Учебный год 22-23 / Mistake, Fraud and Duties to Inform in European Contract Law (The Common Core of European Private Law)

56 m i s t a k e , f r a u d a n d d u t i e s t o i n f o r m

consensus and contract at perhaps the same time as Connanus. They consistently judge the significance that defects in intention have on the valid conclusion of a contract according to the principle of subjective causality. Therefore, if the mistaken or deceived party would not have concluded the contract in full knowledge of the real facts, then as far as he is concerned, the contract is invalid. Mainly the proposals of Dominicus de Soto (1494--1560), Diego de Covarruvias y Leya (1512--77), Ludovicus Molina (1535--1600) and Leonardus Lessius (1554--1623) decisively influenced the school of natural law in the seventeenth and eighteenth centuries.82 The Dutchman Hugo Grotius (1583--1645) is regarded as the founder of this school: his work De iure belli ac pacis (1625) also made the new contractual theory popular in legal discussion.

Mistake

In Grotius’ view too, every defect in intention that has a causal connection to the making of a promise is significant.83 Samuel Pufendorf (1632--94), Jean Barbeyrac (1674--1744) and Christian Wolff (1679--1754) adopt this principle but, under the still immense influence of Roman sources, re-model it in various respects. Above all, they attempt to keep the purely subjective criterion of the causative nature of a mistake under control by means of objective criteria, in order to make general statements about the significance of certain mistakes. Titius and -- following him -- Barbeyrac opine for example, that only mistakes which are made with regard to a res necessaria contractus are operative; these may be factual circumstances which are typically significant in the case of a contract of this type or those which the parties have made fundamental to the conclusion of their contract84 as part of a condition.85 Only in the case of a mistake concerning the identity of the contractual partner (error in persona) are Titius and Barbeyrac among those who continue to be guided by the question whether the mistaken party in

82For more details on this, see: Gordley, Philosophical Origins, pp. 85 et seq. and now Schermaier, Die Bestimmung des wesentlichen Irrtums, pp. 124 et seq.

83Grotius, De iure belli ac pacis, lib. II, cap. XI, § VI.

84Cf. G. G. Titius, Observationes ratiocinantes in compendium juris Lauterbachianum (Lipsiae, 1703), observatio 511: ‘. . . ea, quae vel negotii natura vel paciscentium destinatio tempestiva ac declarata requirit’; similarly J. Barbeyrac, Trad. de Pufendorf: Le droit de nature et des gens, ou systeme general des principes les plus importans de la morale, de la jurisprudence, et de la politique (Amsterdam, 1706), ad lib. I, cap. III, § 10, n. 2.

85On the important role of the condition (in particular of the conditiones tacitae) in the theory of contract law below at pp. 58--60.

a given case would have also concluded the transaction had he not made a mistake. This serves to explain on the one hand, the theory of mistake contained in the Prussian Allgemeine Landrecht (ALR 1794)86 and, on the other, that of Pothier and the Code civil (1804),87 which, as concerns a mistake relating to the subject of the contract, are guided by whether it is ‘objectively’ significant, whilst they judge mistake as to the person of the contractual partner according to its ‘subjective’ significance.

Perhaps at the same time, a fundamentally new proposal of the general theory of contract (and thereby the theory of mistake) arises -- again passed on by Pufendorf88 -- from Hobbes’ social contract theory:89 from the concept that every member of every society must be able to rely on the meaning of certain words and signs, Christian Thomasius concludes that no one can assert the claim that his intention diverged from his declaration. Thus, he also decided, logically, that every mistake had to injure the mistaken party himself.90 The principle drawn from this -- error nocet erranti -- quickly becomes popular in the discussion on the law on mistake, but is refined by the younger natural law jurists pursuant to its origin in the theory of reliance: only if the recipient of the declaration could rely on the intention inferred therefrom, did the giver remain bound to his declaration. However, if the recipient knew of the diverging intention of the giver or if he should have known of it then he cannot rely on his iusta expectatio, i.e. his reliance on the declaration.91 This principle of reliance theory was first anchored in statute

86ALR, 1. Theil, 4. Titel: § 75. A mistake relating to significant elements of a transaction or in the main subject of the declaration of intent makes the same invalid. § 76. A similar situation applies to a mistake in the identity of the one for whom a right is to arise from the declaration of intent as soon as it becomes clear from the circumstances that without this mistake the declaration would not be given in its existing form.

