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

of the limits within which the Trento common core project lies. Apparently, it is difficult, if not impossible, to strip national law reporters of all their legal prejudices!

Thirdly, it has already been suggested that leges speciales, particularly those made to transpose European directives in consumer law, have had a considerable impact on the parties’ consent at the contract’s formation. The rules about when the contract is formed and when the parties’ consent becomes definitive have been subject to change as a result of European legislation about long-distance sales. Two cases treating these questions as well as the effect of misleading advertising on the parties’ consent were originally included in this report.142 In a sense these cases prove perfectly the point that mistake is being pushed to the background in the face of protective legislation, thus rendering defective consent a subsidiary remedy. Methodologically, after consideration it seemed difficult to justify the presence of cases which do not test one of the hypotheses of this enquiry but rather beg the question.143 Moreover, in view of the increasing specialisation of consumer contracts144 it may be inappropriate to make inferences about mistake in general from such contracts which contain specific rules.

Likewise, cases which concern certain contracts regulated by law and often considered as belonging to distinct branches of the law (e.g. employment contracts) have been mostly excluded from the scope of this study. This exclusion is both unfortunate and necessary. During our

142The facts were as follows: (a) The television-watching public is regularly reminded of ‘Eternal Youth’, a cosmetic manufactured and advertised on television by the White Lie Company with the slogan ‘makes your skin look as new as a baby’s’. But when Candida, after using the cream to no avail for a whole year, complained of her bitter disappointment to the White Lie consumer department, she was informed that ‘Eternal Youth’ could not possibly work miracles on vintage skins, and that she should have begun the applications many years ago. What remedy, if any, is available? (b) The Nutshell Bed Company’s catalogue advertises a new concept in bedroom design: ‘beds that fit anywhere, specially designed to be assembled and disassembled in small spaces’. But when Mr and Mrs Dove received a double bed after ordering it by mail directly from the Nutshell Bed Company, it soon became clear that it would never adapt to the nooks and crannies of their little artist’s studio. What remedy, if any, is available?

143The existence of a common core is self-evident in this sort of situation since European harmonisation has imposed a common core.

144It is quite justifiable, when looking at the law of contracts today in the light of European legislation, to ask whether there is not one law of contract for consumer contracts and another for contracts between parties who are both acting in the course of business. This assertion comes as no surprise to jurists whose legal system has a separate Consumer Code.

investigations it was observed that specific rules in relation to nominate contracts sometimes have the effect of distorting the answers. It then becomes easy to particularise the solution as a result of specific legislation. The unfortunate aspect of this exclusionary choice is that inevitably it also warps the neutrality of the enterprise, which is why it has already been pointed out that the neutrality of a comparative investigation must be treated with caution. Methodological considerations apart, the choices in this study reveal the paradoxes of comparative law. Examining mistake, fraud and duties to inform together has, no doubt, revealed a number of surprising comparative challenges.

the one hand, how the vendor (lessor, manufacturer) has described the goods and, on the other, whether he has remained silent as to features that are important for the mistaken party. Sometimes the law on mistake itself also takes into account whether the other party has given flawed or incorrect information: accordingly § 871 of the Austrian ABGB, art. 1302 of the Spanish Civil Code and art. 6:228 (a) of the Dutch BW recognise a mistake where it was induced by the other party.1 This example shows precisely that ‘mistake’ and ‘duty to inform’ mark the range of the two poles between which every civilian set of values lies to determine contractual validity and duty: between taking into account the parties’ (subjective) intention and the (objective) value of the parties’ communication of intent or -- to put it simply -- between intention and reliance.

Roman law

From a historical viewpoint too, it is not always possible to separate these two aspects of law; rather, one observes how they compete with each other in different areas. Nevertheless, the debate concerning the significance of mistake and duties to inform during the course of the history of private law is to a considerable extent governed by the limits laid down by Roman law: the significance of intention for the validity of legal acts is dealt with in the law on mistake and in the interpretation of declarations of intent; neglected duties to inform play a role in establishing and determining contractual liability.

