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

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result from their authenticity as works of Degas but from other factors, such as the fact that long discussions have occurred about the paintings. In this case Anatole’s mistake is one of motive. Anatole’s estimate about the artistic value of the paintings proved to be inaccurate. In this kind of mistake there is a discrepancy between the will of the person making a declaration and the reality. Anatole’s declaration of will coincides with his actual will to sell the paintings. Mistake as to motive is not fundamental according to art. 143 AK, and is therefore inoperative.

As to defects of consent the Greek Civil Code, like other European legal systems, follows an intermediate compromise between the will theory and the security of transactions. The mistaken person can under certain conditions invoke the fact that his will was defective and seek the annulment of the legal act (arts. 140f. AK). The Greek Civil Code’s position closely resembles the German Civil Code but with some differences. Greek law (art. 154 AK) following the system of Roman law78 requires the annulment to be pronounced by a court79 and not by a simple declaration, as under § 143 BGB. Thus the law sacrifices simplicity and speed in the interests of the security of transactions.80 The right to demand annulment is extinguished by the lapse of two years from the point when the state of mistake ceased and, at all events, within twenty years (arts. 154f. AK). Upon annulment, ownership of the paintings reverts ipso jure to Anatole (art. 184 AK), who is obliged to return to Bob the enrichment, that is the price of the paintings (arts. 904f. AK). Anatole is however liable for the loss sustained by Bob, unless the latter knew or should have known of the mistake (art. 145 AK). He is liable to pay the negative interest81 that is the harm arising out of Bob’s reliance on the contract.

Although Anatole was an expert on impressionistic art and an expert’s mistake could be considered as inexcusable,82 under art. 144 § 2 AK, it is considered that this article does not apply on the facts. Other factors such as the level of negligence and the damage which the mistaken

78See also French Civil Code arts. 1117, 1304.

79The right to seek the annulment of a juridical act may be exercised either by an action, a counterclaim, or an exception.

80See G. Maridakis, ‘Introductory report on General Principles’ in Draft of the Civil Law -- General Principles (Athens, 1936) p. 201; Papantoniou, General Principles of Civil Law,

p. 442; M. P. Stathopoulos, Contract Law in Hellas (The Hague, Boston, Athens, 1995), p. 114.

81AP 1030/1992 EllDik 36,75.

82See for example Stathopoulos, ‘Mistake Crucial for the Annulment of the Juridical Act’ in Miscellany of N. Papantoniou (Thessaloniki, 1996), p. 726.

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to the court a long list of cases in which the mistake could be considered fundamental; moreover, it requires that the parties were not able to recognise it by exercising reasonable and proper care at the time the contract was made. The Italian Supreme Court tends either to exclude the presence of a mistake or consider the mistake not essential when it is inexcusable (inescusabile).86 The chance of Anatole’s action succeeding depends on three conditions: (a) is the mistake about authenticity fundamental; (b) could Bob recognise the mistake; (c) is Anatole’s mistake excusable, considering his professional expertise?

(a) It is important to point out that the authenticity of a painting is not always fully ascertainable; the attribution to Degas or to his pupil is something which definitely depends on the development of experts’ studies and may be subject to change. Before the 1942 Code the Italian courts used to consider the sale of a painting as an aleatory contract (contratto aleatorio): ‘someone who has sold an old painting ignoring its artistic value, cannot, once he has discovered it, plead to annul the sale for factual mistake’87 or ‘once he has sold an old painting without a warranty about the value (it was a Raffaello), there is neither fraud on the part of the vendor, nor a fundamental mistake that could annul the sale’.88 This approach has not changed since the new Code,89 but there have not been many cases in the last few years. An Italian court used both the former doctrine of an aleatory contract and the new doctrine of fundamental mistake as to the quality of the said object (art. 1429 n. 2 of the Civil Code) in a case of a Carraccio painting sold for a few

Article 1429 Fundamental mistake: ‘A mistake is fundamental when it concerns:

(i)the nature or the object of contract;

(ii)the identity of the object of the performance or a quality of the said object which, according to common understanding or in the circumstances, should be considered to have determined consent;

(iii)the identity or personal qualities of the other contracting party, so long as the one or the other induced consent;

(iv)when the mistake was one of law and was the only or the principal reason

for entering into the contract’.

