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Oxford Law Citator

Part IV Validity, 18 Fraud and Duress

From: Global Sales and Contract Law (2nd Edition)

Ingeborg Schwenzer, Edgardo Muñoz

Content type:: Book content

Product:: International Commercial Law [ICML]

Published in print:: 14 June 2022

ISBN:: 9780198871255

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Subject(s):: Construction of contract — Formation of contract — Illegality and contract — Interpretation of contract — Validity of contract

(p. 244) 18 Fraud and Duress

1. A. General Remarks 18.01
2. B. Fraud 18.03
  1. I. False Statement, Act, or Omission 18.04
    1. 1. Statement or Act 18.05
    2. 2. Omission 18.08
  2. II. Knowledge and Intent to Deceive 18.16
    1. 1. Made Knowingly 18.16
    2. 2. With Intent to Deceive 18.18
    3. 3. By a Party or Third Persons 18.20
  3. III. Influenced Consent to Contract 18.22
  4. IV. Relationship to Mistake 18.25
3. C. Duress 18.26
  1. I. Illegitimate Pressure 18.27
    1. 1. Meaning of Illegitimate 18.28
    2. 2. Object of the Threat 18.31
    3. 3. Third Party Threats 18.33
  2. II. Inducement to Contract 18.34
  3. III. Relationship to Undue Influence 18.35

A. General Remarks

18.01 The laws concerning fraud and duress in the context of contracts are designed to protect parties rather than the society as a whole. Societies are certainly protected from matters like fraud, threats of violence, and extortion but this is done through other measures often found in the criminal law. As a consequence contracts tainted by fraud or duress are typically voidable rather than automatically void.¹ This is true even where laws exist to protect large classes of parties, such as consumers.²

18.02 The fundamental issue in cases involving fraud and duress is that there is a defect of consent.³ While objectively it might appear there is consent, in the case of fraud a party has been lured into providing that consent, and in the case of duress a party has been coerced. The obligations of the contract therefore do not reflect the real intentions of the party. In those, predominantly civil law, jurisdictions which adopt a ‘will theory’ of contracting, that these are defects is clear. The situation is similar but less clear in those jurisdictions which apply an objective theory of contract, such as the common law. In the common law the focus tends to be on the actions of the other party rather than the subjective intent of the victim.⁴

B. Fraud

18.03 Although the precise wording of the definition of fraud differs slightly from jurisdiction to jurisdiction there is broad agreement on its meaning. In essence it is a statement, act, or (p. 245) omission which deceives another party for the purpose of inducing that party to act in a particular manner, such as entering into a contract, or to refrain from acting.⁵

I. False Statement, Act, or Omission

18.04 Fraud can be perpetrated by positive or negative acts.⁶ In this context a statement is a positive act and an omission is a negative act. Negative acts also include concealment of the truth. The statement, act, or omission must be false.

1. Statement or Act

18.05 There are many statements or acts a party may say or do during the course of contract negotiation. It is impossible to list them all but, for example, the concealment of defects in the goods being purchased;⁷ or more specifically in the sale of a second-hand vehicle, the mileage counter might be turned back;⁸ in the sale of a business, the production of false documents to create false representation exaggerating the value of a clientele;⁹ the adoption of a false identity or the use of fake documents.¹⁰ Furthermore the mere act of entering into a contract to purchase goods is an implied representation of an intention or ability to pay for them¹¹ and the selling of goods represents that the property exists and has value.¹² The use of a credit card represents that the user has the authority to use it.¹³ There are too many others to list.

(p. 246) 18.06 In the context of the sale of goods it is almost trite to note that sellers will make statements about the goods they are selling. When such statements are made it will be necessary to distinguish between mere promotional exaggeration and statements intended to be relied upon. This distinction is known to both civil and common law jurisdictions.¹⁴ In such circumstances it is necessary to give consideration to what is expected and generally accepted in the trade or industry. This point relates very closely to the requirement of inducing the contract below. A buyer will not be understood to have been induced to enter into the contract by a mere sales puff.

18.07 In some jurisdictions, predominantly those from the common law and Germanic tradition, the statement or act must be about a verifiable fact.¹⁵ This can be a past or present fact. Promises about the future, opinions, and intentions cannot themselves be either true or false and therefore cannot of themselves amount to a fraudulent statement in jurisdictions adopting this approach.¹⁶ They may however imply that the maker of such statements has certain knowledge or holds certain facts to be true.¹⁷ These implications may in some circumstances amount to statements or acts which are false, and thus capable of grounding an action for fraud. Despite the different approaches adopted amongst the domestic jurisdictions, it has been suggested that outcomes do not substantially differ.¹⁸ Neither PICC nor PECL explicitly mention facts, referring instead to ‘representations’. Commentary suggests that, in the case of PICC, this should be interpreted broadly to encompass false expressions of opinion.¹⁹

2. Omission

18.08 An omission or failure to act in circumstances where a party would ordinarily be expected to do so, such as when under a duty to disclose or in good faith, can amount to fraud.²⁰

18.09 In the context of the sale of goods, and commercial transactions generally, parties can be expected to operate to their own advantage. Many jurisdictions, particularly common law ones, recognize the principle of caveat emptor (sometimes referred to as ‘buyer beware’). Each party bears responsibility for its own actions and ensuring that it has the information necessary to avoid a bad bargain.²¹ For example, buyers should not generally be able to claim for fraud by a (p. 247) seller simply because the seller did not inform them of a downward trend in a market price, or of new goods expected in the future.²²

18.10 It is clear and not particularly controversial that a failure to disclose in the face of an information duty or duty to disclose is fraud.²³ The decisive question is therefore whether a duty to inform exists. In some instances the duty will be one imposed by statute.²⁴ The circumstances where no obvious information duty exists, but where good faith may demand disclosure, are more difficult.

