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Mistake and Non-Disclosure in Other Systems

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MistakeandNon-DisclosureofFacts:ModelsforEnglishContractLawHughBealeQCFBA

Printpublicationdate:2012PrintISBN-13:9780199593880PublishedtoOxfordScholarshipOnline:September2012DOI:10.1093/acprof:oso/9780199593880.001.0001

MistakeandNon-DisclosureinOtherSystems

HughBeale

DOI:10.1093/acprof:oso/9780199593880.003.0002

AbstractandKeywords

Thischapterexaminesaselectionofotherlawsofcontract,particularlymodelsfoundinnationalsystemsthatsupposedlyformthebasisofthePECLprovisions.ItfirststudiestheCommonwealthlaws,whereitidentifiestwocasesthathavedeviatedfromthedoctrineofunconscionability.ThenextsectiondealswithEuropeanmodels,specificallyDutch,French,Scandinavian,andGermanlaws.ThelawsofindividualstatesintheU.S.arediscussedinthefinalpartofthechapter.

Keywords:lawsofcontract,nationalsystems,PECLprovisions,commonwealthlaws,doctrineofunconscionability,Europeanmodels,lawsofindividualstates

IncasesinwhichChasenteredthecontractunderamisapprehensionastothefactswhichisnotsharedbytheotherpartyDandwhichwasnotinducedbyDsstatementor


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conduct,whatdowefindinotherlegalsystems?Whatarethebasicgroundsforrelief?Whatlimitsorcontrols,ifany,areplacedonreliefformistake?Whatvaluesdotherelevantsystemsappeartobeprioritizing?

CommonwealthlawsOnthispointthelawinIrelandandinScotlandisthesameasinEngland,andlikewiseinthecommonlawsystemsoftheCommonwealthcountriesorrecentcoloniesthatIhavechecked.Thoughonbroadermattersofmistaketherearesomedivergences,withboththeAustralian1andSingaporean2courtsseeingalargerroleforequitythanweallowinEngland,onthepointsweareconsideringthetraditionalapproachseemstobemaintained,togetherwiththestandardlistofexceptions.Thisisthecasein(p.34)Australia,3Brunei,4HongKong,5andIndia.6TheMalaysianContractsAct1950providesspecificallythatacontractisnotvoidablemerelybecauseitwascausedbyoneofthepartiestoitbeingunderamistakeastoamatteroffact.

InAustralia,52oftheFederalTradePracticesAct1974(Cth)prohibitedcorporationsfromengaging,intradeorcommerce,inconductwhichismisleadingordeceptive,orwhichislikelytomisleadanddeceive,7andprovidedthevictimwithacivilremedyforbreach.8Butthoughintheleadingcase9theHighCourtwasatpainstostressthatthemeaningofthesectiondoesnotdependoncommonlawconceptssuchasduty,10thecasesinterpretconductinthetraditionalsenseofrequiringsomethingmorethanmeresilenceunlessthereisadutytospeak.BlackCJsaid:

(p.35) Silenceistobeassessedasacircumstancelikeanyother.Tosaythisiscertainlynottoimposeanygeneraldutyofdisclosure;thequestionissimplywhether,havingregardtoalltherelevantcircumstances,therehasbeenconductthatismisleadingordeceptiveorthatislikelytomisleadordeceive.Tospeakofmeresilenceorofadutyofdisclosurecandivertattentionfromthatprimaryquestion.Althoughmeresilenceisaconvenientwayofdescribingsomefactsituations,thereisintruthnosuchthingasmeresilencebecausethesignificanceofsilencealwaysfallstobeconsideredinthecontextinwhichitoccurs.Thatcontextmayormaynotincludefactsgivingrisetoareasonableexpectation,inthecircumstancesofthecase,thatifparticularmattersexisttheywillbedisclosed.11

ThecasesinwhichitwasfoundthattherehadbeenacontraventionallseemtobeonesinwhichEnglishlawyerswouldsaytherehadbeenamisrepresentation,byprovisionofinformationthatwasmisleadinglyincomplete12orbyconduct,forexamplebyapparentreadinesstograntaleasewithoutrevealingthatathirdpersonhadarightofpre-emption.13Inonecaseitwasheldthattherewasabreachof52whenamanagingdirectordidnotrevealtohisfellowdirectorshisbreachoffiduciaryandstatutoryduties,buteventherehewasinbreachofadutyunderthearticlesofassociation.14RecentlyitwassaidintheHighCourt:

asageneralproposition,s52doesnotrequireapartytocommercialnegotiationstovolunteerinformationwhichwillbeofassistancetothedecision-makingoftheotherparty.15


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(p.36) ThedoctrineofunconscionabilityhasbeendevelopedrathermoreinAustraliathanithasinEngland.InBlomleyvRyan,16FullagarJsaiditrequirestheclaimanttohavebeensufferingfromaspecialdisadvantage,butaddedthatthisincludeslackofassistanceorexplanationwhereassistanceorexplanationisnecessary.Obviouslythismightbeappliedtosimplecasesofmistakeknowntotheotherparty,butitdoesnotappeartohavebeen.Inhisbook,Duress,UndueInfluenceandUnconscionableDealing,Enonchongcitescaseswherebankshavebeenrequiredtopointouttouneducatedcustomersthattransactionsarerisky,17buthesuggeststhatafterCrowevCommonwealthBankofAustralia18thecourtsareturningagainstthisapproach.19Iseenosuggestionthatsomeoneisdisadvantagedwithinthemeaningofthedoctrinejustbecausetheywereignorantoformistakenaboutsomecrucialfact.

Canada

Ihavefoundonlytwodeparturesfromthismonolithicapproach.ThefirstisinCanada.ThereSmithvHughesseemstobeaffirmedbymoderncases,20andthereisnorecognitionofanythinglikeageneraldutytodisclose.Nordoesthedoctrineofunconscionabilityappeartohavebeenusedtodealwithmistakecases.21However,therearetwo(p.37) limitedexceptionstotherulepermittingnon-disclosure.First,incasesinwhichasellerofahouseknowsthatitisnotfitforhabitation,ithasbeenheldthatthesellermustdisclosethisfact.22Secondly,somecourtshaveallowedreliefwhenacontractorhassubmittedabidbasedonamistakencalculation.

Earliercasesonmistakesincalculations,whichhavenotbeenoverruled,seemtotaketheorthodoxposition.InImperialGlassLtdvConsolidatedSuppliesLtd23acontractorsubmittedabidthatwasfartoolowbecauseincalculatingthesquarefootageofglassrequired,anassistanthadmisplacedadecimalpoint.Itwasheldthatthisdidnotpreventtheemployerfromacceptingthebid.Incontrast,inMcMasterUniversityvWilcharConstructionLtd24thecontractorsbidhadomittedapriceescalationclause.Theplaintiffknewthatthecontractorintendedtoincludeaclauseandthecourtheldthatthiswasamistakeoverthetermswhichpreventedtheplaintifffromacceptingthecontractorsoffer.25However,inBelleRiverCommunityArenaIncvKaufmann26theMcMastercasewastreatedasauthoritythatapartycannotacceptanofferwhichheknowshasbeenmadebymistakeandwhichaffectsafundamentaltermofthecontract(emphasissupplied)aratherdifferentandmuchbroaderproposition.Itwasalsoheldthatiftheemployercouldnotacceptthebidbecauseitknewofthemistake,therewasnoliabilityonthebidbondprovidedbythecontractor:theeffectofthebondwasthatthebondingcompanywouldbeliableonlyifthecontractorsbidwaseffectivelyacceptedbutthecontractorrefusedtoenterintoaformalcontractforthework.27

(p.38) InRvRonEngineering&Construction(Eastern)Ltd28thecontractoragainsubmittedtoolowabidbecauseithadomittedanitemfromitscalculations.EsteyJ,deliveringthejudgmentoftheSupremeCourtofCanada,seemeddeterminedthattheintegrityofthebiddingsystemmustbeprotectedwhereunderthelawofcontractsitispossibletodoso.Heindicatednotonlythatreliefisconfinedtocaseswherethecontractordidnotintendtosubmitthetenderintheformandsubstanceitwasandthe


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mistakeisapparentonthefaceofthebid,29butthatsubmissionofthetenderontermsthatitcouldnotbewithdrawnwithoutforfeitingadepositwasaseparatecontract(contractA)fromthecontracttodotheworkitself(contractB).Onlyiftheemployerknewofthemistakeatthetimethetenderwassubmittedwoulditbeunabletoenforcethisseparatecontract.Itisperhapsironicthatthistwo-contractanalysishasbecomefirmlyensconced30asthebasisonwhichatendererwhosebidisimproperlyrejectedmaybegivenaremedyifthetermsinwhichthetenderwasinvitedindicatethataconformingtenderwillbefairlyconsidered.31Whenthetenderwasmistaken,lowercourtshavebeenastutetodistinguishitbyholdingthatcontractAnevercameintoexistence32orthat,providedthecontractorhadnotrefusedtogoaheadbythetimeitsbidwasformallyaccepted,itcouldstillbegivenrelieffromcontractB.33Appellatecourts,however,haveheldthatcontractAisbindingandthetenderermustentercontractBorpay(p.39) damages.34Buttheyhavealsosaidthatamistakentenderermaybegivenreliefinequityiftheerrorwassodisproportionatethattoenforcethecontractwouldbeunconscionable.35ThusitseemsthatinCanadatheremaybereliefwhenatenderisbasedonawrongcalculation,aswellaswhenitstatesthepriceortermsthemselvesinaccurately,andtheemployerknowsofthemistakebeforeitacceptsthetender,ifitwouldbeveryunfairtoenforcethemistakenbid.

IwillcomebacktomistakesincalculationswhenIdealwithparalleldevelopmentsintheUS.

NewZealand

IntheCommonwealththeothermajorexceptionisNewZealand.TheContractualMistakesAct1977allowsreliefwhenCenteredthecontractunderamistakethatwasnotcausedbyamisrepresentationbytheotherparty36iftheexistenceofthemistakewasknowntoD.37Thecourtisgivenaverybroaddiscretiontorefusetoenforcethecontractor,ineffect,toadjustit.38Whetherthemistakewasaboutthetermsoraboutthefactsisimmaterial.

IthasbeenheldthatthereisnomistakewithintheActwhenthepartieshadnotappliedtheirmindstothequestionatall.39Butthoughthisisstatedasifitappliestoa(p.40)unilateralmistakebyoneparty,40thecasesinvolvedareonesofcommonmistake;anditishardtoseethatitwillaffectunilateralmistakes:evenifChasnotappliedhismindtothematter,D(whomustbeactuallyawareofCsmistake)willhavedone.41

Therearerestrictions.Thecourtmaygivereliefonlyif

(i)DhadactualknowledgeofCsmistake;42(ii)Cdidnotbeartheriskofmistake;43and(iii)themistakeresultedinasubstantiallyunequalexchangeofvaluesoronepartyobtainingabenefitorobligationsubstantiallydisproportionatetotheconsiderationtherefor.44

Further,s4provides:


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(2)Thesepowersarenottobeexercisedinsuchawayastoprejudicethegeneralsecurityofcontractualrelationships.