Article 1431 Recognisable mistake: ‘A mistake is considered recognisable when, with respect to the content, the circumstances of the contract, or the quality of the contracting parties, it would have been detected by a person of normal diligence’.

86Cass 16.5.1960, n. 1177, G.I. 1960 I, 1, 112 noted by G. Amorth.

87A. Firenze 18.7.1905 GI 1905, I, 2, 577. 88 A. Firenze 15.3.1910 Filangeri, 1910, 459.

89A. Milano 12.6.1947 GI, 1948, I, 2, 193 noted by Grassetti, Verità, errore ed opinione circa la paternità dell’opera d’arte compravenduta.

liras by a Roman antique shop.90 The discussion about the authenticity of the painting sold by Anatole seems to give the Italian court the possibility of maintaining the aleatory contract doctrine to refuse the action. Moreover, fundamental mistake may fail for the reasons given below.

(b)The fact that the mistake was recognisable could be inferred from the fact that Bob was an art gallery owner, he too was a professional. The criterion of fair dealing91 used by the Italian courts is a very broad concept. The main characteristic of fair dealing should be seen in the fact that the courts mostly consider the ‘status of the parties’ and ‘the contract’s content’ in order to decide if the mistake is recognisable or not.92 The Supreme Court has recently stated that the analysis must be done case by case.93 On the facts, it is pretty likely that an Italian court would be inclined to hold that Bob is not liable because the new information about the paintings’ value was given by third parties. Moreover, it might have been difficult for Bob to recognise the mistake given Anatole’s expertise.94

(c)Anatole’s expertise will also play a role in relation to whether his mistake is inexcusable. The interpretation in concreto made by the judges, under the influence of Italian case law before the 1942 Code, strongly influenced by the French courts, will consider if Anatole, as an art expert, could have been mistaken about the attribution of the painting, in other words whether his mistake is excusable. The transition from the Civil Code of 1865 to the 1942 Code allowed the Italian legislator to prefer the rule of reliance (affidamento) instead of the will theory (dogma della volizione o della responsabilità).95 Some authors, though, consider that the will theory is still firmly established in the Italian courts’ tradition: it is thus necessary to examine if the mistake was excusable

90A. Roma 23.11.1948 RDCo 1949, II, 192 noted by Sacco; a Carraccio painting has been sold as an ‘unknown maestro’.

91Cass 1991, n. 980,

92V. Pietrobon, Errore, volontà e affidamento (Padua, 1990, ried.), p. 225.

93Cass 1985, n. 3892.

94A. Milano 5.6.1951, FP 1951, I, 874. If a picture bought as a real Picasso turns out to be a forgery, the purchaser can only rescind if the vendor could have known that it was a forgery; this requirement was held satisfied in a case where the vendor himself was a painter!

95M. Allara, Teoria generale del contratto (2nd edn, Turin, 1955), pp. 148 ff.; F. Martorano, La tutela del compratore per vizi della cosa (Naples, 1959), p. 217; Pietrobon, Errore, volontà e affidamento nn. 29 ff.; for the Italian case law see Cass 9.2.1952, n. 316, GI 1952, I, 1, 162; Cass 20.5.1954, n. 1623 GI 1954, I, 1, 700; Cass 22.5.1958, n. 1721; Cass 9.10.1963, n. 2684 FI 1963, I, 2088, and RDCo 1963, II, 468; Cass 20.9.1978, n. 4240.