18.11 As a preliminary point a distinction can be drawn between a duty to inform and common law misrepresentation. Within the common law, misrepresentations can be innocent, negligent, or fraudulent. Rather than being a positive duty to provide information, common law misrepresentation is better thought of as a duty to ensure that when information is provided that information is accurate.²⁵ Importantly though this also means correcting any information which has subsequently changed.²⁶

18.12 Where the duty to inform has not been explicitly imposed by statute, it is necessary to give consideration to the circumstances of a given situation.²⁷ For example where one party is relying on the expertise of the co-contractant and the co-contractant is aware of this reliance, many systems would recognize a duty to inform arising from a duty of good faith and the rules of culpa in contrahendo.²⁸ This scenario could be extrapolated to a consideration of the relative equality of the parties more generally. Other circumstances may include established usages and business practices²⁹ or the degree of difficulty for one party to obtain relevant information that the other party already possesses.³⁰

18.13 In the international context the uniform projects contain specific rules dealing with culpa in contrahendo.³¹ Furthermore the DCFR establishes detailed pre-contractual duties for information.³²

(p. 248) 18.14 As discussed further below,³³ the statement, act, or omission must influence the party to enter into the contract. With that in mind, it is apparent therefore that an omission or silence will only give rise to a fraud where the party maintaining its silence knows that the information withheld is of importance to the other party—that is, if the other party had been fully informed it would not have entered into the contract at all or on the particular terms in question.³⁴

18.15 In the context of the sale of goods, instances where a seller deliberately conceals a defect in the goods would amount to a fraud.³⁵ Other examples include the failure to advise goods are affected by intellectual property rights of third parties where the buyer has inquired about rights and claims of third parties generally; the failure of a seller to inform a buyer about the true state of a second-hand vehicle;³⁶ the failure of a seller to disclose to a buyer of a business limiting contract terms in the distribution agreement transferred with the business;³⁷ or a failure by the seller to inform the buyer about the gestation of the mare sold.³⁸ It should be noted that it is not only the seller who may be accused of committing a fraud. While it is less common, it is conceivable that a buyer would have more knowledge about the goods being purchased. If the buyer knows material information that the seller does not then in certain circumstances the buyer can also be expected to communicate that information, failing which there will be a fraud.³⁹ However, on this issue the French Cour de cassation in a case concerning photographs taken by famous nineteenth-century photographer, Edouard Baldus, found that there was no obligation on the buyer to inform the seller of the value of the goods.⁴⁰ In that instance the price paid by the buyer was very low compared to the real value of the photographs. In 2016, the introduction of the second paragraph of Article 1137 of the French Civil Code, recognizing as fraud the intentional concealment by a party of information which it knows is decisive for the other, questioned the value of the Baldus holding. In 2018, however, a third sentence was added to Article 1137 French Civil Code that clarifies that the fact that a party does not reveal to the other its estimate of the value of the performance does not constitute fraud.

II. Knowledge and Intent to Deceive

1. Made Knowingly

18.16 The party committing the fraud must know that the statement, act, or omission was not true and will give rise to a false understanding.⁴¹ A misrepresentation made innocently or in good faith will not be fraudulent but may give rise to a relevant mistake.

(p. 249) 18.17 What amounts to ‘knowing’ differs slightly amongst the legal systems. In the famous common law tort case of Derry v Peek ⁴² the House of Lords stated that ‘ fraud is proved when it is shown that a false representation has been made (i) knowingly, or (ii) without belief in its truth, or (iii) recklessly, careless whether it be true or false’.⁴³ Recklessness is different to negligence, it is something more serious.⁴⁴ In this regard it is similar to the standard provided in systems which follow the Germanic approach.⁴⁵ A typically cited example is that of a seller of used cars informing a prospective buyer that the car had never been in an accident without any idea or concern about the veracity of the statement.⁴⁶

2. With Intent to Deceive

18.18 The party engaging in the fraud must do so with the intent to deceive the other party.⁴⁷ So, for example, it has been suggested that a seller of a second-hand car who does not disclose defects because the seller assumed the buyer was aware of the defects would not be acting fraudulently.⁴⁸

(p. 250) 18.19 Fraud is generally not dependent on either intention to gain profit or cause harm.⁴⁹ However, although many jurisdictions do not require it, the PICC may be understood to include the need for an intention to gain an advantage to the detriment of the defrauded party.⁵⁰

3. By a Party or Third Persons

18.20 As a general rule the fraud must have been committed by a party (or its agent) to the contract.⁵¹ Where the false representation is made by a third person, rescission of the contract can in most cases still be obtained where it is established that the other contracting party was aware of,⁵² or should have been aware of the fraudulent misrepresentation.⁵³ In some jurisdictions there is an additional requirement that the party who had knowledge of, or should have been aware of, the third party’s false representation must obtain a benefit before fraud will be recognized.⁵⁴

18.21 The uniform projects also permit the victim of the fraud to rescind the contract irrespective of the other party’s knowledge or constructive knowledge, if the other party has not yet relied on the contract.⁵⁵ The Official Comment to PECL Article 4:111 indicates that foregone opportunities would amount to reliance in this context.⁵⁶ The ability to rescind the contract where there has not been reliance is not generally recognized by domestic legal systems.⁵⁷

III. Influenced Consent to Contract

18.22 The fraudulent statement, act, or omission must have influenced the other party’s consent to contract.⁵⁸ It is widely accepted amongst many jurisdictions that if the false statement or act (p. 251) was ignored by the party purporting to have been defrauded or if that party was aware of the untruth,⁵⁹ there would not be a fraud. Similarly in the case of an omission where the information could have been obtained there would not be a fraud.⁶⁰ The prevailing view both amongst domestic legal systems and uniform projects is that the false statement, act, or omission need only be a cause (ie not the sole cause) for entering into the contract.⁶¹

