunter v. Bradford Property Trust Limited (1970) SLT 173, see Scottish report.

34See Kotz and Flessner, European Contract Law, pp. 189 ff.

Finally however all analyses point to the same underlying rationale here -- the law can afford to be more flexible and less severe about admitting a mistake made in a deed of gift, since the economic considerations about disturbing the security of market transactions is irrelevant. Contract or no contract -- making gifts does not have the same economic impact on legal certainty.

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reasoning nor a commonality of legal concepts. It is for this reason that it has already been suggested that a truly common core directs itself not only at the commonality of the solution but also at the path by which the solution has been reached.1 It has been extremely important to detail and explain the number of different lines of reasoning used to reach each solution; if this divergence of reasoning is disregarded the value of comparative law would be diminished. That said, evidence suggesting that in eleven out of twelve cases, a majority out of thirteen different legal systems agree on the same solution and so share, to a certain extent, their attitude of what is a fair and just solution is valuable and important. Of the eleven cases that correspond to the defined common core, Case 10 was the sole exception where such a criterion cannot be identified. That said, our empirical observations are purely descriptive or ‘topological’.2 There is of course a great deal of controversy about whether the function of comparative law is positivist or normativist.3 To put this another way, it is clear that finding a common core is only one step of a process (or perhaps several processes) and does not inevitably lead to the inference that the solution is better or even desirable. A quantitative criterion is in this sense both misleading and insufficient. This highlights the meta-legal nature of the project.

At this stage our lines of enquiry may appear self-contradictory. How can we destroy the common law and civil law wall without producing a common core? Surprisingly, the results allow us to do just this: we have seen that the frontiers lie not in terms of legal traditions4 or legal families5 (although of course this sometimes occurs) but mostly in terms of legal values. To be more explicit, we have shown that clusters of replies can be found within each case, but the basis of the cluster is often difficult to identify. It may be due to philosophical, political, economic, social and moral values: all of which one could call

1 See R. Sefton-Green, ‘Le défi d’un droit commun des obligations’ in M. Delmas-Marty, H. Muir Watt and H. Ruiz-Fabri (eds.), Variations autour d’un droit commun. Premières rencontres de l’UMR de droit comparé de Paris (Paris, 2002), pp. 443 ff.

2 The epithet was coined by M. Bussani and U. Mattei in their article, ‘The Common Core Approach to European Private Law’, Journal of European Law, 1997--8, pp. 339 ff.

3 See for example, U. Mattei, Economic Analysis and Comparative Law (Ann Arbor, 1998).

4See P. H. Glenn, Legal Traditions (Oxford, 2000). No suggestion that legal traditions do not exist should be drawn from this statement, since their existence or their historical and contemporary significance are in no way denied.

5See K. Zweigert and H. Kötz, Introduction to Comparative Law (Oxford, 1998); R. David and C. Jauffret-Spinosi, Les grands systèmes de droit contemporain (11th edn, Paris, 2002).

extra-legal or extrinsic considerations.6 It is of course one thing to identify these common characteristics, which often create groups, the pattern of which sometimes requires explanation: for example, why does German law side with England, Ireland and Scotland in Case 2? Why do England and the Netherlands sit side by side producing comparable results in Case 9? Our first step will consist in presenting the evidence, the second in attempting to explain it. In this respect our aims are relatively modest and are confined to speculative inductive observations.

Empirical results: conclusions on the cases

Case 1: Anatole v. Bob

Three legal systems admitted mistake (Greece, Germany and Portugal) but if the mistaken party pays negative interest (Greek and German law solutions) then the remedy is ineffective in practice. Austrian law coincided with the remedy given by Portugal, this time under the head of laesio enormis.

The majority of legal systems (in which we would include Germany and Greece for the reasons explained above) did not award a remedy to the purchaser here. It should be noticed that the minority does not consist of common law countries.

There is a common core of eleven legal systems where no remedy is available to the seller, Anatole.

Case 2: Célimène v. Damien

Nine legal systems admitted a remedy on the grounds of mistake (Austria, France, Belgium, Germany, Greece, Italy, the Netherlands, Portugal and Spain). The actual remedy on the facts would not be annulment but either restitution of the monetary equivalent (France, Belgium, Germany, Italy, Portugal and Spain) or by adapting the contract (Austria and the Netherlands). Exceptionally, under Greek law the seller might be awarded restitution of the paintings, although the analysis is controversial.