Mistake

The portrayal of the Roman law on mistake passed down to us in Justinian’s Digests under the name of Domitius Ulpianus (Ulp. D. 18,1,9; 11 and 14) continues to exercise a profound influence over European discussion today.2 Using sale as an example, the question whether a mistake

1Further commentary on comparative law may be found in E. A. Kramer, Der Irrtum beim Vertragsabschluß. Eine weltweit rechtsvergleichende Bestandsaufnahme (Zürich, 1998), pp. 52 ff.

2On the text’s significance to legal history, see R. Zimmermann, Law of Obligations. Roman Foundations of the Civilian Tradition (Oxford, 1996), pp. 587 et seq. Less fitting is P. Haupt,

Die Entwicklung der Lehre vom Irrtum beim Rechtsgeschäft seit der Reception (Weimar, 1941). But, see also J. A. C. Thomas, ‘Error in persona and error in substantia’ in La formazione storica del diritto moderno in Europa III (3 vols., Florence, 1977), vol. III, pp. 1203 et seq.; B. Schmidlin, in: Berner Kommentar zum schweizerischen Privatrecht, Vol. IV: Obligationenrecht, 1. Abt.: Allgemeine Bestimmungen, 2. Tbd. 1 b: Mängel des Vertragsabschlusses, art. 23--31 OR, Lieferung 1: Kommentar zu art. 23--7 OR (Vorbemerkungen und Kommentar), (Bern, 1993); now M. J. Schermaier, Die Bestimmung des wesentlichen Irrtums von den Glossatoren bis zum BGB (Vienna/Cologne/Weimar, 2000).

circumstances, as for example in Ulp. D. 18,1,9, but solely the parties’ mistakes in understanding;9 nevertheless, both in the latter and the former, the question of an effective consensus is of prime importance.

Application of the condictio indebiti requires a mistake relating to the existence of an obligation to perform (causa solutionis),10 yet this requirement -- although it may have been the subject of early discussion -- is never compared to mistake at the conclusion of a contract. Indeed, even under the heading of De iuris vel facti ignorantia,11 created by Justinian, there is nothing in the text which analyses mistakes made at the conclusion of a contract. Nonetheless, the legal concept of a mistake impeding consensus and those cases which Ulpian was the first to grasp conceptually (error in corpore, substantia, qualitate) experience an astonishing success in later European history and are responsible for the fact that all European legal systems are familiar with and -- subject to different requirements -- take contractual mistake into account.

Misrepresentation

‘Naturaliter concessum est . . . invicem se circumvenire’ (individuals are naturally permitted to overcharge one another), so Julius Paulus, a scholar of the late-classical period and Ulpian’s contemporary, on the question whether one may deal in a thing at a greater or lesser value than it is worth.12 Only if a contractual party had acted with fraudulent intent, i.e. if he wanted to injure the other party by providing intentionally incorrect information, would he be bound to compensate the loss arising therefrom. Accordingly, only dolus malus restricts the liberal pursuit of profit propagated by Paulus.13 Apart from malicious acts, a vendor or lessor is also liable for the presence of certain features if he had given an express warranty to that effect (dictum), or if they were due on account of a special, formal covenant (promissum).14

9For this, see at present: Schermaier, ‘Auslegung und Konsensbestimmung’ (1998) ZSSt 115 at pp. 253 et seq.

10Ulp. D. 12,6,1,1; Pomp. D. 12,6,7; Pomp. D. 12,6,16; Pomp. D. 12,6,19,2 u. 3; Ulp. D. 12,6,26,2; Ulp. D. 12,6,26,12; Paul. D. 12,6,27; Ulp. D. 12,6,31; Marc. D. 12,6,40 pr.; Cels. D. 12,6,47; Papin. D. 12,6,59 and especially Pomp. D. 12,6,50.

11D. 22,6; C. 1,18.

12Paul. D. 19,2,22,3; similarly Ulp. D. 4,4,16,1 citing Pomponius. For an analysis of this see: A. Wacke, ‘Circumscribere, gerechter Preis und die Arten der List’ (1977) ZSSt 94 at pp. 184 et seq.