18.23 The relative effect of the false statement, act, or omission is also important in some jurisdictions. This stems from a distinction between dolus causam dans and dolus incidens—the latter not being considered a defect of consent. In some jurisdictions if the fraud is only incidental (dolus incidens), for example it merely induces one party to agree to more onerous terms in a contract it would have nevertheless entered, then the remedy is limited to only damages.⁶² Other domestic jurisdictions as well as the uniform projects, either no longer—or never did⁶³—recognize a difference and consequently permit rescission in any case.⁶⁴

18.24 As is generally the case the burden of proving the false statement, act, or omission induced the contract is on the party alleging it did.⁶⁵ However, the common law does make an exception in cases of fraud. Where the party did in fact enter the contract, and the representation is demonstrated, then a presumption will arise that the misrepresentation induced the contract. This presumption can be rebutted by the party who made the representation.⁶⁶

IV. Relationship to Mistake

18.25 Mistake in its simplest, non-legal, sense is a necessary element of fraud.⁶⁷ As has been discussed fraud is the deliberate creation or maintenance of an incorrect understanding by one party in the mind of the other party. An incorrect understanding is a mistake. This point is (p. 252) expressly reflected in some, predominantly, Ibero-American jurisdictions where fraud is said to be limited to cases of mistake.⁶⁸ It is clear that fraud makes a mistake legally relevant, in circumstances where the mistake would not have otherwise been so.⁶⁹

C. Duress

18.26 Duress can be broadly defined as illegitimate pressure which may lead a party to conclude a contract when it might not have otherwise done so.⁷⁰ Like fraud, understandings of the notion of duress are largely uniform. The principal differences between jurisdictions stem from a doctrinal difference; whether duress is based on the ‘overborne will theory’ or ‘illegitimate pressure theory’. Overborne will theory, traditionally favoured by common law jurisdictions,⁷¹ as the name suggests, examines the will of the party to whom the threat was made. In contrast, illegitimate pressure theory, traditionally preferred by civil law jurisdictions,⁷² while not completely ignoring the will of the threatened party, focuses instead on the threat itself.

I. Illegitimate Pressure

18.27 All legal systems recognize that the pressure must be illegitimate. The pressure referred to is commonly understood as a violent threat of some description such that the party to whom the threat is made is put in fear.⁷³

(p. 253) 1. Meaning of Illegitimate

18.28 Not every threat will be illegitimate⁷⁴ and hence, not all pressure, economic or otherwise, is recognized as constituting duress.⁷⁵ A threat to undertake a lawful act, or to lawfully exercise a right, will not generally be considered as a threat capable of producing duress, particularly where there is a connection between the contract and the content of the threat. Examples of permissible threats from various jurisdictions include: to enforce claims through a competent authority, if such claims are just and legal;⁷⁶ the threat to declare a debtor’s bankruptcy unless a debt it paid;⁷⁷ the threat to sue even where there are doubts as to the existence of the claim would not be illegitimate pressure;⁷⁸ the threat by a seller to a buyer to withhold future credit;⁷⁹ and the threat to pursue criminal charges unless the other party provides compensation for damages caused.⁸⁰ The critical question appears to be whether the threat amounts to an abuse of the right.

18.29 Where the threat made by a party is itself illegal or subject to a criminal offence, then the illegitimacy is clear and uncontroversial.⁸¹ Furthermore some civil codes do expressly define acts which would be considered illegitimate. Examples include the use or threat of force, the actual or threatened deprivation of liberty, the threat to destroy property or to publish embarrassing information.⁸² However even these must be assessed to determine whether they did in fact put a party in fear. Some jurisdictions adopt a subjective test when determining whether a party was in fact in fear.⁸³ However, most adopt an objective approach, in some instances outlining various factors to which the adjudicator should have regard such as age, physical, and psychological condition of the victim.⁸⁴

(p. 254) 18.30 The illegitimacy or illegality need not be found solely in the manner the threat is made, but could be seen in the purpose for which the threat has been made.⁸⁵ Where neither the threat nor purpose is independently illegal they may however become illegal when seen in combination.⁸⁶ It is therefore not so much the threat that requires assessment, as that can be lawful, but rather the nature of the demand.⁸⁷

2. Object of the Threat

18.31 In all jurisdictions threats of violence towards people constitute illegitimate threats. The threat could be to harm the victim of the duress or another third person.⁸⁸ When the threat is to harm a third person the closeness of the relationship may become relevant.⁸⁹ Threats to property are also considered illegitimate in most jurisdictions.⁹⁰

18.32 Where there is some divergence it is in the notion of economic duress—that is, duress that relates not simply to issues of greater payments, but a threat to a party’s economic well-being (in other words, a threat to a party’s business or trade). Economic duress, or versions of it,⁹¹ is recognized throughout common law systems,⁹² however, its relatively recent development means that the precise boundaries of the doctrine are yet to be established. The concept of economic duress as defined in this work, has been long accepted in numerous civil law jurisdictions.⁹³

3. Third Party Threats

18.33 It is recognized in nearly all systems, as well as in the uniform projects, that threats made by third parties can amount to illegitimate pressure, if the co-contractant participated in, was aware of, or should not have been unaware of, the threat.⁹⁴ A small number of jurisdictions (p. 255) modify the general rule by examining the gravity of the duress⁹⁵ or by permitting rescission where the co-contractant had neither actual nor constructive knowledge on the basis that compensation is provided in lieu as required by equity.⁹⁶

II. Inducement to Contract

18.34 All jurisdictions require that the illegitimate pressure be a cause, and not necessarily the sole cause, of the party entering into the contract.⁹⁷

III. Relationship to Undue Influence

18.35 The concept of ‘undue influence’ known to common law jurisdictions is sometimes addressed under the broader heading of duress in other comparative studies.⁹⁸ Undue influence is the ‘equitable’ counterpart to duress. It developed in the courts of equity because the common law traditionally only recognized threats of violence to a person and not, for example, economic duress.⁹⁹ Due to developments in the common law, such as the recognition of economic duress, this distinction is no longer significant and consequently the overlap between undue influence and situations covered by duress in civil law jurisdictions has diminished.