87Article 1110 of the Civil Code: ‘L’erreur n’est une cause de nullité de la convention que lorsqu’elle tombe sur la substance mˆeme de la chose qui en est l’objet. Elle n’est point une cause de nullité lorsqu’elle ne tombe que sur la personne avec laquelle on a intention de contracter, à moins que la considération de cette personne ne soit la cause principale de la convention.’

88Pufendorf, De jure naturae et gentium, lib. IV, cap. I, §§ 4--5; De officio hominis et civis iuxta legem naturalem, lib. I, cap. X, § 2 (Edition: Cantabrigiae, 1682; repr. New York, 1937).

89For more detail on this: Schermaier, ‘Europäische Geistesgeschichte’, pp. 78 et seq.

90C. Thomasius, Institutiones jurisprudentiae divinae (Edition: Halae Magdeburgicae, 1720), lib. I, cap. I, § 72.

91Thus, for example: J. A. H. Ulrich, Initia philosophiae iusti seu iuris naturae socialis et gentium (Ienae, 1790), §§ 215 ff.; G. Hufeland, Lehrsätze des Naturrechts und der damit verbundenen Wissenschaften (Jena, 1790), §§ 255 f.

in the ABGB’s law on mistake in 1811.92 The Pandect doctrine of the late nineteenth century seizes on this principle and refines it further. Its core however, originates from the late natural law discussion of the Hobbes--Pufendorfian theory of language. Today -- taking into account the corresponding regulations of the Principles of European Contract Law and the UNIDROIT Principles -- it forms the maxim of a modern regulation of the law on mistake.93

Clausula rebus sic stantibus and conditio tacita

Many natural law jurists fell victim to the temptation to deal with mistakes concerning present circumstances or incorrect expectations relating to future circumstances through the legal concept of conditio tacita (implied condition). Grotius had already believed, in his treatment of mistake, that every promisor only gave his promise on the condition that all circumstances would turn out as he had imagined them.94 In support of this, he relied on the classical and medieval clausula doctrine.95 According to this an obligation assumed in contract ceases following a change in the external circumstances pursuant to which the contract was concluded. The problem had already formed the subject of discussion in classical philosophy: Cicero cites the case where someone had taken a sword for safe-keeping and the depositor, who had in the meantime turned mad, demanded its return. The custodian did not breach his obligation to return the object in custody if he refused to surrender the sword.96 In this respect, even medieval jurists had referred

92Sections 871, 872, 876 ABGB 1811; these provisions were re-enacted in 1916. § 876 in the 1811 edition stated for example: ‘If the promisor himself and alone is at fault with regard to his mistakes of whatever kind, the contract remains valid; unless the circumstances were such that the promissee must have recognised the prevailing mistake.’

93Article 4.103 PECL; art. 3.5 UNIDROIT Principles; cf. also art. 6:228 of the Dutch BW.

94Grotius, De iure belli ac pacis, lib. II, cap. XI, § VI 2: ‘Similiter ergo dicemus, si promissio fundata sit in praesumtione quadam facti quod non ita se habeat, naturaliter nullam ejus esse vim: quia omnino promissor non consensit in promissum, nisi sub quadam conditione quae re ipsa non extitit.’

95This connection was hitherto disputed, cf. for example: Diesselhorst, Des Hugo Grotius Lehre vom Versprechen, p. 92; R. Feenstra, De oorsprong van Hugo De Groot’s leer over de dwaling, in: Met eerbiedigende werking. Opstellen aangeboden aan Prof. Mr. L. J. Hijmans van der Bergh (Deventer, 1971), pp. 96 et seq.

