This project was conceived in Paris at a meeting with Jacques Ghestin, Horatia Muir Watt and myself at the request of Mauro Bussani. The original cases were formulated by Horatia Muir Watt, Stéphane Reifegerste and me in June 1996. Our questionnaire become the subject of a brain-storming session in Trento in July with all the members of the contract group present which was most useful. I subsequently became editor of the project.

I am indebted to Jacques Ghestin for formulating the theme of the project and to Horatia Muir Watt for her initial contribution and constant encouragement. I would like to record my thanks to Stéphane Reifegerste for his active participation in the early stages of the project and particularly the group work he carried out with the students of the DEA de droit anglais et nord-américain des affaires at the University Paris I (Panthéon-Sorbonne) in the years 1997–98. I am also grateful to Muriel Fabre-Magnan for her friendly counsel and consistent support.

Above all, I would like to record my warmest thanks to the national reporters of this project with whom I would like to think we have formed a team. I would like to make special mention of the friendships and discussions which have ensued by e-mail and in our annual meetings in Trento and notably the intellectual and moral support I received from John Cartwright and Martijn Hesselink.

Case

In order to encourage management staff to retire early, Mr Dracula, managing director of Monstrous Inventions Ltd, sends out an internal memo without informing the personnel department and Mary Shelley, eligible for the proposal, accepts the ‘package’. A settlement is thus concluded. Unknown to both of them, the personnel department was investigating an allegation of Mary's dishonesty, and Mr Dracula was advised the same day that there was sufficient reason to terminate Mary's contract. What remedy, if any, is available?

Discussions

Austria

(i) Although Mr Dracula made a mistake as to the important qualities of the other contracting party (§ 873 ABGB), namely as to her honesty, it is questionable whether Mary had been aware of this mistake at the time of contracting and had taken advantage of this fact and, if so, she was obliged to disclose the true facts to Mr Dracula. Although Mary had probably been aware of her misbehaviour, it cannot be assumed that she was aware of the consequences of the ‘package’. Only fraudulent intention is retained, gross negligence is not sufficient. Even if it is assumed that Mary recognised Mr Dracula's mistake and failed to disclose the proper facts on purpose, her non-disclosure does not amount to fraudulent misleading in the sense of § 870 ABGB. Despite an employee's duty of special loyalty to the employer, the employee has no duty to disclose information to his employer which would lead to his or her dismissal.

Case

As her daughter Angela was due to be called to the bar, Lady Windermere decided to make Angela a present of her own diamond-studded fan and instructed her lawyer to draw up a deed of gift. Arriving in a hurry before the ceremony, she signed the deed without more than a glance, only to discover later that the gift had been made in favour of her own estranged brother Angel. After her departure but before Lady Windermere's discovery, Angel formally accepted the gift but has not yet received the fan. What remedy, if any, is available against Angel?

Discussions

Austria

The wrong person has been declared the beneficiary of the gift due to the lawyer's mistake. This could be qualified either as a mistake as to identity (§ 873 ABGB) or a mistake of declaration (§ 871 ABGB) but as the conditions and results are the same the qualification is unimportant. This mistake is fundamental but neither provision on mistake applies because the three alternative conditions of § 871 ABGB are not fulfilled: (i) Angel did not cause the mistake; in fact Lady Windermere was careless when signing the deed so it was she who caused the lawyer's mistake; (ii) Angel did not notify the mistake nor should he have done; and (iii) the mistake was not declared in good time.

As the mistake regards a party's name, the doctrine of falsa demonstratio may be considered.

In the context of a study made within the framework of the Trento group known as the ‘common core of European private law’, the first question that needs to be answered is whether there is a common core in the area of mistake, duties to inform and fraud in European contract law, the object of our enquiry. In order to provide an answer we must first look at the empirical results of our study. At the same time we will bear in mind a second critical methodological question, namely what we mean by a ‘common core’.