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(scusabilità). Moreover it is arguable that the reliance principle does not exclude liability, because the courts sometimes use the inexcusable principle without saying so96 by saying that there is no mistake or that the mistake is not about a fundamental subject matter.97

In the unlikely event that the courts were to find Anatole’s mistake excusable, his right to annul is subject to Bob’s claim under art. 1432 of the Civil Code to ask for the contract to be adapted.98

(ii) Another way to attempt to annul the contract is through the use of the doctrine of ‘basic contractual assumption’ (presupposizione),99 a factual situation not related to one of the parties that the work ‘of an unknown artist’ is considered to be a basic assumption of the contract. One way of explaining this idea is that the contract is conditional, where the parties have negotiated under an implied condition that ‘the contract will not stand if the work is attributed to a maestro’. The fulfilment of this condition annuls the contract.100

96R. Sacco and G. De Nova, ‘Il contratto’ in Trattato di diritto civile/diretto da Rodolfo Sacco

(Turin, 1993), vol. 1, p. 378; There are, indeed, a number of articles in the Civil Code that consider the double principle of reliance and responsibility (arts. 1338, 1490, 1494, 1478, 1479, 1◦ and 4◦ co., 1481, 2◦ co.; 1909, 1◦ and 2◦ co.).

97Cass 16.5.1960, n. 1177, GI 1960, I, 1, 112 noted by G. Amorth; Sacco and De Nova, ‘Il contratto’ vol. 1; p. 378.

98Article 1432 of the Civil Code states: ‘The mistaken party cannot demand annulment of the contract if, before he can derive injury from it, the other party offers to perform it in a manner which is pursuant to the substance and characteristics of the contract that the mistaken party intended to conclude’.

99The presupposizione doctrine has a German origin inspired by B. Windscheid,

P. Örtmann, Die Geschäftsgrundlage. Ein neuer Rechtsbegriff (Leipzig, 1921) and Larenz,

Geschäftsgrundlage und Vertragserfüllung (Munich, 1963). It is arguable that the English coronation cases, like Krell v. Henry (1903) 2 KB 740, offer a factual example of a situation in which the Geschäftsgrundlage could have been invoked in Italian law, see A. Pontani, ‘La presupposizione nella sua evoluzione, con particolare riferimento all’errore ed alla causa’, Quadrimestre 1991, 833. However, the Italian Supreme Court in Roy v. Canessa (3.12.1991, n. 12921) has held that: ‘The doctrine [of presupposizione] must be considered as an autonomous doctrine; it has abandoned the theory of the implied condition and now, under the influence of the German doctrine of Geschäftsgrundlage we must think of it as a basic contractual assumption, formed by the contract’s external circumstances, without which the contract itself could not exist; one can find the basis of this doctrine in art. 1467 of the Civil Code which strictly refers to the rebus sic stantibus principle.’

100Cass 17.9.1970, n. 1512, FI 1971, I, 3028; Cass 7.4.1971, n. 1025 FI 1971, I, 2574; Cass 22.9.81, n. 5168, FI 1982, I, 104; Cass 31.10.1989, n. 4554, RDC 1990, II, 350; Cass 11.8.1990, n. 8200; Cass 3.12.1991, n. 12921, GI 1992, I, 1, 2210 noted by ODDI: the latter is a case of a purchase of the stocks of a company annulled when the only immovable good in the company asset was under an action to obtain revocation (art. 2901 of the Civil Code); Cass 1995, n. 1040; Cass 1995, n. 8689.

The Italian courts often find a basic contractual assumption in contracts for the sale of land101 and long-term contracts.102 It would definitely be innovative if the court were to use this doctrine to annul the contract on these facts, but it is not logically impossible. Moreover, the Italian courts appear sometimes to use indifferently, presupposizione, the sale of aliud pro alio103 or mistake104 according to the facts of the situation. Anatole’s position would be stronger if he could allege that Bob was in bad faith or that he did not adhere to a standard of fair dealing during the bargaining process.105 This may be diffcult to prove on the facts. According to the Tribunale of Milan a basic contractual assumption and fundamental mistake are two different aspects of the same situation; the principle of good faith (buona fede, arts. 1337 and 1375) adds new strength to the argument favourable to the use of basic contractual assumptions when it is a practical criterion for the contract’s interpretation.106 If a basic contractual assumption is interpreted as a new kind of mistake107 the contract could still be annulled (art. 1441 of the Civil Code); on the other hand, if it is considered to create

101Cass 1983 n. 6933, Cass 1984, n. 5512.