Thisisaninterestingexampleofaspirationallegislation.Thecourtsdiscretionremainsverywide.45

Itwouldbeusefultofindoutwhatpolicyconcernsunderlaythedevelopmentofthevariousapproaches,andtocomparethemtoourown.TheremovalofthedistinctionbetweenmistakesastothetermsandmistakesastothefactsfromNewZealandlawseemstohavebeenlittlediscussedatthetime.TheReportthatprecededthelegislation(p.41) statedmerelythattheSmithvHughesdistinctionisillusory.Cootewrotein1988thathewasnotconvinced46buttheissuewasnotraisedinthereviewofthecontractstatutespublishedin1993,47possiblybecausetherehadbeennocasesonthepointbythatdate.Ihavefoundonlyonesince.InKingvWilliamsonVknewthatPthoughtlandbeingsoldextendedtoafencewhichwaswellbeyondthetrueboundary,butdidnothingtocorrectPsmisapprehension.48Interestingly,Burrowsetalstillmaintainthattacitacquiescenceinanotherpartysself-deceptioncreatesnolegalliability,andtreatKingvWilliamsonasoneofsilencepositivelyaffirmingamisconception.49

ButithasbeenpointedoutthattoignorethedistinctionbetweenamistakeastothefactsandoneastothetermsisunderstandablegiventhattheprimaryconcernofdraftsmanandActseemstohavebeentopreventunjustenrichmentbecausethevalueofthepartiesperformanceswasveryunequal.Section6(1)(c)iskey.Ifoneisconcernedwithcontractualjusticeinthissense,itdoesntmakemuchsensetodistinguishbetweenbezoarstoneofferedonthemisunderstandingthatitisglassandabezoarstoneofferedatafractionofitsvaluebecauseofasliponthepricetag.50Wewillwereturntothisquestionofunjustenrichmentlater.51

(p.42) EuropeanmodelsInChapter1Ipointedoutthatinsomecasestheso-calledrestatementsofEuropeanprinciplesarenotrestatementsofsharedprinciplestheyareonlyastatementofwhatthegroupthoughttobegenerallyacceptable,orevenasimplecompromise.SoweshouldgobehindthePECLandtheDCFRtoseewhatmodelsareusedinvariousnationallaws.InthespaceavailableIcandealonlywithFrench,German,andDutchlaw,andwiththeScandinavianlaws.

Attheriskofover-simplification,thevarioussystemsseemtoadoptoneofthreebroadapproachestomistake:

(1)toprioritizetheprotectionofinformedconsentasanelementofautonomyofthewill,sothatapartywhowasnotfullyinformedaboutavitalmattermayescapefromtheresultingagreement;(2)totakeasimilarapproachtoautonomyofthewill,buttobalanceagainstittheinterestoftheotherpartyintheformoflegitimaterelianceonthecontract;or(3)torelyongeneralclausesthatraisequestionsofbothsubstantiveandproceduralfairnessoreventhepurelysubstantivequestion,whetherthe


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resultingexchangewasequal.

France

Frenchlawseemsinbroadtermstorepresentthefirstapproach.Itseemstobethereadiesttogivereliefonthegroundthatonepartywasnotfullyinformedandthereforedidnotgenuinelyconsent.

GiventhattheCodecivilwasadoptedin1804,itisnotsurprisingthatitistheclosesttoRomanLaw,whichtooktheapproachthataconsensualcontractrequiredsubjectiveagreementandthatifonepartywasmistakenastoanessentialelementtheprice,thepersonhewascontracting(p.43) with,orthesubstanceofthesubject-matter,aswhenIbuysomethingwhichIthinkismadeofgoldbutwhichinfactisbrassthereissimplynocontractbecauseIhavenotconsented,52andessentiallysubjectiveagreementwasrequiredforavalidcontract.53

UnderArticle1110(1)oftheFrenchCodecivil:

Errorisacauseofnullityofanagreementwhenitgoestotheverysubstanceoftheobjectoftheagreement.

Thecontractaffectedbyerrorisnotabsolutelynull:itisacaseofrelativenullityinwhichannulmentmaybedeclaredattheinstanceofthemistakenparty.54

WhilemanyofthecasesinwhichthecontractisannulledunderthisarticleareonesinwhichreliefwouldalsobegiveninEnglishlawbecauseCsmistakeresultedfrombeinggivenincorrectinformationbyD,55orbecausetheyarecasesofcommonmistake,theFrenchcourtscandeclarethecontractannulledwherethemistakenpartywouldcertainlygetnoreliefunderEnglishlaw.Perhapsthebest-knownexampleisthePoussincase,56wheretheclaimantshadsoldapicturewhichtheyunderstoodcouldnotpossiblybebyNicholasPoussin,despitethefamilytraditionthatitwasbyhim;theyhadbeenadvisedthatitwasprobablybyanartistoftheschoolofCarracci.TheLouvreuseditsrightofpre-emptiontobuythepaintingwithoutrevealingtheirviewthatitwasalmostcertainlyaPoussin,andtheylaterdisplayeditassuch.Afterprotractedlitigation,the(p.44) contractwasannulledonthebasisthatthesellersmistakewasastothesubjectmatter(ratherthan,forinstance,merelythevalueofthepicture)becausetheythoughtitdefinitelywasnotaPoussinwheninfactitmightwellbe.

FrenchlawiswiderthantheRomanlawofmistakenotonlybecauseithasabandonedtheRomancategoriesbutalsobecauseitextendsmoreclearlybeyondwhatcanbecalledthesubstanceofthesubject-matter.Pothierarguedthatitsufficedthatthemistakewasastothequalitiesofthesubject-matterthatpartieshadinviewwhentheymadethecontract.57Inpracticemanycasesinvolveamistakeastosomeessentialcharacteristicthatismainlyimportanttooneoftheparties,suchaswhetherthelandbeingboughtissuitableforthedevelopmentthatthebuyerhasinmind.Intheseconstructabilitycases58itseemsthatwhatmattersiswhethertheimportancetoCwasknowntoD,orperhapsacceptedbyDtheexactrequirementhasbeenamatterofsomediscussion.59


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Inaddition,itistraditionallysaidthattherewillbenoreliefforamereerrorofmotive.60Atraditionalexampleisthefatherwhobuysaweddingdressforhisdaughter61(havingadaughterasyetunmarried,Iwouldprefertoupdatetheexampletoayoungwomanwhobuysaweddingdressforherself),inignoranceofthefactthatherfianchasjustmarriedsomeoneelseandwillthereforebeunavailableatleastforafrustratinglylongperiod.Giventheextendednotionofsubstancewhichhasbeenaccepted,itisnotalwayseasytodistinguishamistakeofsubstancefrommeremistakeinmotive;forexample,intheconstructabilitycasesthebuyersmotiveistodevelopthelandandtheoutcomescasesdonotseemtodependonwhetheritmatterstothesellerthatthedevelopmentispossible(e.g.becauseheisretainingadjoininglandwhichwouldbenefit(p.45) fromit).Thedistinctionseemstobethattherewillbenoerrorofsubstanceunlessthemistakerelatesinsomewaytothenatureofthething,ratherthanwhatitmaybeusedfor,62orthepurposeisanagreedpartofthecontract.63

ItisinterestingtonotethewaythesetwoissuesareresolvedintheAvant-projetCatala,oneofthepurposesofwhichwastobringtheCodecivilintolinewiththejurisprudence.64Ifthemistakewastothesubstanceofthesubject-matter,itissufficientthatthenon-mistakenpartyknowsofitsimportancetothemistakenparty.65Anerrorastomotivemayalsobeagroundforannulment,butonlyifthepartieshaveexpresslymadeitadecisiveelementoftheirconsent.66ThedraftproducedbytheMinistryofJusticeisalmostidenticalonthispoint.67Theconstructabilitycaseswouldcomeunderthefirstprovision,whilethesecondwouldprecludereliefintheweddingdresscase,unlesstheweddingorthecontinuingexistenceoftheengagementweremadeanexpressconditionofthecontract.

Havingsetthebasisforawidedoctrine,however,thecourtshaveimposedanumberoflimits.First,amistakewhichismerelyastothevalueisnotagroundofnullity.68Secondly,apartymaynothavethecontractannulledifitsmistakewasinexcusable.69Thirdly,therewillbenoreliefformistakeifthepartyacceptedtheriskwhichmaybeexpressor,itseems,byimplicationfromthecircumstances.70

(p.46) ThusreliefformistakeastothesubstanceisgivenrelativelyfreelyinFrenchlaw.Thenormalremedyisavoidance.71Commentatorssuggestthatifthepartywhohasavoidedthecontractwasmistakenthroughhisownfault,hemightbemadeliableindamagesforanylosshehascausedtheotherparty.72Thisisthepositiontakenbydoctrine,butinpracticeitseemsthatthissanctionisnotdemanded.Insteadthenormalsanctionistorefuseannulationforerror.73

TheEnglishcasesweconsideredinChapter1wereallonesinwhichCsmistakewasknowntoD.ItshouldbenotedthatthisisnotanecessaryelementofmistakeinFrenchlaw.ProvidedthatDwasawareoftheimportanceofthesubject-matter,itisnotnecessarythatheorshewasawareofCsmistakeorignoranceofthecrucialfact.

Indeed,ifthenon-mistakenpartywasawareofthemistake,thecaseislikelytobetreatedasonenotjustofmistakebutoffraud.Originally,FrenchlawlikeEnglishlawrequiredactivemisconduct,butthecourtshavelongrecognizedthatthemanoeuvres


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requiredbyarticle1116canincludedolparrticence,deliberatesilencewhichisintendedtomisleadtheotherparty.TheclassicexampleisthePigFarmcase.74Theclaimantsboughtacountryhousefromthedefendantwhofailedtorevealthatafarmfor400pigswasabouttobesetup100mfromthehouse.Thepurchaserswereallowedtorecoverthe10,000FFtheyhadpaidonaccount:

(p.47) [D]eceitmayconsistandtaketheformofsilenceonthepartofacontractingpartywhoconcealsfromtheotherpartyafactwhich,haditbeenknownbytheotherparty,wouldhavecausedhimnottoenterthecontract.

Ifthecaseisoneoffraud,themistakenpartymayagainhavethecontractannulled,andmayclaimdamages.Importantly,thelimitationsimposedincasesofmistakedonotapply.75Thusitdoesnotmatterthattheresultingerrorisnotastosubstantialqualityofthingsold,76butismerelytoamatterofmotive.Sotheyoungwomancangetoutofthecontractifthedressmakerknowstheweddingcannottakeplace,forexamplebecauseitisthedressmakerherselfwhohasmarriedthefianc.Evenamistakeastovaluemaysufficeifitwasinducedbyfraud.

JustasinEngland,proofoffraudisdifficult,andwhentheallegedfraudisbysilencethedifficultthingtoprovewillbetheintentiontodeceive.ButasNicholasputit,77therequirementhasbeenside-steppedbyaseconddevelopment.

Thisisthatthecourtshaveacceptedacademicargumentsthatthereissometimesapositivedutytogiveinformation.Sowhereabuyeroflandfromaprofessionalsellerdiscoveredthathewouldneverbeabletogetplanningpermissiontobuildontheland,thesalewasannulled.ThesellerobjectedthatithadnotintentionallydeceivedthebuyerbuttheCourdecassationaffirmedthelowercourt,remarkingthatthesellerhadadutytoinform.78

Thedevelopmentiswell-documented,forexamplebyGhestin,79byNicholas,80andbyLegrand,81whereit(p.48) isexplainedhowitwasconstructedoutofanumberofelementserror,dolparrticence,andbyarguingbyanalogytotheCodeprovisionsonliabilityforhiddendefectsinpropertysoldandotherlegislativeprovisionsaprocesstermedamplifyinginduction.TheAvant-projetCatalamaybetakenasanup-to-datesummaryoftheposition(IquotethetranslationbyCartwrightandWhittaker82):

Art1110

Ifoneofthepartiesknowsoroughttohaveknowninformationwhichheknowsisofdecisiveimportancefortheother,hehasanobligationtoinformhimofit.