18.36 Undue influence, despite its similarities to duress, does differ in a number of material ways. First, whereas duress requires a threat, undue influence does not. Instead undue influence focuses on an abuse of a relationship, in particular whether pressure exerted by the dominant party in that relationship was appropriate. Secondly, the dominant party may be acting without any intent to harm the other party or advantage itself.¹⁰⁰

18.37 As a concept undue influence does not compare neatly to any one civil law notion. Cases which would be dealt with as undue influence in common law jurisdictions may fall under duress, or under modern (and in particular uniform¹⁰¹) law interpretations of gross disparity.¹⁰²

Footnotes:

¹ See paras 19.06 et seq.

² See for modern consumer protection generally paras 6.18 et seq.

³ See eg for Idn Art 1321 CC; Ukr Supreme Court of Ukraine,11 December 2019, contract may be declared invalid if violence is proven; Rom Art 1206(1) CC.

⁴ See the comments of Lord Nicholls on ‘fraudulent misrepresentation and intention’ in his dissenting opinion in the House of Lords decision of Shogun Finance Ltd v Hudson [2003] UKHL 62.

⁵ Art 3.2.5 PICC; Art 4.107 PECL; Common Law (UK) Chitty on Contracts, paras 6-006 et seq; Afg Art 570 CC; Are Art 185 CC; Arg Art 271 CCC; Aus The Laws of Australia/Vout, para 35.2.200; Aut § 874 CC; Bel Art 1116 CC; Bhr Art 89 CC; Bih Art 65(1) LO (RS, FBIH); Can Waddams, para 419; Che Art 28 CO; Chn Zhang, p 170; Cze Art 574 CC; Deu § 123 CC; Dza Art 86 CC, Filaly, Al Nazria Al Ama Lil Aqd, p 124; Egy Art 125(1) CC, Al Sanhuri/Al Maraghy, pp 121–2; Fra Art 1137 CC; Geo Art 81 CC; Hkg Fisher/Greenwood, p 193 (fraudulent misrepresentation); Hun § 6:90 CC; Idn Art 1328 CC; Ind s 17 Contract Act (1872); Irn Art 438 CC; Irq Art 121 CC; Isr s 15 CL (General Part); Ita Art 1439 CC; Jor Art 143 CC, Mansour, p 110; Jpn Sono, H, et al, p 78, para 162; Kaz Art 159 CC; Kwt Art 151 CC, Abdel Reda/Al Nakas, p 88; Lbn Art 208 CO; Lby Art 125(1) CC; Lva Art 1459 CC; Mar Art 52 CO, Safi, Al Qanun Al Madani, p 328; Mda Art 228 CC; Mrt Art 72 CO; Nld Art 3:44 CC; Nzl Burrows/Finn/Todd, p 321 (fraudulent misrepresentation); Pak s 17 Contract Act; Per Art 210 CC; Png Tennant, para 69; Qat Art 134(1) CC; Rom Art 1214(1) CC; Sau Rayner, p 211; Syr Art 126 CC; Tun Art 56 CO; Twn Art 92 CC; Ukr Art 230 CC; usa Restatement (2d) of Contracts, § 162; Williston, § 69.25; Yem Art 179 CC.

⁶ Art 4:107(2) PECL; Art 3.2.5 PICC; Vogenauer/du Plessis, Art 3.2.5, para 10; Common Law (UK) Chitty on Contracts, paras 6-006, 6-015; Arg Art 271 CCC refers to positive fraud and negative fraud respectively, Alterini, p 366; Aus The Laws of Australia/Vout, para 35.2.410; Che Schwenzer/Fountoulakis, para 38.03; Cri Torrealba 2009, p 242; Deu MünchKommBGB/Kramer, § 123, para 8, Leipold, § 19, para 3; Geo Art 81 CC; Ita Antoniolli/Veneziano/Iamiceli, p 207; Mac Art 246 CC; Mng Art 59.2 CC; Nga With v O’Flanagan [1936] Ch 575; Nic Herrera Espinoza/Guzmán García, para 10.9; Pak s 17 Contract Act; Per Art 212 CC; Phl Art 1339 CC; Pry Art 290 CC; Rom Art 1214(1) CC; Rus Art 179(2) CC; Ukr Art 230 CC; Zaf van Huyssteen, para 236.

⁷ Vogenauer/du Plessis, Art 3.2.5 PICC, para 12 also noting the odd expression ‘language or practices’ used in the English version and contrasting the German ‘Handlungsweise’ and French ‘langage ou ses actes’ ; Afg Art 573 CC; but see Idn Himawan & Kusumaatmadja, p 7, failure to inform about hidden defect does not in itself amount to fraud.

⁸ Fra Civ 1, 18 March 1981, Gaz Pal (1981) 2, panor 280, Civ 1, 15 April 1982, Gaz Pal (1982) 2, panor 288, CA Paris, 8 September 1995, JCP (1996) IV 114.

⁹ Fra CA Douai, 31 January 1936, Gaz Pal (1936) 1 702.

¹⁰ See Dza Filaly, Al Nazira Al Ama Lil Aqd, p 127; Jor Mansour, pp 111–12; Kwt Abdel Reda/Al Nakas, p 89; Mar Safi, Al Qanun Al Madani, p 334.

¹¹ Common Law (Eng) Ray v Sempers [1974] AC 370 (HL), as cited in (Sgp) Halsbury’s Laws of Singapore/Low Kee Yang, para 80.179.

¹² Common Law (Gbr) Colt v Woollaston [1723] 2 P Wms 154 at 156–7, Ajello v Worseley [1898] 1 Ch 274, [1895–9] All ER Rep 1222, as cited in (Sgp) Halsbury’s Laws of Singapore/Low Kee Yang, para 80.179.