102Article 1467 relating to contracts for mutual counter-performance has been interpreted as an explicit adoption of the basic contractual assumption by the courts: Cass 1995, n. 1040; Cass 31.10.1989, n. 4554, RDC 1990, II, 350; Cass 1986, n. 20.

103Article 1497 Lack of quality. When the thing sold lacks the qualities promised or those essential for the use for which it is intended, the buyer is entitled to obtain termination of the contract according to the general provisions on termination for non-performance (risoluzione per inadempimento art. 1453 ff.), provided that the defect in quality exceeds the limits of tolerance established by usage. However, the right to obtain termination is subject to the forfeiture (2964 ff., 1495 co.1) and prescription (2946 ff., 1495 co.3) established in art. 1495.

104Trib. Napoli, 24.6.1970, in Giurisprudenza di merito (‘Merito’) I, 1972, 407 noted by Baldanzi; Cass 8.6.1948, n. 864 GI 1949, I, 1, 174.

105This argument favours an interpretation of the presupposizione doctrine as an application of the standard of good faith principle, inferred from art. 1337 of the Civil Code. Sacco and De Nova, ‘Il contratto’, p. 443, pleads for a flexible and adaptable rule in order to solve the case law.

106Trib. Milano, 11.10.1948, in DL II, 1949, 17, where the mistake was on the essential quality of the counterpart, but the judges used the presupposizione doctrine instead of the essential mistake rule; this favours a broad interpretation of presupposizione

Cass 3.10.1972, n. 2828.

107See fn. 92 above following Pietrobon, Errore, volontà e affidamento, p. 357 and

C. Massimo Bianca, Diritto civile, 3 (Milan, 1987), vol. 3: Il Contratto, p. 610 it is possible to create a new hypothesis of fundamental mistake independently from the numbers of art. 1429 of the Civil Code, Sacco and De Nova, ‘Il contratto’, p. 389 does not agree, submitting that there is a numerus clausus of kinds of fundamental mistake.

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an impediment for the contract (causa) the contract itself will be void (nullo) following arts. 1418 and 1325 of the Civil Code.108

However as the use of this legal ground is speculative it is more probable that Italian law will not give Anatole a remedy on this ground nor for mistake.

The Netherlands

There is no remedy available to Anatole. This is a case of seller’s mistake by an expert. Mistake is dealt with by the new Civil Code (1992) by art. 6:228 BW, which reads as follows:109

Article 6: 228 BW

1.A contract which has been entered into under the influence of error and which would not have been entered into had there been a correct assessment of the facts, can be annulled:

a.if the error is imputable to information given by the other party, unless the other party could assume that the contract would have been entered into even without this information;

b.if the other party, in view of what he knew or ought to know regarding the error, should have informed the party in error;

c.if the other party in entering into the contract has based himself on the same incorrect assumption as the party in error, unless the other party, even if there had been a correct assessment of the facts, would not have had to understand that the party in error would therefore be prevented from entering into the contract.

2.The annulment cannot be based on an error as to an exclusively future fact or an error for which, given the nature of the contract, common opinion or the circumstances of the case, the party in error should remain accountable.

It is clear that Anatole ‘would not have entered into this contract had there been a correct assessment of the facts’: had he known that the painting was the work of Degas or of a pupil working under the master’s supervision, he would not have sold it for a moderate price. However, under art. 6:228 BW this is in itself not decisive since the contract can only be annulled if one of the three situations mentioned under a--c has

108The difference between annulment and voidness, a subject of academic debate, depends on the way the judge interprets the facts.