However,thisobligationtoinformexistsonlyinfavourofapersonwhowasnotinapositiontoinformhimself,orwhocouldlegitimatelyhavereliedontheothercontractingparty,byreason(inparticular)ofthenatureofthecontractortherelativepositionsoftheparties.


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Art11101

Intheabsenceofanintentiontodeceive,afailuretofulfilanobligationtoinformgivesrisetoliabilityinthepartysubjecttoit.

GiventhewidereliefthatFrenchlawalreadygaveincasesofbothmistakeandfraud,itishardtoknowhowfarthedevelopmentofthisobligationderenseignementisinfactachangeofsubstanceratherthanoneofform.Itmayseemtobemainlyrecastingthematterintermsofapositivedutytogiveinformationratherthanintermsofwhensomeonewhoisill-informedmayhaverelief.83Butitcertainlywillenableapartywhohasenteredacontractunderamisapprehensionwhichisnotsufficientlyserioustojustifyavoidanceonthegroundofmistake,andwhocannotprovefraud,torecoverdamagesnonetheless.

Frenchauthorsidentifyanumberofdifferingpoliciesorphilosophiesunderlyingthelawofcontract.Itisevident(p.49) thatFrenchlawstillhasastrongattachmenttonotionsofvoluntarismandtheautonomyoftheindividual.While,asRouhetteargued,theCodecivildoesnotprovidesimplythatwhatwaswilledshouldbeenforced,butmediatesitthroughavarietyoflegalrequirements,84Frenchlawyersstillseemingeneraltotaketheviewthatapartysexpressionofwillshouldnotbebindingifthepartysconsentwasnotcorrectlyinformed.Butnotionsofcontractualsolidarityhavealsohadapowerfulinfluence.Thesearenotjustnotionsthatapartyshouldtakesomeaccountoftheinterestsoftheotherparty.Demogueputforwardtheideathatacontractwasnottheresultoftensionsbetweenantagonisticinterestsbutalittlesocietyinwhicheachmustworktowardsacommonendwhichisthesumoftheindividualendspursuedbytheparties.85Itmayalsoinvolvetheideathat,asRipertputitin1948,individualrightsaregiventomanforhimtofulfilhissocialfunction.86Thereforecontractualsituationsmustbecontrolledandmodifiedsothattheyconformtothegeneralinterest(andwecanbesurethatthosewhoespousedthisviewwerenottakingthesameviewofwhatisgoodforsocietyas,say,Chicagoeconomists).Ripertwaswritingagainstabackgroundofextensivecontrolsovercontractsofemployment,forfoodandforhousing,andthatinterpretationofsolidarityisprobablynolongerdefended.Jaminhasputforwardanewinterpretationofsolidarity.87Helooksparticularlyatcasesinvolvingnetworksofcontractsdealershipsanddistributioncontracts,inwhichthecourtshaverestrainedthefirmthatcontrolsthenetworkfromactingwithout(p.50) payingreasonableregardtotheinterestsofthenetworkmember.Jaminarguesthatsolidaritynowrequiresthattheclassicalpresumptionthatthepartiesareequalshouldbereplacedbyonethattheyareunequal.Frenchviewsarecertainlynotmonolithic,however.CarbonniersresponsetoDemoguewasthatitisastonishingthat,inanagewhenmarriagemightperhapsbetransformedintoacontract,somepeopledreamofturningacontractintoamarriage.88Terr,Simler,andLequetteclaimthatDemogue,inarguingthatcontractsshouldbetreatedlikepartnerships,wasseekingtoassimilateexchangecontractsandorganizationcontracts,whicharedifferentandincompatiblenotions;andtheyarefiercelycriticalofnotionsofcontractualsolidarityingeneralandofJamininparticular,arguingthathisapproachwillleavetoomuchtojudicialdiscretion.89ButFrenchlegalthinkingstillseems


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stronglyinfluencedbysolidarity,anditisoftenremarkedthatithasmuchstrongermoralovertonesthanthelawthissideoftheChannel.90ThesepersistintotherecentproposalsDominiqueFenouillethaswrittenthatproposalsinthedraftreformssuggestedbytheFrenchMinistryofJustice,reflectmoralconsiderationsmorethaneconomicones.91

Giventhisintensedebate,itmayseemsurprisingthatthereseemstobelittlespecificdiscussionofthepolicyunderlyingthe(toEnglisheyes)veryliberalFrenchrulesonmistakeandnon-disclosure.Oneofthefirstwritersonthedutyofdisclosure,Juglart,baseditfirmlyonsolidarity.92Onemighthaveexpectedfierceattacksfromthosewhoopposenotionsofsolidarityenteringcontractlaw.PossiblytheansweristhattoaFrenchlawyer,thinkingofcontractualfreedomaslinkedtoindividualautonomy,thereisnotthesameconflictasoversomeothertopics.Inmanyofthecasesweareconsidering,notionsof(p.51) autonomyandnotionsofsolidarityseemtopointinthesamedirection:seekingtoensurethatthecontractingpartyisadequatelyinformed,andallowingescapeifheorshewasnot.

SomeFrenchauthorsatleasthaveexpressedsomeconcernatthereadinesswithwhichthereliefformistakeseemstobegranted.Forexample,someyearsagoFabre-Magnanarguedthatmistakeshouldnotapplyto(andtherewouldbenodutyofdisclosureof)amatterthatwenttothemistakenpartysownprestation,whattheyhadtodeliverordosothatthesellersinthePoussincasewouldhavenoreliefbecausetheirmistakewasastothenatureofthepicturetheyhadundertakentodeliver.93Thissuggestiondoesnotseemtohavebeenaccepted,however;itisexpresslyrejectedintheAvant-projetCatala.94

Recentlytherehasbeensomeretrenchment.ThustheCourdecassationhasmorethanonceheldthatthereisnodutytopointoutamistakeastovalueevenwhentheotherpartyisinaweakposition,thoughitleftopenthepossibilitythattheremightbedolparrticenceinsuchacase.95ButFrenchlawstillgoesfarinallowingapartytoescapethecontractonthegroundthatitwasnotfullyinformedandintryingtopreventmisinformeddecisionsfromoccurring,andIhavenotfoundmanycriticismsofthisapproach.AcommentatoronthePECLcarefullyexplainedtheirmorerestrictiveapproach,limitingrelieftocasesinwhichthemistakewasorshouldhavebeenknowntotheotherparty,butrejecteditoutrightasfailingtoprovideadequate(p.52) protectionforautonomyofthewill.96WehaveseenthatboththeCatalaandtheMinistrydraftshavefollowedatraditionallineonthispoint.

Germany

TheapproachoftheBrgerlichesGesetzbuch(BGB),Germanyscivilcode,tomistakemighthavebeencompletelydifferenttothatoftheFrenchCodecivil,andinsomerespectsitisindeeddifferent.ThedrafterswereheavilyinfluencedbythewilltheoryadvocatedbySavigny.97Savignysawthebindingnatureofthecontractbeingbasedonthedeclaredwilloftheparties,andconsideredthatifthedeclarationdidnotmatchtheiractualwill,itshouldnotbind.98Buthedrewadistinctionbetweenthedeclarationandthemotivationforthedeclaration,andconsideredthatinprincipleamistakethataffectedonly


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themotivation,ratherthanthedeclaration,shouldbeirrelevant.ThefirstdraftoftheBGBappliedthisveryliterally,andgavereliefonlyforerrorsindeclaration,whichwouldrenderthedeclarationofnoeffect.99TheFirstCommission(p.53) chargedwithdraftingtheBGBalsothoughtthaterrorinmotivationshouldnotberelevant;themistakenpartyisadequatelyprotectedbyotherremedies,principallyforbreachofcontract.100However,SavignyhadrecognizedthatitwouldbehardtoreconcilethissharpdistinctionbetweendeclarationandmotivationwiththeRomandoctrineoferrorinsubstantia,101whichhehadre-interpretedinabroadfashiontoincludeerrorsaboutthecommercialcategoryintowhichtheitemshouldfall.102ThefinaldraftoftheBGBwasmoregenerous:119IIprovidesthat

(2)Anerrorastothosecharacteristicsofapersonorthingwhichareregardedinbusinessasessentialisregardedinthesamewayasanerrorastothecontentofadeclaration.103

TheseconddraftingCommissionjustifiedthispartlybytheneedsofbusiness,thoughtheyseemtohavehadsomedoubtsaboutwhatmistakesshouldfallwithintheprovision:theyaddedthatitwouldbebettertoleavethedefinitiontolegalscienceandpracticethantoattempttolegislate.104

SoinGermanlawtoothereispotentialforreliefwhenapartyentersacontractbecauseofamistakeaboutthe(p.54) characteristicsofthesubjectmatter.Butagaintherearelimits.Oneisimposedby119(2)BGBitself:theerrormustbetoacharacteristicregardedinbusinessasessential.ThisisanobjectivecriterionanditsaidthattheGermancourtshaveusedittopreventthesectioncausingmajordistortionsinGermanLaw.105Amistakewhichisnotaboutthesubjectmatterorisnotregardedasimportantinanobjectivesenseisclassifiedasoneofmotiveonlyandthereisnorelief.106Otherlimitsareimposedbythecourts.Theeffectofminormistakesislimitedbyacausalrequirement:notonlymustthemistakehavecausedthepartytoenterthecontract,buttherewillnotbeanadequatecausallinkunlessitwouldhavebeenreasonableforthemistakenparty,hadheknownthetruth,nottoenterintoit.107Thepriceisnottreatedasanessentialqualityofthethingwithin119(2)BGB,soagainerrorsastovaluearenotagroundforrelief.108ThereisafurtherlimitationwhichisnotfoundinFrenchlaw.ThisisthatthearticledoesnotapplywheretheBGBsrulesondefectsingoodsapply.Thisobviouslypreventssellerswhounknowinglydeliveredgoodsthataredefectiveforescapingliabilityonthegroundofmistake,109butalsoitpreventsabuyerfromusing119whereitwouldproduceamorefavourableresult.110

(p.55) Nonetheless,thepotentialforreliefisbroad:themistakemaybeunilateralandthereisnorequirementthatthefactofthemistakebeknowntotheotherparty.111Moreover,thefactthatthemistakenpartywascarelessisimmaterial.(ThefirstdraftoftheBGBcontainedabarforgrossnegligencebutthiswasrejectedbythefinalCommission.112)

ButatthesametimethefinalCommissionimposedarulethatdistinguishestheGermanposition:theyprovidedfortheprotectionoftheotherpartysreliancewherethat


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reliancewasjustified.113122providesthattheCwhoavoidsthecontractmustcompensatetheDforitsreliancelossunlessDknewthegroundofthenullityorrescissionordidnotknowofitduetonegligence.Itissaidthatatypicalclaimforreliancelossunderthissectionwillbeaclaimforalostopportunitytobuyorsellthegoodselsewhere.114

Clearly,whereitapplies,122providesastrongdisincentivetoavoidanceiftheotherpartyhasalreadyreliedonthecontract.Itmustbenotedhoweverthatitdoesnotapplyiftheotherpartyknew,orshouldhaveknown,thattherewasamistake.115