Another group of two is formed by Austria and Belgium that would grant annulment on the basis of laesio enormis or its equivalent.

6See the guidelines given to the Trento working groups. A civilian lawyer may well call these considerations or values ‘extra-legal’, although this could provoke a jurisprudential debate, since it is quite conceivable to explain these values as forming an intrinsic part of what the law is.

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Four legal systems gave no remedy for mistake (England, Ireland, Norway and Scotland). The statement needs further qualification. Norway does not know and use the concept of mistake as such. English and Irish law did not recognise that there is a mistake here. Scots law may admit a mistake here but failed to give a remedy in practice because the rules on restitution are more severe and are barred by the passing of property to a third party.

Nine legal systems, but not exactly the same nine as under mistake (Austria, France, Belgium, Greece, Italy, Norway, Portugal, Spain and the Netherlands), admitted a remedy on the basis of fraudulent nondisclosure. Fraud is preferable to mistake for evidential reasons and, in addition, damages may be cumulated with a claim to annul the contract.

Four legal systems (England, Germany, Ireland and Scotland) did not admit fraudulent non-disclosure on the facts. Three of the four do not recognise this concept and German law would not give a remedy in these circumstances. The attitude of these countries can perhaps be explained on the basis of an economic rationale, but this is to some extent speculative. In any event, this cluster destroys the common law/civil law dividing line.

If a practical approach is taken there is a common core of nine legal systems admitting a remedy but under three distinct legal grounds.

Case 3: Emile v. Far Eastern Delights

Three hypotheses are possible here, the second of which gives rise to a practically unanimous answer.

(i)If the seller honestly believed the contents of its sale catalogue were true, seven legal systems (Austria, Belgium, France, Greece, Italy, Portugal and the Netherlands) would give a remedy for mistake and three (England, Ireland and Scotland) for innocent misrepresentation. It is relatively uncontroversial that innocent misrepresentation overlaps conceptually with other (civil law) versions of mistake so this constitutes a common core. Again, the minority is not easily explicable. A cluster made up of Germany, Norway and Spain does not fit into a pattern and a variety of factors may be invoked to explain why these three legal systems diverge from the majority in their solution (e.g. no concept of mistake for Norway, lex specialis rules prevent mistake being invoked in Germany etc).

(ii)If the seller was fraudulent, e.g. knew that the contents of its catalogue were untrue, there is unanimity (except for Norway, see (iii)) that a remedy lies to the purchaser on the ground of fraud (Austria, Belgium,

France, Greece, Italy, Portugal, Spain, the Netherlands), or fraudulent representation (England, Germany, Ireland and Scotland). In English law the seller’s suspicion that the statement was untrue would suffice. In a sense the solution is unsurprising and wholly unobjectionable since a fraudulent disclosure is a clear-cut example. One could ask whether art. 4:107 of the Principles of European Contract Law represents a fusion of the various legal concepts as it would clearly apply here. One important difference must be highlighted: the PECL provisions treat liability as contractual not as precontractual (see (iii)).

(iii) The choice of remedy between defective consent and breach of contract has also been examined. In most legal systems a remedy will also lie for the purchaser for breach of contract. Norway provides a contractual remedy which is distinct from other contractual remedies in that it specifically covers the seller’s duty to disclose accurate information about the sale. Such a provision, imposing strict liability on the seller, avoids the purchaser having to invoke fraud, as above.

There is a common core for mistake and fraud; Norway is the exception. Norwegian law converges on the actual solution but note that the legal categorisation is quite distinct: the seller is under a strict liability to inform the buyer and his liability is contractual (as opposed to precontractual).

Case 4: Mr and Mrs Timeless v. Mr and Mrs Careless

(i)If the seller was not fraudulent, mistake could be invoked and was admitted by Austria, France, Portugal and the Netherlands. Italy might give a remedy on the basis of a fundamental contractual assumption. If these remedies are cumulated, four legal systems might give a remedy to the buyer on these facts.

In contrast, eight legal systems did not give a remedy under mistake, but once again the cluster is somewhat heterogeneous. England, Ireland and Scotland did not recognise a unilateral mistake as to quality; Greece considered the mistake too subjective. The prevalence of lex specialis prevented mistake operating under German law and Norway did not recognise mistake. In Austria and Belgium the mistake was barred as inexcusable. There is a common core that no remedy is available under mistake.