At the outset we stated that one of our objectives was to investigate the reality of the civil law/common law divide. Taking stock empirically of our answers enables us therefore to assess the facts. The reply is of course highly complex and neither black nor white. First, is it true that there are no differences between common law and civil law countries, hence is there a common core? We are not able to reply affirmatively without qualification. Second, if there are differences, we have shown that they do not necessarily arise where expected. Does it follow that there is no common core? The answer will depend to some extent on the meaning given to ‘common core’.

A quantitative criterion, namely that a majority, as opposed to unanimity, suffices to constitute a common core, has been adopted.

This is the fifth book in the series The Common Core of European Private Law. The Common Core of European Private Law Project was launched in 1993 at the University of Trento under the auspices of the late Professor Rudolf B. Schlesinger. The methodology used in the Trento project is novel. By making use of case studies it goes beyond mere description to detailed inquiry into how most European Union legal systems resolve specific legal questions in practice, and to thorough comparison between those systems. It is our hope that these volumes will provide scholars with a valuable tool for research in comparative law and in their own national legal systems. The collection of materials that the Common Core Project is offering to the scholarly community is already quite extensive and will become even more so when more volumes are published. The availability of materials attempting a genuine analysis of how things are is, in our opinion, a prerequisite for an intelligent and critical discussion on how they should be. Perhaps in the future European private law will be authoritatively restated or even codified. The analytical work carried on today by the almost 200 scholars involved in the Common Core Project is a precious asset of knowledge and legitimization for any such normative enterprise.

We must thank the editors and contributors to these first published results. With a sense of deep gratitude we also wish to recall our late Honorary Editor, Professor Rudolf B. Schlesinger.

Case

Célimène, a venerable old lady, put up a sign outside her house near Giverny, advertising the ‘sale of attic contents’. Damien, an antiques dealer on his way to visit Monet's home, stopped to look and recognised one of the master's original works among the bric-a-brac. He bought it on the spot for twice the asking price, and then proceeded to resell it to the Louvre. What remedy, if any, is available?

Discussions

Austria

Célimène, who is no art expert, has made a mistake (as to the value of the painting, see Case 1) as to the content of the contract. The difference lies in the fact that only one party has made a mistake, whereas in Case 1 there was a common mistake. Damien, as an art expert, immediately recognises the artist. Damien is not worthy to be protected in accordance with § 870 and 871 ABGB. If § 871 ABGB accepts and recognises the fact that the mistake will have to be recognised by using proper alertness and due diligence in order to entitle the mistaken party to avoid or to adapt the contract, this is even more so if the mistake not only had to be recognised but in fact had been so recognised. Scholarly opinion accepts this analogy unanimously. Célimène has, therefore, the right to annul the contract on the ground that she would not have sold the painting at all if she had been aware of the artist and its real value, or the right to adapt the contract on the basis that she would have sold the painting in any case but at a different, namely higher, price.

What is at issue in the law of mistake, fraud and duties to inform?

Why did we choose to look at mistake, fraud and duties to inform? At first sight, the choice appears straightforward: in order to examine the world of European contract law it is quite logical to start at the beginning with contract formation. The general theory of defects of consent provides a safe starting place. The title indicates perhaps that civil law inspires this enquiry. These three initial assumptions will be examined shortly. Before turning to the heart of this study however, a preliminary terminological explanation is required. Mistake has been adopted for the sake of consistency throughout even though it is the term for an English legal concept; ‘mistake’ thus covers the Scots law of error, as well as erreur (French and Belgian law), errore (Italian law), erro (Portuguese law), Irrtum (Austrian and German law), dwaling (Dutch law) and plani(Greek law). It was generally agreed that the use of an English legal term was innocuous in this instance. Likewise, fraud has been used to refer to dol (French and Belgian law), dolo (Italian law), dolo (Portuguese law), arglistige Täuschung (Austrian and German law), bedrog (Dutch law) and apati (Greek law). In contrast, the term ‘duty to inform’ has been chosen so as to avoid using specifically English legal concepts (misrepresentation and duties of disclosure) to denominate concepts existing in other legal systems where such a transposition would be both erroneous and misleading.

