For the comparative lawyer the doctrine of mistake in the English law of contract is a topic of particular interest – and especially for the comparative lawyer with an eye to the historical development of the doctrine and the continental influences on it. No doubt the story is not yet over. But in the light of the most recent decisions on mistake in the Court of Appeal and the House of Lords we can now trace the development of the doctrine of mistake in three centuries, as it passed through the hands of some key members of the judiciary. For the purposes of this discussion, the first life of mistake is in the nineteenth century, born of the common law but with civil law influences through, notably, the insight of Lord Blackburn. The second life is the twentieth century, first growing into a doctrine of mistake at common law with the assistance of Lord Atkin and then in the second half of the century further developing into a doctrine of mistake in equity under the watchful tutelage of Lord Denning. The third life is just beginning, in the twenty-first century. The growth in mistake which was promoted by Lord Denning is being cut back. Mistake is not dead, but its place in the law of contract is being reassessed.

Case

Cinderella, a prosperous businesswoman, bought on the stock market a large number of shares in a company of growing reputation. The sale had hardly been concluded when it was revealed in the press that the company had already lost various important contracts to a Japanese competitor. The value of the shares dropped abruptly. What remedy, if any, is available?

Discussions

Austria

According to the predominant scholarly opinion each party is obliged to give full information to the other party if so required. The obligation to provide information is partly derived from the contract, partly by law. As far as precontractual obligations are concerned a legally requested obligation for disclosure about important aspects of the subject matter of the contract can be assumed by analogy with the doctrine of culpa in contrahendo. Cinderella, therefore, has a remedy against her business partner only if he breaches his duty to disclose. However, the facts and circumstances do not indicate this to be the case. One would expect Cinderella to know how to take care of her business and it is generally known that shares do include such a risk. If Cinderella had false expectations about the increase in the value of the shares she has made a non-fundamental mistake as to motive (§ 901 ABGB). As the duty to inform cannot be interpreted extensively the bank would have been obliged to inform only if the news in the press had already been known to the bank.

Case

Far Eastern Delights, an ancient oriental art gallery, sold a Chinese statuette to Emile, an amateur art lover. The piece was described by Far Eastern Delights' catalogue as ‘Tang dynasty, practically intact with very few restorations’. Emile has now discovered that the head and hands are in fact very recent, and that little remains of the original work. What remedy, if any, is available?

Discussions

Austria

(i) This case again covers a mistake as to the content of the contract (mistake as to the characteristics and qualities of the subject matter).

(a) On one view, there seems to be a common mistake to both parties, if it is considered that Far Eastern Delights did not know that the Chinese statuette sold had not been a pure and practically intact original statuette of the Tang Dynasty. This mistake common to both parties, however, is less problematic than in Case 1. As already described, the prevailing view and the unbroken line of authorities under which a common mistake is to be added to the cases named and recognised in § 871 ABGB and, therefore, entitles both parties to a right to annul or to adapt is criticised on the grounds that a mistake common to both parties does not fit with the system of § 871 ABGB which emphasises the importance of protecting the non-mistaken party since in case of a common mistake both parties are equally worthy to be protected.

Introduction

When comparing the law on mistake in modern legal systems, it is not immediately obvious that their provisions, although very different in some respects, are in fact the same in nature. This also applies to precontractual duties to inform that today are discussed in different contexts. And yet both fields of law spring from the same source, namely Roman law and the Aristotelian-scholastic theory of contractual acts. Nevertheless, there exists a fundamental difference between these two fields: whereas the law on mistake has developed uniformly and without significant interruption, the so-called ‘precontractual duties to inform’ coalesced from very different starting points and even today, have still not been grasped in a systematic fashion but are discussed in completely different fields of law.

At least in the legal systems of continental Europe, the two legal institutions of mistake and precontractual duties to inform may, to a certain degree, be separated. A mistake made when concluding a contract enables the mistaken party to free himself from a given declaration of intent, a promise or a contract – provided certain conditions have been fulfilled. A breach of duties to inform, however, gives rise to either the annulment or amendment of a contract already concluded or imposes a duty to compensate incumbent on the party bound to inform. Despite this major difference, both aspects of law are also partly connected.