GermanlawalsorecognizesthatifDknewofCsmistakeanddeliberatelykeptsilent,Dmaybetreatedasfraudulent;andagainreliefisgivenforfraudmorefreelythanformistake.116Butherethereisaqualification:thereisfraudbysilenceonlyifDhadadutytodisclosetheinformationthatCdidnothave.117TheprocessinGermanyseemsto(p.56) havebeenthereverseoftheFrench:ratherthanadutytodisclosebeingbuiltondolparrticence,liabilityforfraudbysilenceinGermanlawseemstohavebeenbuiltonthedutytodisclose.118Thedutytodisclosewasderivedfromthenotionofculpaincontrahendo,faultinthecontractingprocess.CulpaincontrahendowasdevelopedbyvonJhering119forcaseswhereonepartywasunawarethatthecontractwhichhadbeenmadewasunenforceableforformalreasons.ThereweresomereflectionsoftheideaintheoriginalBGB.120Thecourtsdevelopedandexpandedculpaincontrahendotocoverotherformsoffaultinthecontractingprocess,suchasnegligentinjurytoaprospectivecustomer,121carelesslymisleadingtheotherastoyourintentions,122breakingoffnegotiations,123carelesslygivingwronginformation,andthefailuretodisclose.Atleastinthelasttwocategories,thecourtshavedevelopedthedoctrinepartlyonthebasisof242BGB124(thefamoussectionwhichrequirescontractstobeperformedingoodfaith).125CulpaincontrahendoisnowincorporatedintotheBGB.126

(p.57) Itissaidthatthecourtsfoundaneedtodevelopliabilityformisleadingtheotherpartyonthebasisofculpaincontrahendo,127andlookingatthestructureoftherelevantarticlesoftheBGBitisclearwhy.Withoutittherewouldbenoremedyforcasesofnon-fraudulentmisrepresentation128thatdidnotgiverisetoamistakewithin119(2)(forexample,becauseitdidnotinvolveaqualityconsideredessentialinbusiness),nor(giventherestrictivenatureoftheGermanprovisionsonliabilityintortfornon-physicallosses129)coulddamagesbeawardedfornegligentmisrepresentation.Butevenifitwasaimedprimarilyatcasesofpositivemisrepresentation,130itwasformulatedasadutytoinform.Where,then,thereisadutytodisclose,theill-informedpartymayrecoverdamagesfornon-disclosureofafactwhichdoesnotgotothesubstanceand,iftheywouldnothaveenteredthecontract,evenrescissionmaybepermittedifthisisthebestwayofrestoringthemtothestatusquoante.131Wherethenon-disclosurewasdishonest(itseemstherequirementsarebroadlysimilartothoseofDerryvPeek132),therewillbefraudbysilenceandtherefore,asinFrance,themoregenerousrulesgoverningavoidanceforfraudwillapply.

Itisdifficulttostatewhenthedutytodisclosewillapplybecausethedecisionsarefact-


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specific.133Examplesincludesellersofvehicleswhofailtorevealthatthe(p.58) vehiclehasbeendamagedinanaccident134(wheretheproblemseemstohavebeenthatalthoughthedamagehadbeenrepaired,someeffectsoftheaccidentmightnotappearuntilalongtimeafterwards;ifthevehiclehadadefectwithinthesalesprovisions,e.g.434BGB,thebuyerwouldonlyhavearemedyforbreachofcontractandnotoneforculpaincontrahendo135);sellersoflandwhofailtorevealdefectssuchasdamporcontamination;136constructabilitycases;137andcasesinwhichthesellerofabusinesshadnotrevealedfallsinprofitabilityaftertheperiodforwhichaccountshadbeenprovided.138

Markesinisetalidentifytwocriteria:

(1)theoverwhelmingimportanceoftheinformationtotheill-informedparty;and(2)theexistenceofarelationshipoftrustbetweentheparties,theprimeexamplebeingtheDaktarifilmrightscase.139

Somecasesinvolvingnon-disclosurebycardealersarealsoputintothesecondcategory.140IfthepublicattitudetowardscardealersisthesameinGermanyasitisinEngland,trustinadealerseemsfictitious;Ktzsuggeststhatthecasesarereallytobeexplainedbyathirdcriterion:thesellerisinamuchbetterpositiontodiscoverthedefectthanthebuyer.141

JusthowfarthecasesondisclosuregobeyondwhatwouldhappeninEnglishlawitishardtosay.Many(p.59) ofthecasesareofmisrepresentationbyhalf-truth142orwherethefactshavechangedbetweenthetimethestatementwasmadeandthesigningofthecontract.Englishcourtswillimposeliabilityforfraudonsuchfacts,unlessinthecontextitisquitecleartothereasonablerecipientoftheinformationthatthepartywhogivesitacceptsnoresponsibilityforitsaccuracyorforreviewingit.143Howeverthereareexamples144thatgofurtherthanEnglishlaw,theDaktarifilmrightscasebeingjustone.Incasesinvolvingthesaleofbusinesses,theinformationnotdisclosedseemstobepreciselythesortofthingthatinEnglishpracticewouldbethesubjectofpre-contractenquiresorascheduleofwarranties.145

IhavenotfounditeasytolocatediscussionoftherelevantpolicyinGermanlaw.Indeed,GermancolleaguestoldmethatIwouldfindlittle,andsofarthathasprovedtobethecase.Thediscussionisprimarilyintermsofconcepts,forexample,thedistinctionbetweendeclarationandmotive.AttimesIthoughtitwasentirelystuckinBegriffsjurisprudenz,thejurisprudenceofconcepts.Thatisnottrue.TherulesonmistakeshowatleastthestronginfluenceofInterressenjurisprudenz,considerationsofbalancingofinterests.Thesearedemonstratedbythedevelopmentofculpaincontrahendoandthelinkedpolicyofprotectingreliancethatunderlies122.PrivatelawmoregenerallyhasalsobeeninfluencedbywidernotionsoftheStatessocialresponsibility,buttowhatextentthelawonmistakeand(p.60) non-disclosurehasbeeninfluencedbythisthirdnotionitisveryhardtosay.

WemustnotassumethatallGermanlawyersnecessarilysupportthesolutionsfoundin


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theirlaw.119(2)hasbeencontroversial.Zimmermannquotesadescriptionofthejurisprudenceasamagicalmysterytour;146theMnchenerKommentarcomplainsthatthereisstillnoworkablecriteriafordistinguishingmistakesastoessentialqualitiesfrommotivationalmistakes.147Thecaselawonthedutytodisclose,andtheDaktaricase148inparticular,hasalsobeencriticized.149Othersarguethatthelawistoonarrowforexample,Kramerpointsoutthatthemistakeprovisionsdonotallowforreliefincasesofcalculationmistakes.150ThemajorrevampoftheBGBin2001gaveanopportunitytodiscusschange,butitwasnottakenup,nordoesitseemtohavebeenconsideredinthewiderreviewoftheBGBwhichprecededthe2001reforms.151ThissuggestsatleastthatthereisnoconsensusamongGermanlawyersthatthereisanoverwhelmingproblemwith119and122,orwiththewayinwhichdutiesofdisclosureareapplied.

(p.61) TheNetherlandsIwillendthisbriefsurveyofcodifiedsystemswiththeDutchCivilCode(BW),asanexampleofamoderncode.BeforethecurrentBWcameintoeffect,thecourtshaddevelopedadoctrineofpre-contractualdutytoinformbasedongoodfaith.152

Article6:228oftheBWprovidesthatacontractwhichhasbeenenteredintoundertheinfluenceoferror,andwhichwouldnothavebeenenteredintohadtherebeenacorrectassessmentofthefacts,canbeannulledforaunilateralmistakethatwasnotcausedbytheotherparty,butonlyiftheotherparty,inviewofwhathekneworoughttoknowregardingtheerror,shouldhaveinformedthepartyinerror.153

IfArt6:228isrepresentativeofmoderncivilianthinking,itsuggeststwotendencies.Thefirstistoabandonspecificcategoriesofmistakewhichareorarenottreatedasrelevantandtoreplacethembyageneralformula.154Thedistinctionbetweensubstanceandmotivehasgone.

InafamousDutchcaseof1959,StevensweerdKantharos,155Chadsoldacupwhichhehadfound.LateritwasfoundtobeaveryvaluableGreco-Romankantharos.Cwasnotallowedtoavoidthecontractformistake,anditisthoughtthatthisremainsthecaseunderart6:228:hetakestheriskthatitmayturnouttobevaluable,andthereforethemistakeisamatterforwhichthepartyinerrorshouldremainaccountable.156However,ifthebuyerwasanexpertandthesellerwasnot,itissaidthatthepositionwouldbedifferent.157WhatdoesnotseemtomatteristheissueintheFrenchPoussincase,namely,whetherthesellerhada(p.62) positivebeliefthattheitemwassomethingdifferenttowhatitturnedouttobeintheFrenchcase,anincorrectbeliefthatthepaintingcouldnotbebyPoussin.158

Thesecondtrendthatappearsfromart6:228BWistolimitreliefforunilateralmistakeswhichwerenotcausedbytheotherpartygivingincorrectinformation.Thiskindofunilateralmistakeofitselfisnolongeragroundforavoidance:underart6:228(1)(b),reliefislimitedtocasesinwhichDshouldhaveinformedC.IfChasmadeamistakeofwhichDknows,butinthecircumstancesDisnotobligedbygoodfaith159torevealthetruth,forexamplebecausethatwouldinvolveDinrevealinginformationwhichhehasgainedonlyatconsiderablecost,160Cmaynotavoidformistake.


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Article6:228BWisnoteasytointerpret.Thephraseiftheotherparty,inviewofwhathekneworoughttoknowregardingtheerror,shouldhaveinformedthepartyinerrorhasbeenreadasnarrowingthecircumstancesinwhichreliefwillbegivenforunilateralmistakestillfurther.Ithassometimesbeenunderstoodtomeanthattherewillbenoreliefunderthisarticleunlessthenon-mistakenpartykneworatleastshouldhaveknownthatthemistakehadbeenmade.161IfDdidnotknowandhadnoreasontoknowofCsmistake,howcanhebeexpectedtoinformCoftheerror?

However,thisseemstobeamisunderstanding.TheacceptedinterpretationisthatDneedknowonlythatthefactsorcircumstanceswereessentialtothemistakenparty,162notthatCislabouringunderamistake.Indeed,as(p.63) intheotherciviliansystems,ifDhasactualknowledgeofCsmistaketheremaybeliabilityinfraudfordishonestsilence.163ThepointmaybethatsometimesDisexpectedtopointoutfactstoCiftheyareessentialtoC,whetherornotDknowsorshouldknowthatCisactuallylabouringunderamistake.IfindeedChasmadeamistake,andDhadnotdisclosedthefacts,Cmayavoidthecontract.Thisapproachineffectcreatesaprophylacticdutytowarn.