¹³ Common Law R v Lambie [1981] 1 WLR 78, as cited in (Sgp) Halsbury’s Laws of Singapore/Low Kee Yang, para 80.179.

¹⁴ General Kramer/Probst, § 178; PICC Vogenauer/du Plessis, Art 3.2.5, para 13; Common Law (Gbr) Dimmock v Hallett (1866) LR 2 Ch App 21, Chitty on Contracts, para 6-006; Hkg Chan Yuek Yu and anor v Church Body of the Hong Kong Sheng Kung Hui and anor [2001] 1 HKC 621; Mac Art 246.2 CC; Nic Herrera Espinoza/Guzmán García, para 10.9; Nld Art 3:44(3) CC; Nzl Burrows/Finn/Todd, p 307; Phl Art 1340 CC, Rom Baias et al, Commentary to Art 1214; Ukr Art 2 Federal Law no 19 2016 Combating Commercial Fraud.

¹⁵ Che Schwenzer/Fountoulakis, para 38.04; Deu MünchKommBGB/Kramer, § 123, para 8, Leipold, § 19, para 2; Nzl Burrows/Finn/Todd, p 306; Sgp Ram Niranjan v Navin Jatia and others and another suit [2020] 3 SLR 982 at 51–2; Twn Chen Ziqiang, p 221.

¹⁶ Common Law Edgington v Fitzmaurice (1885) 29 Ch D 459.

¹⁷ USA § 158, Comment (a) Restatement (2d) of Contracts.

¹⁸ Kramer/Probst, § 11-165.

¹⁹ Art 3.2.5 PICC; Vogenauer/du Plessis, Art 3.2.5, para 11.

²⁰ Art 4.107(1) PECL; Art 3.2.5 PICC; Vogenauer/du Plessis, Art 3.2.5, para 15; Common Law (uk) Chitty on Contracts, para 6-014; Afg Art 575(2) CC; Alb Art 94 CC; Are Art 186 CC; Aut Koziol et al/Bollenberger, § 870, para 1; Aze Art 339 CC; Bhr Art 90 CC; Che Schwenzer/Fountoulakis, para 38.03; Deu Palandt/Ellenberger, § 123, para 5; Dza Art 86 CC; Egy Art 125(2) CC; Fra Art 1137 CC, Bénabent, para 102; Geo Art 81 CC; Hrv Art 284 CO; Idn Art 251 Com C; Irq Art 123 CC; Ita Art 1439; Jor Art 144 CC; Kwt Art 152 CC; Lby Art 125(2) CC; Mda Art 231 CC; Pak s 17(2), s 17(5) Contract Act; Prt Art 253 CC; Qat Art 134(2) CC; Rom Art 1214(1) CC, Baias et al, Commentary to Art 1.214; Rus Art 179(2) CC; Syr Art 126 CC; Tkm Art 106 CC; Ukr Art 230 CC.

²¹ Vogenauer/du Plessis, Art 3.2.5, para 15; Ind Shrisht Dhawan (Smt) v Shaw Brothers MANU/SC/0295/1992; Ury Mieres Furtado, María Isabel y Toledo, Matías Joaquín v Pizurnia Rusch, Osvaldo. Nulidad de contrato y auxiliatoria de pobreza [2018] Court of Appeals (Civil) 2°; Rom Baias et al, Commentary to Art 1214.

²² See eg Chen Ziqiang, p 222; see also Kramer/Probst, § 11-194 who draw a distinction between ‘conclusive silence’ and ‘mere silence’.

²³ Che Schwenzer/Fountoulakis, para 38.06; Deu MünchKommBGB/Kramer, § 123, para 16, Leipold, § 19, para 6; Dza Filaly, Al Nazria Al Ama Al Aqd, p 128; Fra Art 1137 CC, Bénabent, para 102, Civ 3, 7 May 1974, Bull civ III, no 186, Gaz Pal (1974) 2, panor 184 (information duty on the seller of a site for constructing a hotel) (former article); Kwt Abdel Reda/Al Nakas, pp 89–90; Idn Art 251 Com C; Pak s 17 (2) Contract Act; Rom Art 1214(1) CC; Sau Rayner, pp 215, 229.

²⁴ In the context of sales law, duties of this kind are most commonly found in consumer protection legislation. See paras 11.23 et seq.

²⁵ Common Law Sefton-Green, p 27; Aus The Laws of Australia/Vout, para 35.2.510; Nzl Burrows/Finn/Todd, pp 308, 311 (noting mere silence is not a misrepresentation, and failure to disabuse misconception); see also PECL Art 4:106 which considers reliance on incorrect information not amounting to fundamental mistake; related see USA Williston, § 18.3 citing case authority to suggest concealment of important facts in a sales transaction would amount to unconscionability. For unconscionability see paras 21.30 et seq.

²⁶ Common Law (Gbr) Chitty on Contracts, para 6-018; Aus The Laws of Australia/Vout, para 35.2.560; Irl Clark, pp 342 ff.

²⁷ See eg Art 4.107(3) PECL which provides a non-exhaustive list of circumstances to consider.

²⁸ See paras 23.06 et seq. However see eg Aze Art 339 CC; Bol Supreme Court, Sala Civil 1, 29 September 2004, Marcial Xavier Pérez y otra v Teddy Mercado Mendoza reported by Muñoz, p 197; Geo Art 81 CC; Irq Amin, p 126; Isr s 15 CL (General Part); Jor Mansour, p 112; Kwt Art 152 CC; Mar Safi, Al Qanun Al Madani, pp 335–6; Prt Art 227 CC; Qat Art 134(2) CC; Sau Rayner, p 211. For the relationship between fraud and pre-contractual duties see para 18.10.

²⁹ See Sefton-Green, pp 27, 28; and Nld Art 6:228 CC. See also Che Schwenzer/Fountoulakis, para 38.06; Deu § 242 CC, Palandt/Heinrichs, § 424, para 37; Nordic § 33 Nordic Contracts Act.