109The translations are taken from P. P. C. Haanappel and E. Mackaay, New Netherlands Civil Code/Nouveau Code Civil Néerlandais (The Hague, 1990); the English version translates dwaling as ‘error’. However, following the terminology adopted, it will be translated as ‘mistake’.

occurred. The case states no facts as to statements made by the buyer (Bob). Therefore it must be held that (a) does not apply. Article 6:228 (1)(b) raises the question whether Bob should have informed Anatole. However, at the conclusion of the contract Bob did not know of the authorship (and, as a result, the real value) of the painting, nor ought he to have known.110 Rather Anatole, as an expert, ought to have known what he was selling. Article 6:228 (1)(c), however, does seem to apply. Not only is the seller mistaken, but also the buyer. In a case of common mistake a party may in principle annul the contract. The exception in art. 6:228 (1)(c) does not apply: if both parties had known of the real author (Degas or his pupil) and the true value of the painting, Bob would have realised that Anatole would not sell the painting for this price.

However, the question arises whether this mistake does not amount to ‘an error for which, given the nature of the contract, common opinion or the circumstances of the case, the party in error should remain accountable’ and whether therefore the contract should not be held valid. In HR 19 June 1959,111 the Stevensweerd Kantharos case, the Hoge Raad decided that in principle the seller has no remedy if he discovers after the sale that the object he sold had characteristics of which he had no knowledge.112 In that case the seller had sold for a small sum a cup which turned out to be a unique Greek-Roman kantharos and was worth a fortune. It was held that the seller may not annul a contract on the mere ground that the object of sale turned out to have a quality which the seller could not have anticipated, because according to reasonable prevailing opinion a party that sells an object of his own for a certain price, by doing so gives up the chance that the object afterwards will appear to have such an unanticipated quality.113 It is generally held that this rule still applies under the new code and should be regarded as

110A party is not only under a duty to inform if he has actual knowledge of certain fact, but may also be under an obligation to investigate in order to be able to inform, especially if he is an expert. Not knowing is, in itself, not always a defence. Cf. Asser/Hartkamp II (2001), no. 185.

111NJ 1960, 59, note Hijmans van den Bergh.

112This decision met with some critical reactions. Cf. e.g. A. H. M. Santen, De Kantharos van Stevensweert (rede UvA, Deventer, 1993), Ars Notariatus LX, and J. C. M. Leijten, ‘De Kantharos van Stevensweert in het licht van de gerechtigheid’ in W. M. J. Bekkers and A. A. H. Gommers (eds.), De Kantharos: Over recht en onrecht in de rechtspleging (Wijn & Stael bundel), (Deventer, 1998).

113It was also held that the result may be different if the buyer was under a duty to inform the seller (art. 6:228(1)(b) BW). As we have seen, in the mechanism of the new code this is a preliminary question which in this case must be decided in the negative.

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being based on art. 6:228 (2) BW.114 The underlying policy of this rule lies in the distribution of risks between the seller and the buyer: the risk of not knowing the true characteristics of the object of sale, typically is one which the seller should bear. Application of this rule means that the contract cannot be annulled for mistake and is therefore valid.

Some authors have argued that the rule that the seller should bear the risk of his own mistake (unless the buyer was under a duty to inform him) should not be absolute. They say that things should be different if the buyer was an expert and the seller was not.115 Although this argument is convincing, this is not of much help to Anatole in this case since here we have the reverse case where the seller himself is the expert.

Since there is no other reason for the invalidity of the contract nor any other remedy available, Anatole has no remedy.

Norway

On the facts, Anatole, the seller, would scarcely succeed with a claim on the grounds that he was mistaken about the value of the painting.

(i) The conclusion is clear cut if the purchaser (Bob) is supposed to have had knowledge of the artist’s (possible) identity only after entering into the purchase contract.116

(a)A remedy for breach of contract in this situation would not succeed. There is no breach of the duty to inform. Unforeseen events which occur after the time of delivery, and which influence the value of the object for sale, are the risk of the parties concerned (in this instance, the purchaser’s profit). In other words, there is no defect in the item.