ThecaselawthatIhaveseentranslatedordiscussedinEnglishdoesnotprovideaclearanswertothequestionabove,nordoesitmakeitclearwhentherewillbeadutytoinform.TheHogeRaadhassaidthatpartieshaveadutytoinformthemselvesofthefacts,butthatDmayhaveadutytogiveinformationinordertopreventamistake.Whetherthesellermustrevealitsknowledge,forexamplethatcracksinthebuildingsoldareduetoinadequatefoundations,ormayassumethatthebuyerwillinvestigatethecause,dependsonopiniongenerallyacceptedinsocietyandtheparticularitiesofthecase.164Onthefactsofthecaseitwouldbehardtoarguethatthesellershadnoreasontosuspectthebuyerwasmistaken.165Commentatorsstatethatitisdifficulttoestablishwhenthereisadutytoinform.166

(p.64) NordiclawsThethirdofthethreeapproachesImentionedearlierisrepresentedbytheNordiclaws.ThelawsofcontractinDenmark,Finland,Norway,andSwedenhavemuchincommonbecauseeachadoptedtheso-calledNordicContractsAct.167UndertheAct,reliefonthegroundsofmistakeitselfislimitedtocasesofmistakesindeclaration.168Thereisaprovisiononfraudwhichisbroadenoughtocoverfraudbysilence,169butitisreportedtobelittleused,atleastinSweden.170

Instead,theNordiclawsseemtoemploytwomainapproachestotheproblemwithwhichwearedealing.171Thefirstistotreatthenon-mistakenpartyashavingfailed(p.65) toperformthecontract.Thisisdonebyemployingabroadnotionofdefectwhichdependsnotsomuchonobjectivequalitiesorevaluationofthegoodsorotherpropertyasonwhatthebuyerthoughttheywouldreceive,providedthatthesellerkneworshouldhaveknownofthebuyersexpectation.ThustheDanishSaleofGoodsActof2003provides:

76.


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(1)Thegoodsarenotinconformitywiththecontractif(iii)thesellerhasfailedtogivethebuyernoticeofcircumstancesthatinfluencedthebuyersassessmentofthegoodsandwhichwereknownoroughttohavebeenknownbytheseller172

Insimilarvein,theNorwegianSaleofPropertyActof1992provides:

Thepropertyhasadefectifthepurchaserhasnotbeeninformedaboutconditionswhichthesellerknewoforcouldnothavebeenunawareof,andofwhichthepurchaserhadreasontobelievethatheshouldhavebeeninformed.This,however,isonlyrelevantifonecouldassumethatthenon-performancehasinfluencedthecontract.173

Likewise,theSwedishLandCodeof1970,Section19provides174thatthesellerwillbeinbreachifthepropertyunitdeviatesfromwhatthepurchasercouldhavejustifiablyanticipatedatthetimeofthepurchase.ThisprovisionwasusedbytheSwedishSupremeCourttogiverelieftoabuyerofanapartmentwhowasnottoldbythesellerthatbecauseofachangeintrafficregulations,theapartmentwouldbecomemuchnoisier.175

(p.66) Thesecondapproachistorelyongeneralclauses.Theprovisionmostfrequentlycitedinthiscontextis33oftheNordicContractsAct:

33.Evenifadeclarationofintentionshallotherwiseberegardedasvalid,thepersontowhomthedeclarationwasmademaynot,however,relyonthedeclarationif,asaresultofcircumstancesexistingatthetimewhenhehadnoticeofthedeclarationandofwhichhemustbedeemedtohaveknown,itwouldbeagainsttheprinciplesofgoodfaithtoenforcethedeclaration.

Inthetravauxprparatoiresitwassaidthatthesectioncanbeusedwheneverthepromiseinadishonestwaytookadvantageofthepromisorsignoranceofthecircumstances,176forinstancebysellingshareswithoutrevealingthatthecompanyisinsolvent.177InallfourjurisdictionsitwouldbethefirstarticleoftheNordicContractsActunderwhichtodealwiththecaseofapartybuyingapicturewithouttellingtheseller,whowasobviouslyignorant,thatitwasbyanoldmaster.178InFinland17933hasregularlybeenreliedonasrequiringapartytodisclosefactsthatwerecrucialtothecontractbutthattheotherdidnotknow;suchaswhenthesellerofakioskdidnotrevealtothebuyerthatthekioskwouldhavetobemoved,180orwhenabuyeroflandknewthatthesellerwasmistakenabouttherighttobuildonthelandandthereforewasallowingittogofortoolowaprice.181

Ingeneral,forreliefunder33itseemsthatthenon-mistakenpartymusthaveknowntheimportanceofthemattertotheother,182butitisnotnecessarythatthenon-mistakenpartywasawareoftheothersmistake;(p.67) thatmerelystrengthensthecaseforrelief.183Asthenon-mistakenpartyisatfault,itissaidthatthemistakenpartymayalternativelyclaimdamages.184


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Itseemsthat33canbeappliedtoanyerror,oneofmotive,185orevenofvalue.186Theapproachisflexible:faultonthepartofthemistakenpartyisonlyafactor,notabartorelief.Ontheotherhand,itseemsthatreliefwillnotbegivenifthecourtthinksthatthemistakenpartyshouldbeartheriskofhismistake.ThusinaSwedishcasewherebuyersbidonapicturethinkingthatitwasgenuinebecauseitappearedtobeartheartistssignature,thesellerwasnotrequiredtopointoutthatitwasareproduction.187

33issometimesdescribedasbeingbasedonfairnessratherthangoodfaith.188However,thepointisfrequentlymadethatreliefwillnotbegivenunlessthenon-mistakenpartyshouldhaveknownoftheimportanceofthemistake,becauseonlythenwoulditbecontrarytogoodfaithtoinsistonthecontract.189Fromthediscussion,itseemstobiteoneitherproceduralorsubstantiveunfairness.Butassessmentsofthepracticalimportanceof33seemtovary.Somecommentatorspointoutthatmuchoftheworkisdonebytherulesonnon-conformitydescribedearlier,190andthattherearenotmanycases.191

Thereisalso36,whichwasintroducedintotheActsbylateramendments:

(p.68)

36.(1)Acontractmaybemodifiedorsetaside,inwholeorinpart,ifitwouldbeunreasonableoratvariancewiththeprinciplesofgoodfaithtoenforceit.Thesameappliestootherjuristicacts.(2)Inmakingadecisionundersubsection(1)hereof,regardshallbehadtothecircumstancesexistingatthetimethecontractwasconcluded,thetermsofthecontractandsubsequentcircumstances.

36caninprinciplecovercasesofmistake,butitdoesnotseemthatithasbeenemployedinthiscontext;atanyrate,itissuggestedthatthesamefactorswillberelevantasunder33.192

Lastly,thereisasuggestionthatamistakenpartymayalsobeabletoobtainreliefiftheotherpartyhasnotyetreliedonthecontract.193

UnitedStatesIntheUS,sofarasthelawsoftheindividualstatesareaccuratelyreflectedintheRestatement2dandthecasescitedinleadingtextbooks,therehasbeenasignificantdeparturefromtheclassicalcommonlawmodel.194Thishasoccurredinatleasttwotypesofcase.

(p.69) Thefirstiswhereapartyhassubmittedabidtodoworkortobuypropertyandthebidisbasedonamistake.195Notonlymaytheemployernotacceptthebidifthebiditselfthefigurestatedisobviouslyerroneous,196asinEnglishlaw;intheUS,reliefisalsoallowedbymanycourtswhentheerrorwasintheunderlyingcalculationsorabouttheamountofworkinvolved.197Itisallowedbothwhentheemployerkneworoughttohaveknownofthemistake,198andalsowhentheemployerdidnotknowofitwhenit


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acceptedthebidbuttheemployerhasnotyetreliedonthebid,providedthatitwouldbeunconscionablefortheemployertoinsistonperformance.Reliefmayberefusedonthegroundofrelianceif,forexample,theemployerhasreliedonthebidbyrejectingotherbidsforthesameworkandsomakingitimpossibletoturnimmediatelytoanothercontractor.Insomecourts,reliefmaybeallowedonlyifthemistakenbidderpaysthecostofarrangingasecondroundoftendering.199Thefurtherrequirementthatitmustbeunconscionabletoenforcethecontractsoundsveryrestrictive,butthecasesIhavereadsuggestitissatisfiedassoonasitisshownthatastheresultofthemistakethebidderwouldmakeasignificantlossonthecontract.200

(p.70) Reliefwillsometimesbedeniedonthebasisthatthemistakenpartyshouldbeartheriskofitsmistake.Thisseemstohappenwhenthemistakewasanerrorofjudgmentratherthanaclericalerrororsomeotherformofpositivemistake;201orwhentheriskisonethatthebidderwasinabetterpositiontoevaluatethantheemployer.202

Reliefonsimilargroundshasalsobeengiveninothertypesofcasewhichseemtoinvolveunilateralmistakeastothefactsratherthanthepriceorothertermsofthecontract,203andRestatement2dstatesageneralrule:

153WhenMistakeofOnePartyMakesaContractVoidable

Whereamistakeofonepartyatthetimeacontractwasmadeastoabasicassumptiononwhichhemadethecontracthasamaterialeffectontheagreedexchangeofperformancesthatisadversetohim,thecontractisvoidablebyhimifhedoesnotbeartheriskundertherulestatedin154,and

(a)theeffectofthemistakeissuchthatenforcementofthecontractwouldbeunconscionable,or

(b)theotherpartyhadreasontoknowofthemistakeorhisfaultcausedthemistake.

Secondly,despitetheauthorityofLaidlawvOrgan,204somecourtshaveheldthatapartywhosellspropertywhichheknowstobedefectiveinawaythatthebuyerisnotawareofmustdisclosethistothebuyer.AmuchcitedexampleisObdevSchlemeyer,205wherethedefendantsfailedtorevealthatthehousetheyweresellinghadsufferedfromserioustermitedamagewhichalmostcertainlyhadnotbeeneradicatedbythelimitedtreatmenttheyhadcarriedout.They(p.71) wereheldliabletothebuyersforfraudulentnon-disclosure.ThereisalsoadirectparalleltotheEnglishbody-partscase206describedinChapter1:inCaliforniaithasbeenheldthatasellerofahousemustdisclosethefactthatfivepeoplehadbeenmurderedthere.207Althoughithasbeensaidthattheconcepthasprovedbroadenoughtogiverelieffornon-disclosurewellbeyondthetermitecases,208thecasesinwhichithasbeenheldthatthereisadutytodiscloseallseemtoinvolveasellerwhoknewofadefectinthepropertysold.209WewillseethatincaseslikeLaidlawvOrganitself,theUScourtshavetendedtosaythattheknowledgeablepartyneednotdisclosewhatheknows.210


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WhattomakeofthissurveyWhatcanwemakeofthissurvey?Therearecleardifferencesofapproachbetweenthelegalsystemswehavelookedat.Oneiswhethertheconcernisprimarilywithtryingtoensurethatapartysconsentisinformed,atleastasregardsthefactsthataremostobviouslyrelatedtothecontractandthatarethemostimportanttohimorher.Others,liketheNewZealandscheme,seemlessconcernedwiththeseriousnessofthemistakeoritsobviousrelationshiptothecontractandplacetheemphasislargelyonthe(p.72)fairnessoftheresultingexchange.OverallfairnessalsoseemstobeanimportantfactorinScandinavianlaw,thoughtherelevantsectionsoftheNordicContractsActcoverproceduralfairnessaswellasthesubstantiveequalityoftheexchange.