Case

Emmanuel, a gifted philosophy student but not much of a handyman, bought a computer from a shop specialising in the sale of quality second-hand office equipment. He chose a model that was fairly expensive, but, as he informed the salesman, he recognised the brand and preferred to pay extra as he was acquiring the benefit of a proper maintenance contract. The salesman made no comment. However, when, on encountering various technical difficulties, he applied to the manufacturer for help, he was informed that the maintenance contract had expired before the sale. What remedy, if any, is available?

Discussions

Austria

Emmanuel's reason for buying the fairly expensive computer was in order to have a proper maintenance contract with the manufacturer of a recognised brand mark. Even if Emmanuel had informed the salesman about his motives it is uncertain and questionable whether these motives had been agreed upon by both parties (in the sense of § 901 1st sentence ABGB) as a condition relating to the subject matter of the contract. If not, such motives have no influence on the validity of a legal transaction for payment (§ 901 2nd sentence ABGB). Such an agreement must be made expressly and prevailing scholarly opinion interprets ‘expressly’ in the sense of ‘sufficiently clear and evident’, which can already be assumed under the general legal provisions (compare § 863, § 914 ff. ABGB).

The fact that Emmanuel recognises the brand is very clearly to be seen as a mere motive.

Case

Just as Mr and Mrs Timeless were ready to sign the contract of sale as purchasers, the vendors, Mr and Mrs Careless, found out that the right of way at the bottom of the garden had been varied by permission of the local authority to allow motor vehicles a right of way through the woods. One of the main attractions of the house and garden for Mr and Mrs Timeless was the quiet adjoining woods at the bottom of the garden. Anxious, however, to complete the sale Mr and Mrs Careless omitted to inform Mr and Mrs Timeless of the variation. After moving in Mr and Mrs Timeless complain of the substantial noise caused by vehicles crossing the woods. What remedy, if any, is available against Mr and Mrs Careless?

Discussions

Austria

(i) Mr and Mrs Timeless are entitled to annul the contract of sale for fraudulent misrepresentation in accordance with § 870 ABGB. Four cumulative conditions must be satisfied: (a) one of the parties has made a mistake, (b) there must be fraudulent intent of the non-mistaken party, (c) such intent causes the mistake, and (d) the misleading act is unlawful.

If one of the parties has been fraudulent in order to conclude the contract it is not necessary to differentiate the type of mistake. Both mistakes, as to the content of the contract and as to motive apply. Furthermore, the mistaken party is entitled to annul the contract even if the mistake is non-fundamental.

Case

Estella opened the door to Uriah Heep, who was selling steam-operated pans that cook without fat. Estella, who has few pounds in her purse but rather too many elsewhere, could not resist the temptation and accepted Uriah's offer of a special credit arrangement. In her haste to begin cooking, she signed various documents full of small print without reading them. She later discovered to her cost, that the pan could only be used on a gas ring whereas her kitchen was entirely electric. However, when she contacted Uriah for help, he was less than friendly. He told her that her statutory rights were written out in the documents he had supplied, and that as she had not returned the pan within the period indicated, she could no longer cancel the sale. He also reminded her that her first monthly instalment on the loan was due. What remedy, if any, is available?

Discussions

Austria

(i) In accordance with § 3 Konsumentenschutzgesetz (the law regulating consumer rights) the consumer is entitled to cancel the contract upon written notice within one week after the purchase in the case of a so-called door-step sale. The seller must send a document to the buyer identifying the subject matter of the contract as well as informing him about the right to cancel; time begins to run when this document is sent.

Case

Several months ago, Bruno bought a second-hand car from his local garage, who assured him that it was a 1995 model ‘as good as new’. He has now discovered that the car is unroadworthy and the motor needs replacing. What remedy, if any, is available?

Discussions

Austria

Bruno's claims lie in mistake and breach of contract.