96Cic. off. 3,94 et seq. On this and other sources of the clausula doctrine see: R. Feenstra, ‘Impossibilitas and clausula rebus sic stantibus’ in A. Watson (ed.), Daube noster.

Essays in Legal History for David Daube (Edinburgh/London, 1974), pp. 77 et seq.;

M. Beck-Mannagetta, ‘Die Clausula rebus sic stantibus und die Geschäftsgrundlage in der Dogmengeschichte’ in La formazione Storica del Diritto Moderno in Europa (3 vols.,

to a condition which is ‘impliedly’ included at the conclusion to every contract.97 Grotius came across the clausula doctrine in both scholastic theory98 and Roman common law.99 Grotius’ innovation lies in the connection between the law on mistake and the clausula doctrine, which he created with help from the legal concept of the conditio tacita.

According to this, the promisor’s mistake ought to be operative due to the fact that he had only given his promise under the (implied) condition that his expectations are met. If the meaning of a promise (promissio) is judged according to the promisor’s intention,100 the construction of an ‘implied condition’ is largely unproblematic. This has to be viewed from Grotius’ doctrine of promissio, which was guided by the moral theory of the scholastics how to impute human actions: a promise is -- in Grotius’s doctrine -- the nucleus of legal acting and the main task of the law of contract is to elaborate rules for ‘imputing’ this sort of action: therefore the questions, what kind of promise it is, to whom it is addressed or what its contents are, can only be answered by the promisor’s will and intention. The assumption of a conditio tacita becomes difficult however, if the justified expectations of the recipient of the promise are considered, especially if the mistake is examined at the conclusion of the contract. Pufendorf had already conceded that a mistake relating to promissiones, could only be taken into consideration if the mistaken party recognisably ‘expressed’ his (incorrect) expectations.101 In the case of mistake relating to the creation of a contract (by exchanging two or

Florence, 1977), vol. III, pp. 1263 et seq.; G. Gieg, Clausula rebus sic stantibus und Geschäftsgrundlage. Ein Beitrag zur Dogmengeschichte (Aachen, 1994).

97Joh. Teutonicus, Gl. furens, ad C. 22, q. 2, c. 14; for further comment see: R. Zimmermann, ‘“Heard melodies are sweet but those unheard are sweeter . . .” Conditio tacita, implied condition und die Fortbildung des europäischen Vertragsrechts’ (1993) 193 AcP, pp. 134 seq.; Feenstra, ‘Impossibilitas and clausula rebus sic stantibus’, pp. 80 et seq.

98In this Grotius may have drawn directly from Lessius, De iustitia et iure ceterisque virtutibus cardinalibus . . . ad secundam secundae D. Thomae (edn: Venice, 1608), lib. II, cap. XVII, dub. V, n. 33.

99M. Rummel presents numerous sources of legal theory of the middle ages and early modern era: Die clausula rebus sic stantibus (Baden-Baden, 1991).

100Also Pufendorf, De iure naturae et gentium, lib. III, cap. VI, § 6; C. Wolff, Jus naturae methodo scientifica pertractatum (edn Halae Magdeburgicae, 1744, repr. Hildesheim/New York, 1972), pars IV, § 569; also on this: Zimmermann, “‘Heard melodies are sweet but those unheard are sweeter . . .”’, pp. 146 et seq.

101Pufendorf, De jure naturae et gentium, lib. III, cap. VI, § 6: ‘Verum si promissio praesentiam aut absentiam alicuius qualitatis tanquam conditionem prae se non tulerit, licet fortasse ea facta non fuisset, ubi de illa promissori constitisset; promissio nihilominus valida erit.’

more promises), he even stipulated that only those circumstances which at the outset the mistaken party had communicated to the other in the form of a condition would constitute a basis for the contract.102

Despite these restrictions, the model of the conditio tacita did not lose its popularity; it played an important role, to a lesser or greater degree, in Continental-European law on mistake until the end of the nineteenth century. It may be found both in Windscheid’s Voraussetzunglehre as an ‘undeveloped condition’103 and in Leonhard’s doctrine of mistake.104 The doctrine of the implied condition has also assumed a special role in English law on mistake since Couturier v. Hastie.105