Whileintheciviliantraditionsthenotionofinformedconsentseemstobethebasisofrelief,theconsequencesareworkedoutratherdifferently.OnthefaceofitFrenchlawseemslittleconcernedwithprotectionofthedefendantsreliance,whereasinGermanLawthenon-mistakenpartysrelianceonthemistakenpartyspromisewillbeprotectedprovidedthatitwasreasonable.ItispossiblethatinpracticethedifferenceislessthanitappearsbecausetheFrenchcourtscanemploytherulethatthemistakemustnotbeinexcusabletoexcludereliefatleastwhenthemistakenpartywasatfault,andsomecommentatorshavesaidthatthecourtswillapplythisruleevenincasesofsimplenegligence:thenegligencedoesnothavetobegrosstobeinexcusable.211Butthatcanonlybeanindirectformofprotection.Itwillnothelpthenon-mistakenpartywhohasreliedonthecontractwhenthemistakenpartywasnotnegligent.Thecontrastwith119and122BGBisclear:inGermanlawthecontractmaybeavoidedbuttheinnocentnon-mistakenpartywillbeprotected.

Bethatasitmay,bothsystemswillallowavoidancewherethefactthattheclaimantwasmistakenwasunknowntothedefendant.Incontrast,boththePECLandtheUPICClimitreliefforCsunilateralmistakestothecasewhereDkneworoughttohaveknownofthemistake.InthecaseofthePECL,thisseemstorepresentacompromiseratherthanacommonpositionamongthelawsoftheMemberStates.212Bothsetsofprinciplesseemtomovesignificantlyawayfromthecivilianpositiontowards(p.73) protectingthereasonableexpectationsofthenon-mistakenparty.213

Butinallthesesystems,wherethedefendantactuallyknewCwasmakingamistakebutdishonestlydecidedtosaynothing,Cmayavoidthecontractandmayclaimdamagesforfraud.BothFrenchandGermanlawalsoplaceadutytoinformonpartieswhohaveinformationtowhichtheotherisunlikelytohaveaccessorwhichtheothermaynotthinktoaskaboutforexamplebecausethepartiesrelationshipissuchthattheclaimantexpectedtobetoldofanyproblem.

ThuswhattheEuropeanmodelsallhaveincommonisthattheyallowreliefincasesinwhichEnglishlawdefinitelydoesnot.Thenumberofsituationsthatcauseproblemsinpracticemaynotbelarge,butthedifferencesareremarkable.WemightcaricaturethedifferencebysayingthatconductwhichonthecontinentisregardedasfraudisregardedinEnglandasgoodbusiness.214


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Soweshoulddecidewhetherwewishtoretainourlawasitis,orshouldpursuesomethingclosertothePECLoroneoftheothermodels.Weshouldbeginbyconsideringwhetherwecandeviseanalternativemodelthatwillworktolerablywell;ifwecan,wemustthendecidewhetherornotwewanttoadoptit.ThosearetheissuesforChapter3.(p.74)

Notes:

(1)SeeTaylorvJohnston(1983)151CLR522(HCt);Chitty,5079n345.

(2)InChweeKinKeongvDigilandmall.comPteLtd[2005]1SLR502,noted(2005)LQR393(andseeWoan(2006)22JCL81),GreatPeaceShippingLtdvTsavlirisSalvage(International)Ltd(TheGreatPeace)[2002]EWCACiv1407,[2003]QB679wasnotfollowed,andonthequestionofmistakeastoterms(buyerstryingtosnapupanoffermistakenlyplacedonawebsitetoselllaserprintersatpricesthatwereafractionofthenormalprice),thecourtconsideredthat,inadditiontothecommonlawrule,thereisanequitablejurisdictiontosetasideacontractforunilateralmistakeincasesinwhichthereissharppracticeorunconscionableconduct(at[76][77]).Butthereisnodifferenceonunilateralmistakeastothefacts.

(3)JCarter,EPedenandGTolhurst,ContractLawinAustralia(5thedn,LexisNexisButterworths,ChatswoodNSW,2007),para1814.

(4)s23.Fraud(s17)andmisrepresentation(s18)aredefinedintheconventionalway.Exceptionallyaguaranteeobtainedbyconcealmentisinvalid,s96.OnSingapore,MalaysiaandBruneiseeAPhang(ed),Cheshire,FifootandFurmstonsLawofContract,2ndSingaporeandMalaysianedition(ButterworthsAsia,Singapore,1998),ch9.

(5)CPChui,LawofContractinHongKong(ChinaandHongKongLawStudies,HongKong,1988),paras6.21and6.35.ThelawofmistakeinHongKongisusefullydiscussedbyGreenwood,IsMistakeDeadinContractLaw?(2004)34HongKongLJ495,butwithnomentionofaremedyforunilateralmistakeastothefactsornon-disclosure.

(6)TheIndianContractsAct1872,ss17and18definefraudandmisrepresentationasrequiringpositiveconductonthepartofthemisrepresentor;theexplanationtos17addsthatmeresilencedoesnotamounttofraudunlessthereisadutytospeak.Section20providesforreliefformistakeonlywherethemistakeiscommon.SeeHSaharay(ed),DuttonContract(9thedn,EasternLawHouse,Calcutta,2000),192,199,217and224.

(7)TheActwasrepealedbytheCompetitionandConsumerAct2010,witheffectfrom1January2011.Section52hasbeenplacedinthenewAustralianConsumerLawwhichiscontainedinSchedule2ofthe2010Act.Section18(1)oftheAustralianConsumerLawnowprovidesthat[a]personmustnot,intradeorcommerce,engageinconductthatismisleadingordeceptiveorislikelytomisleadordeceive.

(8)TradePracticesAct1974s52(1);seenowtheAustralianConsumerLaw,s236(damages)ands237(compensationorders).


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(9)DemagoguePtyLtdvRamensky(1992)110ALR608.

(10)Ibid,perGummowJat615616.

(11)DemagoguePtyLtdvRamensky(1992)110ALR608at609610.

(12)Ibid(vendorindicatedthattherewouldbeaccesstositefordevelopmentviadrivewaywithoutrevealingthatthedrivewaywasapublicroadandalicencewouldhavetobeobtained).SeealsoWintertonConstructionsPtyLtdvHambrosAustraliaLtd(1992)111ALR649,666.

(13)MikaelianvCommonwealthScientificandIndustrialResearchOrganisation(1999)163ALR172.

(14)GroeneveldAustraliaPtyLtdvNolten2010VSC533(unrep,2010)at[66][67].

(15)Miller&AssociatesInsuranceBrokingPtyLtdvBMWAustraliaFinanceLtd(2010)270ALR204(HCt),perFrenchCJandKiefelJat[22](heldthatifdocumentaboutinsurancepolicynotmisleading,nobreachbyfailingtopointoutthatnon-cancellable).

(16)(1956)99CLR395,402.

(17)e.g.ElkofarivPermanentTrustee[2002]NSWCA413.

(18)[2005]NSWCA41.

(19)NEnonchong,Duress,UndueInfluenceandUnconscionableDealing(Sweet&Maxwell,London,2006),para26025etseq.

(20)SWaddams,LawofContract(6thedn,CanadaLawBook,Toronto,2010)437.SeeRadhakrishnanvUniversityofCalgaryFacultyAssociation(2002)215DLR(4th)624(AltaCA)(nogeneraldutytorevealfactswhennegotiatinganordinarycontract:at[34]);AmesvInvestoPlanLtd(1973)35DLR(3d)613(fraudrequiresactiveconcealment:at615);RyanvMoore2005SCC38,254DLR(4th)1at[76][77].

(21)SeeWaddamsch14.

(22)Seee.g.McGrathvMacLean(1975)95DLR(3d)144;WardvCudmore(1987)75NBR(2d)112(QB).

(23)(1960),22DLR(2d)759(BCCourtofAppeal).

(24)22DLR(3d)9(OntSC).

(25)Ibidat[61][63];thecourtappliedHartogvColin&Shields[1939]3AllER566.

(26)(1978)87DLR(3d)761(OntSC),at[13].


Page 22 of 35


(27)Ibidat[20].

(28)(1981)119DLR(3d)267.

(29)Ibidat[18];seealsoat[22].

(30)GHLFridman,QC,TheLawofContractinCanada(4thedn,Carswell,ScarboroughOnt.,1999)(atp42).

(31)Seee.g.MJBEnterprisesLtdvDefenceConstruction(1951)Ltd170DLR(4th)577(SCC),notedin(1999)115LQR583.SeealsoJMcCamus,MistakenBidsandUnilateralMistake:Anewsolutionforanoldproblem(2008)87CanBarRev1,6.

(32)e.g.TorontoTransitCommissionvGottardoConstructionLtd68OR(3d)356(mistakeonfaceofdocumentthatwaspartoftendermeanttenderobviouslydidnotconform).

(33)e.g.Calgary(City)v.NorthernConstructionCo(1982)23AltaLR(2d)338(QB).

(34)Calgary(City)vNorthernConstructionCo[1986]2WWR426(AltaCA),435;TorontoTransitCommissionvGottardoConstructionLtd(2005)257DLR(4th)539.

(35)IntheCalgarycaseat436andintheTorontoTransitCommissioncaseat5478.SeeMcCamus(above,n31),whoarguesthatthisisapreferablebasisforgivingreliefinsuchcasesandwhenthemistakeisastothetermsoftheoffernottheunderlyingcalculation.

(36)MisrepresentationisdealtwithbyContractualRemediesAct1979s6.Itissaiditisnotfinallydeterminedwhethers6alsoappliestoabreachofanydutyofdisclosure:Burrows,Finn&Todd,LawofContractinNewZealand(2ndedn,LexisNexisNZ,Wellington,2002),365.

(37)Section6.SeeAppendix,below,p130.

(38)Ibid,s7.

(39)NewZealandRefiningCoLtdvAttorney-General(1992)14NZTC9,006(GreigJ)and(1993)15NZTC10,038(CA);LadstoneHoldingsLtdvLeonoraHoldingsLtdCP308/SD00,[2006]1NZLR211(HCt)at[70][87].

(40)e.g.LawsofNewZealand,Contract(LexisNexisNZOnline),para172;seealsoPCookeinNZRefiningat10.045.

(41)ThismaybewhyTri-starCustoms&ForwardingLtdvDenning[1999]1NZLR33,whichinvolvedaunilateralmistake,wassaid(at38)tobepossiblydistinguishableonfactsfromNZRefining.

(42)Constructiveknowledgeisnotsufficient:Tri-starCustoms&ForwardingLtdvDenning[1999]1NZLR33,37;thepositionwherethemistakeisknownbutnotitseffect


Page 23 of 35


isopen,VaucluseHoldingsLtdvNZGuardianTrustLtdCA237/99,20April2000,Burrowsetal(above,n36)298.

(43)Section6(1)(c)(seeAppendix,below,p131).

(44)Section6(1)(b)(i).Forarecentcasewheretheclaimforreliefformistakefailedbecausetheexchangewasnotunequal,seeJanusNomineesLtdvFairhallCA336/2008,[2009]3NZLR757.

(45)Seefurtherbelow,p76.

(46)(1988)13NZULR160,167.

(47)NewZealandLawCommission,ContractsStatutesReview(LawCommission,Wellington,1993).

(48)(1994)2NZConvC95,234.ThefactsseemsimilartothoseofDennyvHancock(1870)LR6ChApp1,inwhichspecificperformancewasrefusedbut,unlesstheplangiventothebuyeramountedtoapositivemisrepresentation(whichitmaywellhavedone),thecontractwaspresumablybindinganddamagescouldthereforebeawardedagainstthepurchaserwhorefusedtogothroughwiththesale:cfMalinsvFreeman(1837)2Keen25,3435;cfWoodvScarth(1855)2K&J33,3EqRep385(specificperformancerefused),(1858)1F&F293(damagesawarded).