(i) Bruno can allege that he made a mistake when concluding the contract, as provided for in § 871 ABGB. As Bruno assumes that the car is capable of being used on the roads and is in good working order for a 1995 model, both of which turn out not to be the case, he has made a mistake; that is a mistake as to the important qualities of the subject matter of the contract. One out of the three conditions stated in § 871 ABGB applies since Bruno's mistake has been caused by the seller's promises.

The right to annul (§ 871 ABGB) or the right to adapt (§ 872 ABGB) is available by considering respectively the importance of the mistake. If Bruno would not have bought the car if he had recognised its defects, namely the poor condition of the car, the mistake is fundamental. The contract can then be judicially annulled in accordance with § 871 ABGB and he is entitled to the reimbursement of the purchase price at the same time as returning the car to the seller in an action under § 877 ABGB (condictio sine causa).

Case

Anatole, an impressionist specialist at the Musée d'Orsay, put up for sale his own private collection of paintings. For a moderate price, Bob acquired two of them for his New York gallery, ballet scenes described by the catalogue prepared by Anatole as the ‘charming work of an unknown artist’. Anatole has now learnt from the American press that the two paintings have been hailed by certain American impressionist experts as authentic Degas, hitherto undiscovered, and are to be resold at a breathtaking price. French experts, called in to give their views, are more reserved; the painting might not be the work of Degas himself, but could well have been carried out by a pupil under the master's supervision. If confirmed, such doubts as to the paintings' authenticity could well diminish their value as re-estimated in New York; however, it is also patently clear that Anatole's own initial judgement was inaccurate and that the price paid by Bob was in any event greatly below the one the work could now reach. What remedy, if any, is available?

Discussions

Austria

(i) Anatole made a mistake as to the content of the contract, such a mistake relates to the qualities of the subject matter of the contract and was an intrinsic element of Bob's performance. Whether or not the paintings were by Degas himself or by one of his pupils is not important.

Case

When Scrooge Bank told David it was not prepared to give him a loan for his business without a personal guarantee, he did not dare tell his wife Nell. Instead, he explained that he was taking a short-term loan from the bank that required her to sign the loan document as secretary of his one-man company. Trusting David, Nell went to the bank and signed what subsequently proved to be a personal guarantee for David's business. Now that David's business has been declared insolvent, Scrooge Bank has called in the guarantee against Nell. What remedy, if any, is available?

Discussions

Austria

(i) In the case in discussion Nell has made a mistake of expression which is also a mistake as to the content of the contract in the broad sense. However, the question of whether the mistake is fundamental must be considered. The mistake will be considered important if the mistaken party, namely Nell, would not have concluded the contract had she known the true facts. Clearly, here Nell would not have agreed to conclude the contract of guarantee. Nell cannot, however, hope to succeed in contesting the validity of the contract, since none of the requirements stated in § 871 ABGB is fulfilled. The persons acting for Scrooge Bank were in no way responsible for causing Nell's mistake. Moreover they could not have been aware that Nell had made a mistake since she did not mention her intentions to them.

Case

Zachary, delivery boy for Red Hot Pizzas, uses his own vehicle for his work. Believing himself bound to do so, he took out a motor insurance policy without realising that the same risks for liability were covered by the insurance taken out by his employer. What remedy, if any, is available when Zachary's insurance policy is with (a) the same insurance company as his employer and (b) a different company?

Discussions

Austria

(a) § 59 of VersVG, Austrian Insurance Contract Law of 1959, provides for double insurance when the insurance is concluded with two different insurers. In my opinion § 60, which allows the insured to terminate the insurance contract concluded at a later point in time, cannot be directly applied. This provision requires that the insured is obliged to terminate immediately after he has recognised that there is double insurance. Application of this provision by analogy seems to be pretty reasonable, although unfortunately no comments could be found in case law nor in scholarly opinion.

In addition, annulling on the grounds of mistake (a mistake shared by both parties) is possible according to scholarly opinion and case law. According to the prevailing view, annulment would have effect ex nunc.

(b) Zachary can terminate the contract with another insurer as a result of §§ 59 ff. VersVG. Moreover, Zachary is obliged to cancel the second contract immediately after he has found out about the double insurance.