Pandectism (1800--1900)

The historical school of jurisprudence -- or, as it is also known, the ‘Pandectist’ movement according to its major subject of observation the Pandects (Digests) of Justinian -- is primarily a German phenomenon. However, the influence that this school had, particularly in France, Austria, Switzerland and Italy, justifies its treatment as a European phenomenon. It also carries the second European wave of codification106 -- just as the natural law of the eighteenth century carried the first -- owing to which, its more important results are contained in rules still applicable today.

Mistake

The Pandectist law on mistake is dominated by the legal concept of Savigny’s ‘mistake in declaration’. This legal concept described the

102Pufendorf, De jure naturae et gentium, lib. III, cap. VI, § 7; for present analysis on this: Schermaier, Die Bestimmung des wesentlichen Irrtums, 4.2.2.3.

103B. Windscheid, Die Lehre des römischen Rechts von den Voraussetzung (Düsseldorf, 1850), pp. 80 et seq.

104R. Leonhard, Der Irrthum bei nichtigen Verträgen nach römischem Rechte. Ein Beitrag zur Vereinfachung der Vertragslehre (Berlin, 1882/1883), p. 512: ‘Those mistakes of a contracting party relating to circumstances are significant when his correct expectation thereof has been displayed in a manner recognisable to the other party as a necessary pre-condition of the contract’s validity.’

105Couturier v. Hastie (1856) 5 Clark’s Reports, HL 673; for further information and comment on this see: Zimmermann, ‘“Heard melodies are sweet but those unheard are sweeter . . .’”, pp. 149 et seq.; P. S. Atiyah, ‘Couturier v. Hastie and the Sale of Non-Existent Goods’ (1957) 73 LQR 340 et seq.

106Swiss OR (1881) and ZGB (1907); German BGB (1900); 3rd partial re-enactment of the Austrian ABGB (1916); Soviet ZGB (1922); Turkish Civil Law Code/Law of Obligations (1926); Italian Codice civile (1942); Greek ZGB (1946).

situation where someone made a mistake relating to the content of his declaration (judged according to an objective standard) and was termed by Savigny an ‘unreal mistake’,107 yet it became the hub of the doctrine of mistake of the nineteenth century. Savigny himself, but more strongly his pupils and supporters -- above all Brinz and Zitelmann -- had already placed the operative mistake in declaration in conceptual antithesis to an inoperative mistake in motive.108 This distinction also has its roots in the scholastic doctrine of contractual acts. Zitelmann divided the ‘psychological’ process of making a declaration of intent into three stages: first of all, someone makes the decision on the basis of his perception to make a declaration of intent (=motive); this decision develops into an actual intent to declare (=intention) and this is once more expressed in a declaration of intent undertaken on this basis (=declaration). The law, in Zitelmann’s view, may only take mistakes into account which result from the declaration perceived by the recipient diverging from the intention of the declarer; for example, where someone intends to say ‘10,000 euros’ but in fact only says ‘1,000 euros’. Mistakes in the formation of intention -- mistakes therefore which influence an intention to declare and which the declarer would not have formed had he known of the true circumstances -- had to remain insignificant as mere ‘mistakes in motive’. Accordingly, whosoever believes a bracelet to be made of gold and wishes to purchase it for this reason, is therefore only committing a ‘mistake in motive’ because his intention to purchase was formed on the basis of a defective perception.109 It logically follows from Zitelmann’s theory that all mistakes concerning the underlying state of facts -- i.e. concerning the foundations of the contract -- are insignificant being mistakes in motive. The old cases of error in corpore, in substantia, in materia or in qualitate -- provided they did not cause a mistake in declaration -- could therefore no longer be taken into account.110

107F. C. v. Savigny, System des heutigen römischen Rechts (7 vols., Berlin, 1840), vol. III, pp. 99 et seq.; for a comprehensive analysis and further comment see: Schermaier, Die Bestimmung des wesentlichen Irrtums, 9.2.2.