(b)Another approach is to consider the question in light of the set of rules leading to invalidity.

The doctrine of mistake as found in the common law and in continental law, does not exist in Scandinavia, only a ‘mistake in transaction’ is explicitly covered.117 On the other hand, from the turn of the century, a doctrine of contractual assumptions (not implemented in law)

114Cf. Asser/Hartkamp II (2001), no. 195; Asser/Hijma 5-I (2001), no. 246; P. Clausing, ‘De Kantharos en artikel 6:228 BW’, WPNR 6357 (1999), pp. 385 f.

115A. G. Castermans, De mededelingsplicht in de onderhandelingsfase (Deventer, 1992) (diss. Leiden, 1992), p. 130; Asser/Hijma 5-I (2001), no. 246; Santen, ‘De Kantharos’, n. 124; Leijten, ‘De Kantharos’, n. 124; Clausing, ‘De Kantharos’, n. 126, p. 385.

116We are then facing a situation where both parties experience an identical mistake, in common law doctrine referred to as ‘common mistake’ or ‘shared mistake’.

117The Scandinavian contract laws contain only one regulation that deals directly with mistake (not created by force or fraud). The Norwegian Contract Act, § 32, para. 1, regulates situations of mistake in the transaction. But mistake would naturally be an important element when the general invalidity regulations are applied, as, for instance, in the Contract Act, § 33.

was developed. It finds its roots in the theories put forward by the German legal scholar Bernhard Windscheid.118 The doctrine of assumption entered Scandinavian law principally through Danish writing.119 The doctrine deals both with wrong assumptions at the time of the contract (uriktige forutsetninger -- initially failed contractual assumptions), and with later changes of conditions (bristende forutsetninger -- subsequently failed contractual assumptions). A common term is failed contractual assumptions (sviktende forutsetninger).

The basic conditions for claiming failed contractual assumptions are that the assumptions have been a determining element in the contract (so-called fundamental assumptions) and that the other party was aware of the assumptions (but not necessarily of the mistake). Furthermore, an assessment of risk120 should be made, which in practice is the chief obstacle to reaching a claim based on failure of assumptions. The principal rule in Scandinavian law has always been that each party should bear the risk of its own assumptions.121 Only in special cases would the court judge in favour of the party making the assumptions.122

In the eighties, the so-called General Clause of Scandinavian law of obligations and property was incorporated into contract law (§ 36 of the Contract Act). The relationship between the older non-statutory doctrine of breach of contract and § 36 of the Contract Act has been problematic. In more recent Norwegian case law it might appear as if the older doctrine would particularly apply in situations concerning professionals only, whereas the Contract Act’s provisions have greater significance in consumer relations.123

Based on the grounds that the purchaser had no knowledge of the identity of the artist at the time he entered into the contract, the General Clause should be used, possibly in combination with the older doctrine of assumption. The Norwegian version of the Contract Act, § 36, reads:

A contract can wholly or in part be set aside or changed if it would seem unreasonable or contrary to good business practice to insist on it. The same holds for unilateral contracts.

118B. Windscheid, Die Lehre des romischen Rechts von der Voraussetzung (Düsseldorf, 1850).

119A more recent description of the doctrine is found in the monograph, by B. Lehrberg,

Förutsettningsläran (Uppsala, 1989).

120Particularly on the basis of Ussing’s treatment of the doctrine of contractual assumption, H. Ussing, Aftaler paa formuerettens omraade (3rd edn, Copenhagen, 1974), pp. 459 ff., there has been agreement that the assessment of risk is essential.

121See NJA 1985.178, p. 191 (cf. NJA 1981.269) and Kjetil Krokeide, TfR 1977.569, p. 592.

122K. Krüger, Norsk kontraktsrett, (Bergen, 1989), p. 688.

123RT 1999, p. 922 and RT 2000, p. 806.