(ii)If the seller was fraudulent, fraudulent non-disclosure would take over from mistake for Austria, Belgium, France, Germany, Greece, Spain, the Netherlands, Norway and Portugal. Two distinct categories can be observed: Germany awards a contractual remedy (damages to cover the

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expectation interest) on the basis of contractual fraud as does Norway (on the basis of a breach of a contractual duty to inform), whereas all the other systems grant a remedy on the basis of precontractual liability. In contrast, the same does not hold true under English, Irish and Scots law. This case shows that certain countries impose a ‘higher’ standard of dealing or behaviour between the parties. This behaviour requires parties to consider one another’s interests (as well as their own). It has been suggested elsewhere that such an attitude can be explained on moral grounds and that the common law attitude is probably explained by a prevailing priority given to economic considerations.

A majority of legal systems would give a remedy for fraudulent concealment or breach of a duty to inform.

(iii) Austria and Germany and Italy also gave a contractual remedy for breach of the obligation to transfer the property with good title.

Case 5: Bruno v. The Local Garage

Solutions to this case were examined under the head of (i) defective consent and (ii) breach of contract.

(i)Ten legal systems admitted a remedy for fraud. Three admitted mistake and three innocent misrepresentation (see the remarks made in Case 3 on the functional equivalence of these two concepts). It is interesting to note that the mistake/misrepresentation cluster breaks through the common law/civil law wall.

(ii)Breach of contract remedies, variously defined as a guarantee against hidden defects, non-conformity or breach of description, also give rise to a majority solution admitting a remedy, if once again functionally equivalent comparisons are drawn. Comparing the different national concepts used to found breach of contract is admittedly speculative. The complexity of harmonising such conceptually diverse legal concepts may perhaps explain the presence of Directive 1999/44/EC.7 Subsequent case law interpreting the transposition of the above Directive will enable us to consider more clearly how or whether such functional equivalence can be made. In any event, before European attempts to harmonise,8 one of the issues raised by this case was that of determining the availability and reasons for choosing a remedy for defective consent or for breach of contract. It can be inferred that once the European

7It should be pointed out that not all national reporters have incorporated this Directive as it had not yet been transposed at the time of writing their report.

8Harmonisation will certainly not be total as art. 7.1 of the Directive allows a derogation in relation to time limits concerning second-hand goods.

Directive has been transposed, such a choice will be displaced to a certain extent. This induction confirms the increasingly residual nature of defective consent remedies observed in this study. Although the choice may not be entirely eliminated9 by the implementation of the Directive, it will inevitably be altered in the future.10

Case 6: Emmanuel v. The Computer Shop

A division as to legal concepts used is balanced against a certain harmony of solution.

(i)As far as remedies for defective consent are concerned, nine legal systems provided relief as follows: Belgium, Portugal, Greece and the Netherlands admitted mistake. France and Belgium raised the possibility of relying on a statutory duty to inform. Belgium, France and Spain admitted a variety of fraud. Germany, Greece, Italy and Portugal relied on breach of good faith culpa in contrahendo, now a precontractual duty to inform in Germany. Norway could invoke a statutory invalidity provision although this would not be used in practice.

(ii)Some of the systems provided remedies for breach of contract as an alternative; others provided remedies under both heads. Austria, Germany, England and Ireland might provide a remedy on the basis of a breach of collateral contract (relating to the existence of the maintenance contract). The Netherlands would provide a remedy for nonconformity. Furthermore, Norway and the Netherlands would grant a remedy on the basis of a contractual statutory duty to inform or help the other contracting party.

Only Scotland does not provide a remedy here. Twelve legal systems provide a remedy to the claimant with a considerable diversity of legal grounds.

In addition, a major enquiry as to whether priority should be given to precontractual or contractual remedies needs to be considered (see below).

Case 7: Cinderella

The solution reached by a majority that there is no remedy for the buyer is achieved by a number of analyses. It was unanimously agreed

9This statement should be qualified: the concurrence of such an action is considered to be of more concern in some legal systems than in others. To take an example, the French Law Commission of October 2000 explicitly proposed maintaining concurrent actions for non-conformity and mistake.

10It is suggested that the presumption of conformity (a concept open no doubt to multiple interpretations) would push a claimant to choose a contractual remedy since evidential difficulties will be alleviated.