108A. Brinz, Lehrbuch der Pandekten (4 vols., 2nd edn, Erlangen/Leipzig, 1892), vol. IV, §§ 315 et seq.; E. Zitelmann, Irrtum und Rechtsgeschäft. Eine psychologisch-juristische Untersuchung (Leipzig, 1879), pp. 329 et seq., pp. 373 et seq.

109Cf. Zitelmann, Irrtum und Rechtsgeschäft, pp. 328 et seq., pp. 441 et seq. For this reason, regard is paid to the case of the viriola aurea in Ulp. D. 18,1,14.

110So indeed: Zitelmann, Irrtum und Rechtsgeschäft, pp. 461 et seq., pp. 490 et seq., pp. 549 et seq.; in summary: Schermaier, Die Bestimmung des wesentlichen Irrtums, pp. 521 et seq.

Although Zitelmann himself later believed this ‘psychological’ doctrine of mistake to be an unsuitable basis for a statutory regulation,111 and despite many other critical opinions,112 modern German legal theory still holds fast to the distinction between mistake in declaration and mistake in motive.113 Due to the insecurity concerning the apparently conclusive evidence that mistakes relating to the facts of the case are always insignificant, certain provisions were adopted in § 119 II BGB and in art. 24 I 4 of the Swiss Code of Obligations which categorise mistakes relating to quality or the basis of the contract as operative mistakes.

Culpa in contrahendo

Among the various elements which serve to sanction the neglect of duties to inform in modern private law systems, the enduring obligation to pay damages is the most interesting from a dogmatic point of view. This legal concept establishes both an obligation that the mistaken party pay damages and the obligation that a party compensate the loss suffered by his contractual partner -- whom he was bound to have informed of certain circumstances. Its history begins in Roman law as a form of precontractual liability for dolus in contrahendo: in some decisions liability arising from a contract is also approved if a contract has not even come into existence (especially where this is due to initial impossibility).114 In such cases, Roman jurists allowed the contractual complaint without utilising any particular fictions and arguments115 and in so doing, extended the standard of contractual bona fides to the precontractual relationship of the parties. Rudolf v. Jhering generalised these rudiments into the principle that the party, whose fault causes the conclusion of

111E. Zitelmann, from discussions during the second session of the first section,

12 September 1889, Verhandlungen des Zwanzigsten Deutschen Juristentages, published by the Schriftführer-Amt der ständigen Deputation (Berlin, 1889), vol. IV, pp. 101 et seq.

112Foremost amongst contemporary criticism: E. Pfersche, Zur Lehre vom error in substantia (Graz, 1880).

113Cf. for example: W. Flume, Allgemeiner Teil des Bürgerlichen Rechts (4th edn, Berlin/Heidelberg/New York, 1993), vol. 2: Das Rechtsgeschäft, pp. 449 et seq., pp. 472 et seq. For a summary, see for example: Zimmermann, Law of Obligations, pp. 614 et seq.; Kramer, Der Irrtum beim Vertragsabschluß, pp. 34 et seq.

114For example, Ulp. D. 11,7,8,1 (sale of a locus religiosus); Mod. D. 18,1,62,1 (sale of loca sacra/religiosa/publica); Ulp. D. 18,4,4 (sale of a non-existent debt); Paul. D. 19,1,21 pr. (sale of a non-existent partus ancillae).