³⁰ Art 4:107(3) PECL; see also Vogenauer/du Plessis, Art 3.2.5, paras 19-21.

³¹ See Arts 2.1.15, 2.1.16 PICC; Arts 2:301, 2:302 PECL; Arts II.-3:301, II.-3:302 DCFR. See also para 23.10.

³² Arts II.-3:101–II.-3:109 DCFR.

³³ See paras 18.22 et seq below.

³⁴ Afg Art 575(2) CC; Are Art 186 CC; Aut Koziol et al/Bollenberger, § 870, para 1; Bhr Art 90 CC; Deu Palandt/Ellenberger, § 123, para 24; Dza Art 86 CC, Filaly, Al Nazria Al Ama Lil Aqd, pp 129–30; Egy Art 125(2) CC, Egyptian Civil Court of Cassation, 17 April 2001, Challenge no 5524, Court of Cassation Rulings Collection, judicial year 63, Al Sanhuri/Al Maraghy, p 124; Geo Art 81 CC; Idn Art 1328 CC, Art 251 Com C; Irq Art 123 CC; Jor Art 144 CC, Mansour, p 112; Kwt Art 152 CC; Lby Art 125(2) CC; Mar Safi, Al Qanun Al Madani, pp 340–1; Mex Collegiate Tribunal, June 2007, Registry 172,151, Novena Época, SJF XXV, p 1170; Pak s 17 Contract Act; Qat Art 134(2) CC; Syr Art 126 CC; Tha Art 162 CC; Ukr Art 230 CC.

³⁵ Common law (Sgp) Halsbury’s Laws of Singapore/Low Kee Yang, para 80.181; Sau Rayner, p 230.

³⁶ Fra Civ 1, 19 June 1985, Bull civ I, no 201 (seller acting within its trade); see also Civ 1, 15 May 2002, no 99-21.521 (seller acting within its trade has a duty to inform).

³⁷ Fra Cass Com, 4 May 1993, Bull civ IV, no 163, no 91-17.321 (seller’s failure to disclose that the connected agreements were subject to conditions for renewal).

³⁸ Fra Civ 1, 5 February 2002, Bull civ I, no 38, JCP 2003 II 10175, note Lièvremont (mistake on the essential qualities of the horse purchased).

³⁹ Fra Cass Com, 27 February 1996, no 94-11.241, Bull civ IV, no 65, D 1996. 518, note Ph Malaurie, JCP 1996 II 22665, note Ghestin (failure by a CEO to disclose better price for the stock purchased constitutes a breach of duty of good faith).

⁴⁰ Fra Cass 1re civ, 3 May 2000, Bull civ I, no 131, JCP 2001 II 10510, note Jamin, Defrénois 2000. 1110, obs. D Mazeaud, and 1114, obs Ph Delebecque, D 2002, somm 928, obs Tournafond; confirmed by Civ 3, 17 January 2007, no 06-10.442.

⁴¹ Art 4.107 PECL; Art 3.2.5 PICC; Vogenauer/du Plessis, Art 3.2.5, para 6; Common Law (uk) Chitty on Contracts, para 6-010; Afg Art 570 CC; Are Art 185 CC; Arg Art 271 CCC; Aut Koziol et al/Bollenberger, § 870, para 1; Bel Art 1116 CC; Bhr Art 89 CC; Che Art 28 CO; Can Waddams, para 419; Chn Zhang, p 170; Cze Art 574 CC; Deu § 123 CC, Palandt/Ellenberger, § 123, para 2; Dza Art 86 CC, Filaly, Al Nazria, Al Ama Lil Aqd, p 124; Egy Art 125(1) CC; Al Sanhuri/Al Maraghy, pp 121–2; Fra Art 1137 CC, Bénabent, para 103; Geo Art 81 CC, Tbilisi Court of Appeal, 19 February 2015, no 2b/4356-14, the transaction is invalidated when it is obvious that the transaction would not have been concluded without deception; Hun §6:90 CC; Idn Art 1328 CC, with the exception of insurance agreements where negligent misrepresentation may result in invalidity, see Simanjuntak, p 47, Art 251 Com C; s 17 Contract Act, General Manager, Electrical Rengali Hydro Electric Project, Orrisa and Ors v Giridhari Sahu and Ors (2019) 10 SCC 695 ; Irn Art 438 CC; Irq Art 121 CC; Isr s 15 CL (General Part); Ita Art 1439 CC; Jor Art 143 CC; Mansour, p 110; Kaz 159 CC; Kwt Art 151 CC, Abdel Reda/Al Nakas, p 88; Lbn Art 208 CO; Lby Art 125(1) CC; Lva Art 1459 CC; Mar Art 52 CO; Safi, Al Qanun Al Madani, p 328; Mda Art 228 CC; Mrt Art 72 CO; Nld Art 3:44 CC; Pak s 17 Contract Act; Per Art 210 CC; Png Tennant, para 69; Qat Art 134(1) CC; Rom Art 1214(1) CC, Baias et al, Commentary to Art 1.214, ICCJ, com section, dec no 4202/2005, ICCJ, com section, dec no 422/2004; Sau Rayner, p 211; Syr Art 126 CC; Tun Art 56 CO; Twn Art 92 of CC; Ukr Art 230 CC; usa Restatement (2d) of Contracts, § 162, Williston, § 69.25; Yem Art 179 CC.

⁴² Common Law (UK) Derry v Peek (1889) 14 App Cas 337 at 374.

⁴³ Common Law (UK) Derry v Peek (1889) 14 App Cas 337 per Lord Herschell; see also Aus Civil Service Co-operative Society of Victoria Ltd v Blyth (1914) 17 CLR 601; Can Parma v G & S Properties Ltd (1970), 15 DLR (3d) 336 (SCC); Hkg Pacific Electric Wire & Cable Co Ltd v Harmutty Ltd and ors [2009] HKCU 357.