(49)Burrowsetal(above,n36)p334.

(50)SeediscussioninDLLange,StatutoryReformoftheLawofMistake(1980)18OsgoodeHallLJ428,442443.

(51)Below,p77.

(52)SeeNicholas,8485;Zimmermann,Obligations,587etseq.

(53)Zimmermann,Obligations,564.

(54)Avoidanceisnotbynoticetotheotherpartybutbydeclarationofthecourtinresponsetoanactionennullit:art1117CC;Nicholas,7778.Cartwright,DefectsofConsentinContractLaw,inAHartkampetal(eds),TowardsaEuropeanCivilCode(4thedn,Kluwer,AlphenaandenRijn,2011),537,547.Invaliditymayalsoberaisedasadefencetoanactiontoenforcethecontract:Malaurieno700.

(55)e.g.Cassciv23November1931,DP1932.1.129,annJosserand;GazPal1932.1.96(transIusCommunecasebookno10.25).

(56)Orrathertheseriesofcases:thefinalstageswereCassciv13December1983,JCP1984.II.20186andCourdappel,Versailles,7January1987(transIusCommunecasebookno10.26).


Page 24 of 35


(57)SeeNicholas,85.

(58)SeeNicholas,86;examplesaregiveninTerrno216n5.

(59)SeeNicholas,9293.

(60)e.g.Terrno220.

(61)e.g.Kramer,IECL29.

(62)Nicholas,92.

(63)SeeMalaurieno505,n30.

(64)PCatala,Prsentationgnraledelavant-projet,para5;IusCommunecasebook,79.

(65)Avant-projetCatala,art11121.

(66)Ibid,art11125.

(67)MinistrydraftofMay2009(seeabove,p12,n51),arts47and49.

(68)Malaurieno505;Terrno220.

(69)Malaurieno506;Terrno223.Thecasescitedinbothbooksseemtoinvolvefairlyextremecarelessnessonthepartofthemistakenparty.Terrstatesthatthelawwillnotprotectapartywhohasthenecessaryinformationorwhocouldobtainiteasily.

(70)Aswhentheattributionofapicturewasknowntobeindoubt:Cass1civ,24March1987,D.1987.488;seeTerrno217,textatn5;Avant-projetCatalaart11121(3).

(71)Ifthemistakenpartydoesnotwishtoavoidthecontracthemayrecoverdamagesiftherewasfaultonthepartofthenon-mistakenparty(orhisagent):Cassciv,29November1968,GazPal1969.II.63.Thisisnotaquestionoferrorastothesubstancebutoneofresponsibility:Malaurie(3rdedn,2007),no501.Thebasisofliabilityisconsideredtobethesameasthatforpre-contractualfault:seeNicholas,110.

(72)Terrno227,butnoexamplesaregiven.Cf122BGB.

(73)SeeJGhestin,LaFormationducontrat(3rdedn,Paris:LGDJ,1993),para522.

(74)Cassciv3,2October1974,BullcivIII.330;D1974,IR.252;RGLJ1975.569,annBlanc(transIusCommunecasebookno10.41).

(75)Compareart1116CC(fraud)toart1110(mistake)andseeMalaurieno511,512.

(76)Ibid.


Page 25 of 35


(77)Nicholas,103.

(78)CassCiv.3.2.1981,D.1984.J.497;seeNicholas,103.

(79)SeeJGhestin,Thepre-contractualObligationtoDiscloseInformation:FrenchReport,inDHarrisandDTallon(eds),ContractLawToday:Anglo-FrenchComparisons(ClarendonPress,Oxford,1989),151.

(80)Nicholas,102etseq.

(81)PLegrand,Pre-contractualDisclosureandInformation:EnglishandFrenchlawcompared(1986)6OJLS322.

(82)InJCartwright,SVogenauerandSWhittaker(eds),ReformingtheFrenchLawofObligations:ComparativeObservationsontheAvant-projetderformedudroitdesobligationsetdelaprescription(Hart,Oxford,2009),639.

(83)Sefton-Green,1011pointsoutthatwhereasreliefformistakeisbasedonprotectingthemistakenpartyandfraudonsanctioningthefraudulentparty,thedutytodiscloseseemstostraddlethetwo.

(84)GRouhette,TheBindingNatureofContractualObligations:TheObligatoryForceofContractinFrenchLawinHarrisandTallon(aboven79),38.

(85)RDemogue,Traitdesobligationsengeneral,t6,(Rousseau,Paris,1931),no3;seeTerrno41.

(86)GRipert,LeRgimedmocratiqueetledroitcivilmoderne(2ndedn,LGDJ,Paris,1948),251.

(87)CJamin,Plaidoyerpourlesolidarismecontractual,inLecontrataudebutduXXIemesicle:tudesoffertsJacquesGhestin(LGDJ,Paris,2001),441.

(88)Carbonnier,Lesobligations,t4,no113,quotedinTerrno41.

(89)Terr,no42.

(90)e.g.HarrisandTallon(above,n79),Conclusions,385.

(91)DFenouillet[2009]1RDC279,280.

(92)MdeJuglart,LObligationderenseneignementsdanslescontrats(1945)RevtrDC1.

(93)MFabre-Magnan,DutiesofDisclosureandFrenchContractlawinJBeatsonandDFriedmann(eds),GoodFaithandFaultinContractLaw(ClarendonPress,Oxford,1995),99.


Page 26 of 35


(94)Avant-projetCatala,art11121(2);seelikewiseMinistrydraftofMay2009art47.

(95)Civ3e,17January2007,D,2007,1051,noteDMazeaud,et1054,notePhStoffel-Munck;RTDciv,2007,335,obsJMestreetBFages;Defrnois2007,443,obsESavaux;RDC2007/3,703,obsYMLaithier;JCP2007,d.G,II,10042,noteChJamin;Contconcconso2007,n117,obsLLeveneur.

(96)GLoiseau,Laqualitduconsentement,inPRmy-CorlayandDFenouillet,LesconceptscontractuelsfranaislheuredesPDEC(Dalloz,Paris,2003)65,73.

(97)KZweigertandHKtz,AnIntroductiontoComparativeLaw(3rdedn,transTWeir,ClarendonPress,Oxford,1998)413;Markesinis277278;Zimmermann,Obligations614617(Markesinis,278refersalsotoWindscheid,LehrbuchdesPandektenrechtsI(6thedn,Rtten&Loening,Frankfurt,1887),78,233etseq);Kramer,IECL24.

(98)TheBGBdidnotfollowSavignyintreatingthedeclarationasvoid:anoperativemistakerendersthecontractvoidableunder142BGB.Avoidanceisbynoticetotheotherparty,143,whichmustbegivenwithoutculpabledelayafterthegroundforavoidanceisknown,withamaximumperiodof10yearsfromthedateofthecontract:121(1).OntimelimitsandtheeffectsofavoidanceseeMarkesinis,278.

(99)Section119(1)provides:

(1)Apersonwho,whenmakingadeclarationofintention,isinerrorastoitscontent,ordidnotintendtomakeadeclarationofsuchcontentatall,mayavoidthedeclarationifitmaybeassumedthathewouldnothavemadeitwithknowledgeofthefactsandwithreasonableappreciationofthesituation.

Thisappliestoboththecasewherethepartyusesawordmistakenlythinkingithasonemeaningwhenithasanother(Inhaltsirrtum)andslipsofthepen,whenthepartyintendsonethingbutwritesanother(Erklrungsirrtum).ItseemsthatthecourtssometimesinterpretInhaltsirrtumbroadlytocoversituationsthatlookmorelikeamistakeaboutthefacts:seetheexamplesgiveninZweigert&Ktz(above,n97),414.Ithasalsobeenusedtocoversomecasesinwhichapartyismistakenaboutthelegaleffectofthecontract:Markesinis,296.

(100)Motive,vol1,p199,citedMarkesinis,297.SeetheaccountinZimmermann,Obligations,616.EZitelmann,IrrtumundRechtsgeschft(Duncker&Humblot,Leipzig,1879)hadtakenasimilarview:Zimmermann,Obligations,617.

(101)Markesinis,278.

(102)Zimmermann,Obligations,617.

(103)AdistinguishedGermanscholarhasremarkedthatthephrasingsoundsembarrassed,sincethesemistakesoffactaredealtwithbywayofalegalfiction:Kramer,IECL,24.


Page 27 of 35


(104)ProtokollederzweitenKommissionpara235,quotedinBMugdanDiegesamtenMaterialienzumBrgerlichenGesetzbuchfuerdasdeutscheReicht:BandIEinfhrungsgesetzundAllgemeinerTeil(1979)ScientiaVerlagAlen718.


(106)Foranexampleofamistakethatwasonlyofmotive,seeBGH28February2002,BGHNJW2002,2312(transMarkesiniscaseno87)(whetherpartysearningsundercontractaffectedbyVAT).


(108)Markesinis,298.Likewise,thepracticalusefulnessofgoodssoldforaparticularpurposewillonlybeonethegoodsessentialcharacteristicsifthatwasrecognizablythebasisonwhichthecomplainingpartyenteredthecontract:seeBHG18December1954,BGHZ16,54,IusCommunecasebookcaseno10.18andfollowingnotes.Equally,GermanlawfacesthesamedistinctionasisfoundinEnglishlawbetweenmistakesinanofferandmistakesinthecalculationsthatprecedetheoffer:compareabovep39andbelowp69.Thisdistinctioniscriticizedasunrealistic:Markesinis283,295;Kramer,IECL80.

(109)SeethediscussioninBGH8June1988,BGHNJW1988,2597(transMarkesiniscaseno89).

(110)SeeMarkesinis,314.

(111)SucharequirementwasexplicitlyrejectedbytheCommission:Markesinis,278.ThustheGermandoctrineofmistakeissometimesdescribedaspsychological:seethesourcescitedbyMarkesinis,283.

(112)MunchK.BGBs119,Rn53.

(113)Zimmermann,Obligations,612attributesthisideatoGrotius.


(115)122BGBisoftenreferredtoasanemanationofthedoctrineofculpaincontrahendo,e.gMarkesinis,279;butcompareZimmermann,Obligations,602and614,whopointsoutthatliabilityisnotbasedonfault.

(116)Compare123BGB(fraudand119(2)andseee.g.RGZ81,13;seealsoHKtz,EuropeanContractLaw(transTWeir,ClarendonPress,Oxford,1997),196.


(118)SeeKZweigert&HKtz(above,n97),425.

(119)R.vonJhering,CulpaincontrahendooderSchadensersatzbeinichtigenodernichtzurPerfectiongelangtenVertrgen,JahrbcherfrdieDogmatikdesheutigen


Page 28 of 35


rmischenunddeutschenPrivatrechts,1861.IV.1.

(120)Markesinis,94(e.g.former307,liabilityofpartywhoenteredacontractthathe(butnottheotherparty)shouldhaveknowntobeimpossible;andperhaps122,butseeabove,n115).

(121)RG7December1911,RGZ78,239(transIusCommunecasebookcaseno3.15).AnactionintortwasnotpossiblebecausethefaultwasthatofanemployeeandGermanlawlacksageneralnotionofvicariousliability:SeeWvanGerven,JLeverandPLarouche,Cases,materialsandtextonTortLaw(Hart,Oxford,2000),480etseq.

(122)RG5April1922,RGZ104,265(transMarkesiniscaseno12)(partyliableifgaveappearanceofwishingtobuywheninfactintendedtosell).