115V. Arangio-Ruiz, La compravendita in diritto romano (2 vols., 2nd edn, Naples, 1961; rist. 1976), vol. I, 209 n. 1 (210) makes reference to a ‘validità del contratto (come putativo)’; see also: P. Stein, Fault in the Formation of Contract in Roman and Scots Law

(Edinburgh/London, 1958); Y. Ben-Dror, ‘The Perennial Ambiguity of culpa in contrahendo’ 27 (1983) American Journal of Legal History, pp. 142 et seq.

a contract to fail, is bound to compensate the other’s loss arising from his reliance on a futile promise (‘negative interest’).116 In particular, the unsatisfactory solution which Savigny’s doctrine bestowed (due to the fact that it regarded every mistake in declaration as significant, no matter whether the recipient of the declaration had relied on the validity of the declaration), led Jhering to make the following generalisation: that the mistaken party may indeed be able to free himself from his declaration but he is obliged to compensate the loss which the recipient of his declaration of intent has suffered due to reliance on its validity.117

Even this solution was not new; Grotius had already held the mistaken party liable to compensate loss where he was negligent in re exploranda vel in sensu suo exprimendo (i.e. in investigating the circumstances of the contract or in communicating information to the other party).118 Here, and also in Jhering’s case, the liability of the mistaken party due to his own culpa in contrahendo is thus the price of being able to rely on the mistake and annul the contractual obligation. Legal systems which only take unavoidable or excusable mistakes into account,119 or those which make the mistaken party’s ability to annul dependent on whether the recipient of the declaration suffered loss arising from his negative interest,120 do not recognise such a connection.

In Germany, Austria and Switzerland,121 but also in Italy and France,122 the legal concept of culpa in contrahendo has conquered a new and broad field branching off from the law on mistake in that it enables infringements of duties to inform of one party in general to be punished. Due to the fact that German law on delict usually only allows damages

116R. v. Jhering, ‘Culpa in contrahendo oder Schadenersatz bei nichtigem oder nicht zur Perfektion gelangten Verträgen’ (1863) 4 Jherings Jahrbücher, pp. 1 et seq.

117As is the case today: § 122 BGB.

118Grotius, De iure belli ac pacis, lib. II, cap. XI, § VI 3.

119As is the case with the French, Belgian and Spanish practice; cf. the comments in Kramer, Der Irrtum beim vertragsabschluß, pp. 61 et seq.

120Cf. for example, § 871 ABGB, which only allows annulment on the ground of mistake if the non-mistaken party did not suffer any loss despite relying on the validity of the declaration of intent (res integra).

121However, also in the USA for example, cf. F. Kessler, ‘Der Schutz des Vertrauens bei Vertragsverhandlungen in der neueren amerikanischen Rechtsprechung’ in H. C. Ficker (ed), Festschrift für Ernst von Caemmerer zum 70 Geburtstag (Tübingen, 1978),

pp. 873 et seq.; F. Kessler and E. Fine, ‘Culpa in Contrahendo, Bargaining in Good Faith, and Freedom of Contract: A Comparative Study’ (1964) 77 Harvard Law Review,

pp. 401 et seq.

122See once again the comments in Kramer, Der Irrtum beim Vertragsabschluß, pp. 134 et seq.

where certain objects deserving of legal protection are infringed but that ‘property’ is not protected as such an object,123 liability for culpa in contrahendo has even established itself as the third track of the law on liability besides contractual and delictual liability. The attraction of a legal institute which was not regulated in statute until 2002, thereby offering practice and science sufficient freedom for expansion and distinctions, has led to conventional rules governing liability for disclosure (e.g. the law on mistake and fraudulent misrepresentation, the law on unconscionable transactions, usury or on liability for defects in quality) being somewhat pushed into the background. The incursion of culpa in contrahendo into the field of mistake may lead us to enquire whether it is possible to fit it into the established set of values of civil law countries or whether it is going to eat up the older legal concepts.124

123Especially not by § 823 I BGB, the central rule of the German law on delict. Matters are different in French and Austrian law for example, which recognise both delictual general clauses; cf. art. 1382 of the French Civil Code and § 1295 ABGB.

124For the German discussion cf. most recently: W. Krüger, ‘Eine Linoleumrolle und die Folgen’ in G. Brambring (ed.), Festschrift für Horst Hagen (Cologne, 1999), pp. 409 et seq.; H. C. Grigoleit, Vorvertragliche Informationshaftung. Vorsatzdogma, Rechtsfolgen, Schranken

(Munich, 1997).