⁴⁴ As can be inferred from Williston, § 69:25. Note also the separate recognition in common law of ‘negligent’ misrepresentation. A tortious remedy for negligent misstatement (or misrepresentation) was first recognized in the well-known case of Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] 2 All ER 575.

⁴⁵ Chn Zhang, p 172; Deu MünchKommBGB/Kramer, § 123, para 8, Leipold, § 19, para 3; Mac Art 246(1) CC; Twn Chen p 223; Zaf van Huyssteen, para 237. This position is understood in all Asian Germanic systems, namely, Khm, Kor, Jpn, Tha, and Vnm.

⁴⁶ See eg Deu BGH, 7 June 2006, NJW (2006), 2839, 2840.

⁴⁷ Art 3.2.5 PICC; Art 4.107 PECL; Common Law (Gbr) Derry v Peek (1889) 14 App Case 337; Afg Art 570 CC; Are Art 185 CC; Arg Art 271 CCC; Aut Koziol et al/Bollenberger, § 870, para 1; Bel Art 1116 CC; Bhr Art 89 CC; Bih Art 65(1) LO (RS, FBIH); Can Waddams, para 419; Che Art 28 CO, Schwenzer/Fountoulakis, para 38.07; Chn Zhang, p 170; Cze Art 574 CC; Deu § 123 CC; Dza Art 86 CC, Filaly, Al Narzria Al Ama Lil Aqd, p 124; Egy Art 125(1) CC, Al Sanhuri/Al Maraghy, pp 121–2; Fra Art 1137 CC, Cass Com, 28 June 2005, no 03-16.794, Bull civ IV, no 140, RTD civ 2005 591, obs J Mestre et B Fages, RLDC 2005/20, no 810, obs C Le Gallou; Geo Art 81 CC; Hun §6:90 CC; Idn Art 1328 CC, with the exception of insurance agreements where negligent misrepresentation may result in invalidity, see also Simanjuntak p 47, Art 251 Com C; Ind s 17 Contract Act (1872); Irn Art 438 CC; Irq Art 121 CC; Isr s 15 CL (General Part); Ita Art 1439 CC; Jor Art 143 CC; Mansour, p 110; Kwt Art 151 CC, Abdel Reda/Al Nakas, p 88; Lbn Art 208 CO; Lby Art 125(1) CC; Lva Art 1459 CC; Mar Art 52 CO, Safi, Al Qanun Al Madani, p 328; Mda Art 231 CC; Mrt Art 72 CO; Nga Yakubu, Law of Contract, p 189; Nld Art 3:44 CC; Pak s 17(3) Contract Act; Per Art 210 CC; Png Tennant, para 69; Qat Art 134(1) CC; Rom Art 1214(1) CC, Baias et al, Commentary to Art 1214 ; Sau Rayner, p 211; Syr Art 126 CC; Tun Art 56 CO; Twn Art 92 CC; Ukr Art 230 CC; USA Restatement (2d) of Contracts, § 162, Williston, § 69.25; Yem Art 179 CC. But see Ita Antoniolli/Veneziano/Iamiceli, p 207; Zaf van Huyssteen, para 238 noting commentary suggesting fault rather than intention.

⁴⁸ Can Wescom Solutions Inc v Minetto (2019) ONCA 251; Twn Chen Ziqiang, p 223.

⁴⁹ pecl Art 4:107 Note 4; Common Law Beale et al, p 434 citing references; Aze Art 339 CC; Deu MünchKommBGB/Kramer, § 123, para 9, Leipold, § 19, para 3; Fra Beale et al, p 434 citing references; Geo Art 82 CC; Ind State of Orissa v Harapriya Bisoi JT 2009 (7) SC 92; Mng Art 59.1 CC.

⁵⁰ See for the PICC the Official Comment 2 on Art 3.2.5 PICC; Vogenauer/du Plessis, Art 3.2.5, para 9.

⁵¹ General Beale et al, p 437; Afg Art 570 CC; Aut Koziol et al/Bollenberger, § 870, para 1; Bhr Art 89 CC; Che Schwenzer/Fountoulakis, para 38.11; Deu MünchKommBGB/Kramer, § 123, para 24, Jauernig/Jauernig, § 123, para 10, Leipold, § 19, para 11; Dza Art 86 CC; Egy Art 125(1) CC; Fra Arts 1137, 1138 CC, Bénabent, para 105, which now expressly sets forth a list of people who may commit fraud, Cass Com, 27 November 2001, no 99-17.568, Contrats, conc, consom 2002, comm 45, obs L Leveneur; Ind s 17 Contract Act (1872) (former article); Irq Art 121 CC; Isr s 15 CL (General Part); Kwt Art 151 CC; Lbn Art 208 CO; Lby Art 125(1) CC; Mar Art 52 CO; Mus Art 72 CO; Nzl s 6 Contractual Remedies Act (1979); Pak s 17 Contract Act; Rus Art 179(2); Qat Art 134(1) CC; Syr Art 126 CC; Tun Art 56 CO; Yem Art 179 CC.

⁵² Aut § 875 CC; Che Art 28 CO; Schwenzer/Fountoulakis, para 38.11; Deu § 123(2) CC, Palandt/Ellenberger, § 123, para 12; Egy Art 126 CC; Hun § 6:90 CC; Ita Art 1432 CC; Jpn Art 96(2) CC; Lbn Art 209 CO; Mar Art 52 CO; Mda Art 231 CC; Mex Art 1645 CC; Per Art 210 CC; Pol Art 86(2) CC; Rom Art 1215(1) CC; Tkm Art 108 CC; Tun Art 56 CO; Ven Art 1154 CC.