13Cf. Ulp. D. 4,3,1,2: ‘Dolum malum Servius quidem ita definit machinationem quandam alterius decipiendi causa, cum aliud simulatur et aliud agitur.’

14For an analysis of this see: A. L. Olde Kalter, Dicta et promissa. De ansprakelijkheid van de verkoper wegens gedane toezeggingen betreffende de hoedanigheid van de verkochte zaak in het klassieke romeinse recht (Utrecht, 1963).

Where the vendor merely praised the thing or also where he made reference to alleged qualities, such statements were held not to be binding. Thus, determining the boundaries of an informal but binding dictum was therefore just as important and difficult for legal practice then as it is now: ‘Ea quae commendandi causa in venditionibus dicuntur, si palam appareant, venditorem non obligant’, according to Florentinus.15 The application of this rule -- which is still valid today -- was far from a simple matter in a given case:16 if the vendor said, for example, that the slave (for sale) was handsome, then he was not liable, if he said however, that the slave was especially educated, healthy or not prone to escape, then he was liable for such assurances.17 This distinction nevertheless only makes sense if the object of purchase is present at the time the contract is concluded.18 If things are sold, which the purchaser himself cannot see, then the seller must probably answer for every statement relating to their quality which was of significance to the conclusion of the contract. Only this may explain why, according to Labeo and Marcian, someone who sells used clothes as new,19 is liable for their newness.

Duty to inform

An important step exceeding the obligation to comply with warranties was taken within the sphere of liability for defects in quality imposed by the aediles curules. One power of this magisterial body, which was responsible for supervising the market in Rome, included the judicial control of disputes which arose during the course of market trading. It ordered that protection be given to the purchaser who had purchased slaves or cattle which later displayed certain defects. The edict contained a list of typical, recurring defects which the vendor had to answer for independently of his own knowledge.20 The list of defects presumably only

15Flor. D. 18,1,43 pr.: ‘That which is said during a sale for promotion purposes does not bind the vendor if one thereby only promotes that which is obvious in any case.’

16Cf. also Ped./Ulp. D. 21,1,19 pr.

17Numerous examples of warranties given in the purchase of slaves may be found in D. 21,1 (e.g. Ulp. D. 21,1,17,20; Gai. D. 21,1,18,1--2; Ulp. D. 21,1,19).

18Cf. Flor. D. 18,1,43,1.

19Lab./Marc. D. 18,1,45; it is debated whether Labeo and Marcian proceed on the basis of an express or implied warranty of the vendor or rather on the basis of the vendor’s dolus. Cf. for example: G. Impallomeni, ‘Applicazioni del principio dell’ affidamento nella vendita romana’ (1995) 21 Studia et documenta historiae et iuris, pp. 166 et seq.; H. Honsell, Quod interest im bonae fidei iudicium (Munich, 1969), p. 94; Olde Kalter, Dicta et Promissa, pp. 64 et seq.

20The view that originally this liability also depended on a promise of the vendor (which could certainly be obtained by force), to the effect that the slave/cow is free from defect was unsettled by the work of Éva Jakab; cf. E. Jakab, Stipulationes aediliciae

referred to features which could not possibly have escaped the attention of the vendor as previous owner of the slave.21 However, in a dispute the question whether the vendor knew or must have known of the defects was not regarded as decisive.

This model of liability under a warranty was also adopted as a starting point for other contracts of sale and even, to a certain degree, for other barter transactions. Provided the claim of a purchaser (lessee, customer) was measured against bona fides however, one was able to establish the vendor’s liability only by means of a breach of good faith. Originally, a breach of this nature was only perceived to exist where the presence of defects was fraudulently withheld. If, for example, the vendor knew that the house was due to be pulled down by an official order,22 that a piece of land was encumbered by an easement23 or that it was subject to taxation,24 then he was bound to communicate this to the purchaser. If he remained silent despite being aware of the defect, then he was liable on the basis of the actio empti (the purchaser’s complaint) to compensate the purchaser’s expectation in the complete satisfaction of the contractual obligation (‘positive interest’). The question as to which facts the vendor was bound to communicate and those which he could withhold was scarcely debated. As far as the decided cases reveal however, Roman lawyers had a fine sense of judgement for the thin dividing line between permissible and illegal circumvenire.25