(123)e.g.BGH10July1970,LM276[Fa]BGBNo.34,NJW1970.1840,transBealecaseno9.14(thoughinthatcasetheclaimfailed).SeegenerallyJCartwrightandMHesselink,PrecontractualLiabilityinEuropeanPrivateLaw(CUP,Cambridge,2008);IusCommunecasebook,ch9.

(124)242Performanceinaccordancewiththeprincipleofgoodfaith

Thedebtormustperformhisobligationinaccordancewiththerequirementsofgoodfaith,takingintoaccounttheprevailingpractice.

(125)Markesinis,305andseetheDaktaricase,abovep1,n2,para3.

(126)241(2)(Anobligationmayalso,dependingonitscontents,obligeeachpartytotakeaccountoftherights,legalinterestsandotherinterestsoftheotherparty)and311(2)(Anobligationwithdutiesundersection241(2)alsocomesintoexistenceby(1)thecommencementofcontractnegotiations).


(128)Andfraudisnarrowlydefined:seeMarkesinis,311.

(129)SeeMarkesinisandUnberath,TheGermanLawofTorts(4thedn,Hart,Oxford,2002),52etseq.

(130)AnexamplethatisavailableinEnglishisBGH25May1977,BGHZ69,53(transMarkesiniscaseno93).

(131)Markesinis,311citingBGBNJW1985,1769;NJW1993,2107.

(132)(1889)14AppCas337.Thusarecklessstatementwillamounttodeceit:Markesinis,305.However,inEnglishlawadishonestmotiveisnotneeded,whereasinGermanlawapartyisnotfraudulentiftheydidnotrecognizethatthemattermightbeimportanttotheother:Markesinis,311.


Page 29 of 35


(133)Markesinis,307and308.

(134)e.g.BGH3March1982,NJW1982,1386,translusCommunecasebookno10.43(DE).


(136)Markesinis,308referringtoBGHNJW1993,1703andBGHNJW1995,1549.

(137)Markesinis,308referringtoBGHNJW2003,2381andBGHNJW-RR1988,394.

(138)e.g.BGHNJW2001,2163;BGH6December1996,BGHNJW-RR1996,429(transMarkesiniscaseno91).

(139)Seeabove,pp12and29.


(141)HKtz,(above,n116),201.

(142)e.g.NJW-RR2003,700.

(143)IFEFundSAvGoldmanSachsInternational[2006]EWHC2887(Comm),[2007]1LloydsRep.26at[60];[2007]EWCACiv811,[2007]2LloydsRep.449,seeat[35],[38],and[74].

(144)SeeMarkesinis,308,givingexamplesofdefectsinland;thefinancialconditionofacompanysold,seeBGH6December1996(note138above)sellermustinformbuyeroffallinturnover.Itisnoticeablethatcourtsnotonlydenyreliefwhenthematterisnotsoimportant,butalsowhenquestionseemsanobviousoneforCtohaveaskedbutdidnot:BGH13July1988,NJW1989.763(transIusCommunecasebookcaseno10.44),sothedutyariseswhereCisnotlikelytoknowortoaskabouttherelevantfact.

(145)NJW2001,2163.

(146)Zimmermann,Obligations,616,quotingRaape(1949)150ArchivfrdiecivilistischePraxis501.

(147)MunchK(Kramer)119,Rnn102,105.

(148)Seeabove,p1,n2.

(149)e.g.Ktz(above,n116),201(seeabove,p29);Markesinis,309.


(151)ThustherewerenoproposalsonmistakeintheBGB-KE(AbschlussberichtderKommissionzurberarbeitungdesSchuldrechtsDraftprovisionsproposedbythe


Page 30 of 35


CommissionontheReformoftheLawofObligations,1992);thedraftconcentratedontheprovisionsonbreachofcontractandprescription,seeWLorenz,ReformoftheGermanlawofBreachofContract(1997)1EdinburghLR317,344;RZimmermann,TheNewGermanLawofObligations(OUP,Oxford,2005),3132.NorwasmistakeincontractcoveredintheextensivestudiescarriedoutbeforethedraftingoftheBGB-KE:seeBundesministerderJustiz(ed),GutachtenundVorschlgezurberarbeitungdesSchuldrechts,(VolsIandII,1981;VolIII,1983,Bundesanzeiger,Kln).

(152)Sefton-Green,151.

(153)Forthefullarticle,seeAppendix,below,p133.

(154)Thougherrorsastofuturefactsarespecificallyexcluded,BW6:228(2).

(155)HR19June1959.

(156)Art6:228(2)BW,seeAppendix,below,p133;Sefton-Green,114.

(157)Sefton-Green,114n115,referringtoanumberofauthors.

(158)SeethediscussionofSefton-Greenscase2underDutchlaw(150152);thesellersstateofmindseemstobethesameasintheStevensweerdKantharoscase.

(159)Oropiniongenerallyacceptedinsociety,seebelow.Therequirementofgoodfaithisstillsaidtoexplainwhyundercertaincircumstancesapartymaybeunderadutytoinform:Sefton-Green151.

(160)Seebelow,p91.

(161)e.g.PECL,p.236;HBeale,AHartkamp,HKtzandDTallon,Cases,MaterialsandTextonContractLaw(1stedn,Hart,Oxford,2002),394.

(162)SeeHartkampandTillema,ContractLawintheNetherlands(Kluwer,TheHague,1995),para80.SeeIusCommunecasebook,496;Asser-Hartkamp6III*nr226ff.

(163)HartkampandTillema,para80,pointoutthatknowledgewouldberelevanttoaclaimfordamagesunderBWart6:162(ageneralprovisiononliabilityfordamagecausedbyunlawfulacts).

(164)HR10April1998,NJ1998,666withanotebyWMKleijn.ThiscasewasdecidedunderthelawoftheformerDutchcivilcode,whichwasinforceintheDutchAntillesatthattime,butitissaidtoreflectpresentDutchlawwithrespecttoart6:2281(b)BW:Asser/Hartkamp6III*2010nr.231.CompareHR14November2008,NJ2008,588,inwhichitwasheldthatitwasobviousthatthebeamsina16thcenturybuildingmightnotbeadequatefortherestaurantthatthebuyerhadinmind,andthereforethebuyersdutytoinformitselfprevailedoveranydutyonthesellertorevealwhatitssurveyors


Page 31 of 35


hadreported.IamindebtedtoDrJRutgersfortranslationsofthecases.

(165)Sefton-Green,212213suggeststhatthebuyersdutytoinformhimselfwillusuallybeheldtooutweighthesellersdutytoinformunlessthesellerhadpositiveknowledge.

(166)Asser/Hartkamp6III*2010nr232;Sefton-Green151.

(167)ThiswasthemodelforContractsActswhichenteredintoforceinSweden(1915),Denmark(1916),Norway(1918)andFinland(1929).ForanaccountoftherelevantprovisionsseeTWilhelmsson,GoodFaithandtheDutyofDiclosureinCommercialContractingTheNordicExperience,inRBrownsword,NHurdandGHowells(eds),GoodFaithinContract(Ashgate,Aldershot,1999),165.

(168)Section32.

(169)RNielsen,ContractLawinDenmark(Kluwer,TheHague,1997),369.

(170)RZimmermannandSWhittaker(eds),GoodFaithinEuropeanContractLaw(CUP,Cambridge,2000),233,discussingacaseofthebuyersfailuretodisclosethevalue(andprobablytheattribution)ofapicturetoanobviouslyignorantseller.ThereportersforDenmark,FinlandandNorwaydonotrefertothissectionintheiraccounts.

(171)Thereisalsoadoctrineofimpliedconditions,apparentlyimportedundertheinfluenceofWindscheid(seeSefton-Green,114),whichcanbeusedtoproviderelief,notonlyincasesofcommonmistakebutalsowhenonepartywasactingonacrucialassumptionwhichwasincorrect,andthisassumptionwasoroughttohavebeenknowntotheother,evenwithouttheotherbeingawareofthefirstpartysmistake:SeeOLando,TheLawofContracts,inHGammeltoft-Hansenetal(eds)DanishLaw:aGeneralSurvey(Gads,Copenhagen,1982),152etseq.Reliefwillbegivenonlyifthemistakenpartyisnotregardedastakingtheriskofitsownassumptions:SeftonGreen115.ThedoctrinehasapparentlybeenusedmoreinDenmarkthanSweden,whereitisregardedascontroversial,orinFinland,whereithashadonlylimitedacceptance(seeDCFRII-7:201,noteI.2).EveninDenmarkitissaidtobereplacedbythemodernapproachlookingatfairness,thoughonecommentatorremarksthatitwasthoughttobedeadbuthasbeenrevived:BDahlinBDahl,TMelchiorandDTamms(eds),DanishLawinaEuropeanPerspective(2ndedn,ForlagetThomson,Copenhagen,2002),250.

(172)Trans:http://www.sprog.asb.dk/sn/cisg.SeealsotheFinnishAct(355/1987),s19,referredtointhiscontextbyTWilhelmsson(above,n167),166.

(173)SaleofPropertyAct,3July1992,no93,37,quotedinSefton-Green,215.

(174)SFS1970:994jordabalk.

(175)NJA1981.894,citedinSefton-Green216.

(176)Sefton-Green,232.


Page 32 of 35


(177)SeeWilhelmsson(above,n167),173.

(178)SeeZimmermann&Whittaker(above,n170),2303.

(179)SeeWilhelmsson(above,n167),174.WilhelmssonalsodiscussesKKO1985II58,acaseofsellingsharesincircumstancesthatseemtohaveamountedtoinsiderdealing.

(180)KKO1949II258(Wilhelmsson,174).

(181)KKO1975II92(seeZimmermann&Whittaker(above,n170),233).

(182)DCFRartII-7:201,noteII.10.

(183)SeftonGreen117;DCFRartII-7:201,noteII.22(musthaveknownor,inFinland,oughttohaveknown).

(184)Sefton-Green,153,referringtosomewriterswhoarguethatthedamagesmayincludelossofexpectation.

(185)DCFRartII-7:201,noteVI.28.

(186)DCFRartII-7:201,noteVI.30,citingKKO1968II33.

(187)SeeNJA1975152(Zimmermann&Whittaker(above,n170),232).

(188)SeeWilhelmsson(above,n167),166;Lando(above,n171),158.

(189)e.g.CHultmark,inMBogdan(ed),SwedishLawintheNewMillennium(NorstedtsJuridik,Stockholm,2000),10.8.

(190)SeftonGreen216.

(191)ThusitisreportedthatintheNorwegianSupremeCourttherewerenocasesbetweenbusinessesbasedon33between1945and1991:Sefton-Green,260.

(192)Zimmermann&Whittaker(above,n170),231.

(193)DCFRartII-7:201,noteV.26,onthebasisof39oftheAct.Thisprovidesthat:

[W]hen,undertheprovisionsofthisAct,thebindingeffectofadeclarationofintentiondependsonthefactthatthepersontowhomitwasmadedidnotknoworoughtnottohaveknownacertainmatterorotherwiseactedingoodfaith,regardshallbehadtowhatherealisedoroughttohaverealisedatthetimehehadnoticeofthedeclaration.Ifspecialcircumstancessowarrant,regardshallalsobehadtotheknowledgehehasacquiredoroughttohaveacquiredafterthetimespecifiedabove,butbeforethedeclarationofintentionhasadecisiveeffectonhisconduct.

TheDCFRnotesthattheDanishcourthastakenthisline(U2001.42)butthecourtsin

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