⁵³ Art 4:111(2) PECL; Art 3.2.8(2) PICC; Vogenauer/du Plessis, Art 3.2.5, para 11; Nordic § 29 Nordic Contracts Act; Afg Art 574 CC; Are Art 190 CC; Aut § 875 CC; Bhr Art 91 CC; Bih Art 65(3) LO (RS, FBIH); Can Hatcher v Sheikhan (2019) ONSC 3890; Che Art 28 CO; Deu § 123(2) CC; Dza Art 87 CC; Grc Art 147 CC; Hun § 6:90 CC; Irq Art 122 CC; Jor Art 148 CC; Kor Art 110; Kwt Art 153 CC; Lby Art 126 CC; Mar Art 52 CO; Mda Art 228 CC; Nld Art 3:44 CC; Pol Art 86(2) CC; Prt Art 254 CC; Qat Art 135 CC; Rom Art 1215(1) CC; Syr Art 127 CC; usa Restatement (2d) of Contracts, § 164(2); Yem Art 180 CC.

⁵⁴ Ita Art 1439 CC; Jpn Art 96(3) CC; Lbn Art 209 CO; Mar Art 52 CO; Prt Art 254 CC; Tun Art 56 CO.

⁵⁵ Art 3.2.8(2) PICC; Vogenauer/du Plessis, Art 3.2.8, para 19; Art 4:111(2) PECL; Antoniolli/Veneziano/Iamiceli, p 227.

⁵⁶ See for the PECL, Comment D on Art 4:111 PECL.

⁵⁷ Kramer/Probst, § 11-268; but see usa Restatement (2d) of Contracts, § 164(2) where it is recognized.

⁵⁸ Art 3.2.5 PICC; Art 4.107 PECL; Common Law (uk) Chitty on Contracts, paras 6-032 et seq (noting a ‘but for’ causation test does not apply to cases of fraud); Afg Art 570 CC; Arg Art 271 CCC; Aus The Laws of Australia/Vout, para 35.2.700; Aut Kozio et al/Bollenberger, § 870, para 2; Cze Art 574 CC; Bhr Art 89 CC; Che Schwenzer/Fountoulakis, para 38.10; Chn Zhang, p 174; Deu Palandt/Ellenberger, § 123, para 24; Dza Art 86 CC; Egy Art 125(1) CC, Al Sanhuri/Al Maraghy, p 125; Fra Art 1137 CC; Geo Art 81 CC; Idn Art 1328 CC, Art 251 Com C; Gtm Art 1262 CC, Contreras Ortiz, para 401; Irq Art 121 CC, Amin, p 126; Isr s 15 CL (General Part); Jor Mansour, p 113; Kwt Art 151 CC, Abdel Reda/Al Nakas, pp 90, 91; Lbn Art 208 CO; Lby Art 125(1) CC; Lva Art 1457 CC; Mar Art 52 CO, Safi, Al Qanun Al Madani, pp 342–3; Mus Art 72 CO; Nzl s 6 Contractual Remedies Act (1979), Burrows/Finn/Todd p 313; Pak s 17 Contract Act; Qat Art 134(1) CC; Rus Resolution of the Plenum of the Supreme Court of the RF No 25 (2015), para 99; Syr Art 126 CC; Tun Art 56 CO; Yem Art 179 CC; Zaf van Huyssteen, para 239.

⁵⁹ General Beale et al, p 436; in Asia this rule is generally recognized in literature even though the law is silent on this point; see Sgp Halsbury’s Laws of Singapore/Low Kee Yang, para 80.189.

⁶⁰ See eg Ita Antoniolli/Veneziano/Iamiceli, p 208.

⁶¹ Vogenauer/du Plessis, Art 3.2.5, para 24 noting that the PICC are silent on this point and suggesting that the preferable interpretation is simple reliance rather than sole cause; General see Kramer/Probst § 11-249 and noting only ‘scattered court opinions’ which support the sole cause requirement; Rom Art 1214(2) CC.

⁶² Arg Arts 273, 275 CCC, Benavente, p 450: the obligation to pay damages caused by either incidental or essential fraud is now expressly regulated, before it was implicitly included, Alterini, p 366; Bel Art 116 CC; Bol Art 482 CC; Bra Art 146 CC; Can Hearn v McLeod Estate (2019) ONCA 682; Chl Art 1458 CC; Cri Brenes Cordoba/Ramírez/Trejos, p 83; Ecu Art 1474 CC; Esp Art 1270 CC; Fra Kramer/Probst, § 11-243 but contra Beale et al, p 436 noting criticism in both jurisprudence and doctrine, see also Cass com, 27 January 1998, no 96-13.253 (giving the victim of fraud an option between a claim in rescission and a claim in damages, regardless of fraud being incidental or not, thus indicating that case law might no longer recognize dolus incidens); Gtm Contreras Ortiz, para 402; Ita Art 1440 CC, Antoniolli/Veneziano/Iamiceli, p 207; Lva Art 1461 CC; Mex Art 1645 CC; Nic Art 2470 CC; Herrera Espinoza/Guzmán García, para 10.9; Per Art 211 CC; Phl Art 1338 CC; Pry Art 291 CC; Tha Art 161 CC; Ven Art 1154 CC.

⁶³ See for Common Law (uk) Chitty on Contracts, para 6-037 noting materiality is not relevant to fraud. See also Aus The Laws of Australia/Vout, para 35.2.800 noting that the better view is that materiality is not a requirement of Australian law.

⁶⁴ Vogenauer/du Plessis, Art 3.2.5, para 24 preferring this interpretation; PECL Antoniolli/Veneziano/Iamiceli, p 207 suggesting it can be reasonably inferred.

⁶⁵ See eg. Vogenauer/du Plessis, Art 3.2.5, para 25; Rom Art 1214(4) CC, Baias et al, Commentary to Art 1.214.

⁶⁶ Common Law (Gbr) Redgrave v Hurd (1881) 20 Ch D 1; Aus The Laws of Australia/Vout, para 35.2.730.

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