Cicero’s critical eye also reveals, however, that the contemporary understanding of bona fides was infused with value concepts which we would hardly share today. One known example is that of the corn merchant who sells his produce to the famished Rhodian. He certainly knows that more ships are on course for Rhodes, to provide for the starving masses, but, in order to obtain the highest possible price for his corn, he withholds this fact.26 From this example, reports Cicero, an argument ensued between Diogenes and his pupil Antipater about whether an advantage of knowledge held by one party is not ethically acceptable

(Szeged, 1993) and E. Jakab, Praedicere und cavere beim Marktkauf -- Sachmängel im griechischen und römischen Recht (Munich, 1997).

21From different sources -- for example, Ulp. D. 21,2,31 pr. -- the lists of possible defects of a slave may be reconstructed in the following way: ‘ut sanus est, erro, fur, noxius, fugitivus, vispellio non est’ (‘That he is sound in body and mind and is no loiterer, thief, is free from convictions, is not prone to escape and is not deceitful’).

22 Cic. off. 3,66; Val. Max. 8,2,1. 23 Ulp. D. 19,1,1,1. 24 Paul. D. 19,1,21,1.

25Cf. once more Wacke, ‘Circumscribere, gerechter Preis und die Arten der List’, pp. 185 et seq.

26Cic. off. 3,50.

in barter transactions. Whilst Antipater believed that the vendor may not withhold from the purchaser any information that he possesses,27 Diogenes argued that the vendor is not bound to surrender all that knowledge which would be useful for the purchaser.28 Thereby Diogenes -- as he himself emphasised -- stood in the camp of contemporary civil law, whilst Antipater represented the ideal of the vir bonus, oriented around the common good. The argument between the two philosophers may not have been of direct importance for the practical application of law.29 Nevertheless, it may be deduced from Cicero’s description, that basically no distinction was made between fraudulent misrepresentation and the withholding of correct facts.

However, practice and science expanded the vendor’s liability in another way: for as part of liability imposed by the aediles curules the vendor was required to reveal defects in the object of sale which were normally of concern to the purchaser. If he withheld them, then he would be liable on the basis of the actio empti even where he could not be accused of dolus or even negligence. However, the vendor -- within the sphere of the aedilian edict -- was only liable to reduce or refund the purchase price. Herein the distinction of Salvius Julianus, a jurist of the age of Hadrian, gained currency: this demanded that the vendor who was aware of the defects has to compensate additionally the loss which might occur from the defect. If, for example, a defective girder had been sold and used in the construction of a house which then collapsed, the seller who himself was unaware that the girder was defective was only liable for the depreciation in the girder’s value. If, however, he had sold a defective girder intentionally, then he was bound to replace the whole value of the loss suffered by the purchaser.30 Understandable as this differentiation is, it is surprising to make the unaware vendor liable on the basis of an action (actio empti) supported by good faith (bona fides). The only explanation for this is that his unawareness was equated with a breach of duty of care: he as owner should have been the first to

27Cic. off. 3,51: ‘. . . ut ne quid omnino, quod venditor norit, emptor ignoret’ (‘. . . so that the buyer does not in the least ignore, what the seller knows’).

28Cic. off. 3,52: ‘Sed non, quicquid tibi audire utile est, idem mihi dicere necesse est’; (‘I do not have to tell you everything that would be helpful for you to know’).

29The formula advocated by Cic. off. 3,57 himself nevertheless provides a practical pretext: silence for the sake of profit is reprehensible and contravenes good faith (‘neque enim id est celare, quicquid reticeas, sed cum, quod tu scias, id ignorare emolumenti tui causa velis eos, quorum intersit id scire’).

30Jul./Ulp. D. 19,1,13 pr. Julian’s distinction obviously convinced his contemporaries and successors; cf. also Ulp. D. 19,1,11,15; Marc. D. 18,1,45; Ulp. D. 19,2,19,1.