A central implication of the theory developed in Chapter 2 is that legislative majorities in the Bundestag will be strongly tempted to evade judicial decisions that touch on interests that are fundamental to the parties, and that this temptation is particularly strong whenever public support or transparency is low. The theory further implies that judges of the FCC anticipate this potential for evasion and adjust their behavior in two ways. First, they will be sensitive to the preferences of legislative majorities and employ methods to reduce the costs of their decisions. Second, when they choose to annul a statute, they will try to increase the transparency surrounding the decision to generate greater pressure for compliance.

In the previous chapter, we found considerable evidence for the various components of this argument. Legislators reported that the costs of a decision affect their response to a judicial decision, and judges discussed a number of strategies they employ to reduce the political costs of their rulings. In this chapter, I illustrate these interactions in greater detail through a case study of the interactions between the Bundesverfassungsgericht and Bundestag in a particular policy area: public financing of political parties. This case study is particularly valuable because it traces the dynamics of the often contentious relationship between the FCC and the Bundestag as they interact repeatedly over the same issue.

The principal argument of this book, laid out in Chapter 2, takes off from the observation that the decisions of a constitutional court like the Bundesverfassungsgericht are not self-enforcing. Implementation of judicial decisions often requires the cooperation of other actors who may not wish to comply with a specific ruling, most importantly – for our purposes – legislative majorities. As a result, the incentives that legislators face in deciding how to respond to a judicial ruling take on central significance. The greater the pressure to implement a court's rulings faithfully, the more influential and effective a court will be. One important mechanism that creates such pressure for elected officials like legislators is the potential for a public backlash if they are perceived to flaunt a judicial decision. As I argued in greater detail in Chapter 2, two factors are central to this mechanism:

1. The degree of public support a court enjoys and

2. The likelihood that a sufficiently large number of citizens will become aware/convinced that a judicial decision has not been complied with if evasion is attempted (transparency).

As I stated at the end of Chapter 2, the second condition (transparency) is conditioned by a range of factors that work to decrease or increase the likelihood that citizens will become aware of evasive attempts by a legislative majority. Thus, transparency is generally higher in cases that are salient and attract more public attention.

In the previous chapter, I provided systematic statistical support for a central implication of the theory presented in Chapter 2. This implication focuses on the fact that if the potential to lose public support for evasion represents a key enforcement mechanism for judicial decisions, the Bundesverfassungsgericht will be more aggressive in using its veto powers the more transparent its political environment is. The evidence was overwhelmingly consistent with this prediction. The court is considerably more likely to annul legislation when public awareness of a case is high, when the court enjoys outside political support for an annulment, and when the issue involved is noncomplex and easy to police. Although critical, this relationship between transparency and judicial deference constitutes only on aspect of the theoretical argument. In this chapter, we explore other implications of the theory. Before I outline these implications, a few remarks about the approach taken in this chapter are useful.

Methodologically, we change tracks in this chapter. Instead of analyzing data statistically, we will consider qualitative evidence – specifically, interviews with judges of the FCC and members of the Bundestag. What makes such qualitative evidence particularly relevant? Rational choice theories (like the one presented here) posit that actors are conscious decision makers who act in ways that they believe will maximize their welfare as they perceive it. In other words, the subjective perceptions of the actors whose behavior is being explained constitute a crucial ingredient in rational choice approaches.

In much of the Western world, the institution of constitutional review has become a central component of constitutional democracy. In the previous chapter, I argued that how and under what circumstances courts are able to exercise influence over the policymaking process poses a puzzle. While many courts have successfully established a claim to the power of constitutional review, most have few means at their disposal to force compliance with their decisions. President Andrew Jackson's apocryphal reaction to the U.S. Supreme Court's decision (written by Chief Justice John Marshall) in Worcester v. Georgia (31 U.S. 515), invalidating attempts by the State of Georgia to assert jurisdiction over the Cherokee Indians provides a poignant illustration: “John Marshall has made his decision, now let him enforce it” (see Smith 1996:518). This lack of formal enforcement powers is potentially significant because implementation of a judicial decision often requires or induces a response by other policymakers. As the examples presented in the previous chapter suggest, governing majorities may be tempted to exploit the opportunity to evade, or at least limit, the impact of unwelcome judicial decisions. How then do courts constrain other political institutions?

Scholars have investigated various bases of judicial authority, including the value that political parties that alternate between government and opposition may place on judicial independence (Landes and Posner 1975; Ramseyer 1994), the fact that courts can help parties to solve Prisoner's Dilemma–type problems (Carrubba 2003), and the informational gain that legislative majorities may achieve from judicial review (Rogers 2001).

Constitutional review – defined as the power of judicial bodies to set aside ordinary legislative or administrative acts if judges conclude that they conflict with the constitution – has emerged as an almost universal feature of Western-style democracy. The commitment to this institution has become so pervasive that it is now virtually unthinkable to draft a democratic constitution without providing for its inclusion. Whether in postfascist Spain, postapartheid South Africa, or postcommunist Eastern Europe, recent transitions to democracy have been transitions to constitutional democracy, including judicial oversight of the political process. As Mauro Cappelletti has observed, in much of the Western world, constitutional review has come to be understood as “the necessary ‘crowning’ of the rule of law” (1989:205).

The experiences of totalitarianism provided a natural impetus for this development. In writing his monumental survey of American democracy in the 1830s, Alexis de Tocqueville praised the role of the judiciary in the new political system, arguing that “the power granted to American courts to pronounce on the constitutionality of laws is yet one of the most powerful barriers ever erected against the tyranny of political assemblies” (1835/1988:103f.). Similarly, constitution writers following World War II, and again in the wake of the peaceful revolutions of 1989 in Eastern Europe, turned to courts armed with the power of constitutional review in the hope of creating effective limitations on the power of legislative majorities.

In the remainder of the book, I explore and test the empirical implications of the theory laid out in the previous chapter by applying the framework to the FCC. In the roughly fifty years since its creation, this court has emerged as “the most active and powerful constitutional court in Europe” (Kommers 1994:470), and it has served as a model for many of the new constitutional courts of Eastern Europe (Schwartz 2000). Aside from the intrinsic importance of this court as one of the most significant legal actors in the world today, the FCC therefore provides an appropriate testing ground for the argument. Before we dive into the details of the politics of constitutional review in Germany, it is useful to briefly survey the Bundesverfassungsgericht and its history. How was this court established? How is it organized, and what are its powers? And how does it compare to other European constitutional courts? This chapter provides answers to these (and other) questions. Readers who are already familiar with the structure, jurisdiction, and powers of the FCC can skip without much loss to the next chapter.

I begin with a short account of the history and establishment of the court. One of the implications of the argument in the previous two chapters is that establishing a court, maintaining its institutional integrity, and generating compliance with its decisions constitute separate (though interrelated) problems.

Around the world, courts with the power to declare legislative and executive actions unconstitutional are playing a more and more prominent role. Establishing a constitutional court to act as the guardian of the constitution is often seen as a necessary part of making a transition to democracy (Howard 1993; Schwartz 2000; Widner 2001). Thus, in one of the most sweeping waves of democratic transition in history, each of the newly democratic states in Eastern Europe chose to include judicial review in its new constitutional order (Elster, Offe, and Preuss 1998:102). Nor is the influence of courts limited to new democracies. In countries where constitutional review has been a part of the political process for decades, courts appear to be playing a more and more active role (e.g., Shapiro and Stone 1994, 2002; Stone Sweet 2000). The reach of courts extends even beyond the nation-state. Supranational courts like the ECJ that can rule on the validity of national legislation are growing increasingly influential (Alter 2001; Mattli and Slaughter 1998; Stone Sweet and Brunell 1998). It is perhaps not surprising that scholars have begun to speak of a “globalization of judicial power” (Tate and Valinder 1995) and a “judicialization of politics” (Stone Sweet 2000).

Given these trends, understanding how courts interact with legislative majorities and other institutions of governance is of central importance in understanding politics in constitutional democracies today. And yet, comparative political scientists have traditionally devoted surprisingly little attention to studying courts.