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Part IV Validity, 18 Fraud and Duress

From: Global Sales and Contract Law

Ingeborg Schwenzer, Pascal Hachem, Christopher Kee

Content type:
Book content
Product:
International Commercial Law [ICML]
Published in print:
26 January 2012
ISBN:
9780199572984

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved. Subscriber: null; date: 06 June 2023

Subject(s):
Performance of contract — Validity of contract — Remedies for breach of contract

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

(p. 224) 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. 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.3

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 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.4

(p. 225) I.  False Statement, Act, or Omission

18.04  Fraud can be perpetrated by positive or negative acts.5 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;6 or more specifically in the sale of a second-hand vehicle, the mileage counter might be turned back;7 in the sale of a business, the production of false documents to create false representation exaggerating the value of a clientele;8 the adoption of a false identity or the use of fake documents.9 Furthermore the mere act of entering into a contract to purchase goods is an implied representation of an intention or ability to pay for them10 and the selling of goods represents that the property exists and has value.11 The use of a credit card represents that the user has the authority to use it.12 There are too many others to list.

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.13 In such circumstances it is necessary to give consideration to what is expected and generally accepted in the trade or (p. 226) 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.14 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.15 They may however imply that the maker of such statements has certain knowledge or holds certain facts to be true.16 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.17 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.18

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.19

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.20 For example, buyers should not generally be able to claim for fraud by a 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.21

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.22 The decisive question is therefore whether a duty to inform exists. In some instances the duty will be one imposed by statute.23 The circumstances where no obvious information duty exists, but where good faith may demand disclosure, are more difficult.

(p. 227) 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.24 Importantly though this also means correcting any information which has subsequently changed.25

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.26 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.27 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 practices28 or the degree of difficulty for one party to obtain relevant information that the other party already possesses.29

18.13  In the international context the uniform projects contain specific rules dealing with culpa in contrahendo.30 Furthermore the DCFR establishes detailed pre-contractual duties for information.31

18.14  As discussed further below,32 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.33

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.34 Other examples include the failure to advise goods are affected by intellectual property rights of third parties where the buyer has inquired about (p. 228) 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;35 the failure of a seller to disclose to a buyer of a business limiting contract terms in the distribution agreement transferred with the business;36 or a failure by the seller to inform the buyer about the gestation of the mare sold.37 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.38 However, on this issue the French Cour de cassation in a case concerning photographs taken by famous ninetenth-century photographer, Edouard Baldus, found that there was no obligation on the buyer to inform the seller of the value of the goods.39 In that instance the price paid by the buyer was very low compared to the real value of the photographs.

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.40 A misrepresentation made innocently or in good faith will not be fraudulent but may give rise to a relevant mistake.

18.17  What amounts to ‘knowing’ differs slightly amongst the legal systems. In the famous common law tort case of Derry v Peek 41 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’.42 Recklessness is different to negligence, it is something more serious.43 In this regard it is similar to the standard provided in systems which (p. 229) follow the Germanic approach.44 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.45

2.  With Intent to Deceive

18.18  The party engaging in the fraud must do so with the intent to deceive the other party.46 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.47

18.19  Fraud is generally not dependent on either intention to gain profit or cause harm.48 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.49

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.50 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,51 or should have been aware of, the fraudulent misrepresentation.52 In some jurisdictions there is an (p. 230) 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.53

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.54 The Official Comment to PECL Article 4:111 indicates that foregone opportunities would amount to reliance in this context.55 The ability to rescind the contract where there has not been reliance is not generally recognized by domestic legal systems.56

III.  Influenced Consent to Contract

18.22  The fraudulent statement, act, or omission must have influenced the other party’s consent to contract.57 It is widely accepted amongst many jurisdictions that if the false statement or act was ignored by the party purporting to have been defrauded or if that party was aware of the untruth,58 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.59 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.60

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.61 (p. 231) Other domestic jurisdictions as well as the uniform projects, either no longer—or never did62—recognize a difference and consequently permit rescission in any case.63

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.64 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.65

IV.  Relationship to Mistake

18.25  Mistake in its simplest, non-legal, sense is a necessary element of fraud.66 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 expressly reflected in some, predominantly, Ibero-American jurisdictions where fraud is said to be limited to cases of mistake.67 It is clear that fraud makes a mistake legally relevant, in circumstances where the mistake would not have otherwise been so.68

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.69 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,70 is the (p. 232) 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,71 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.72

1.  Meaning of Illegitimate

18.28  Not every threat will be illegitimate.73 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;74 the threat to declare a debtor’s bankruptcy unless a debt it paid;75 the threat to sue even where there are doubts as to the existence of the claim would not be illegitimate pressure;76 the threat by a seller to a buyer to withhold future credit;77 and the threat to pursue criminal charges unless the other party provides compensation for damages caused.78 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.79 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 (p. 233) information.80 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.81 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.82

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.83 Where neither the threat nor purpose is independently illegal they may however become illegal when seen in combination.84 It is therefore not so much the threat that requires assessment, as that can be lawful, but rather the nature of the demand.85

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. When the threat is to harm a third person the closeness of the relationship may become relevant.86 Threats to property are also considered illegitimate in most jurisdictions.87

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,88 is recognized throughout common law systems,89 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.90

(p. 234) 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-contractrant participated in, was aware of, or should not have been unaware of, the threat.91 A small number of jurisdictions modify the general rule by examining the gravity of the duress92 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.93

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.94

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.95 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.96 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.97

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 uniform98) law interpretations of gross disparity.99

Footnotes:

1  See paras 19.06 et seq.

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

3  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.

4  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 931 CC; Aus The Laws of Australia/Vout, para 35.2.200; Aut § 874 CC; Bel Art 1116 CC; Bhr Art 89 CC; 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 1116 CC; Geo Art 81 CC; Hkg Fisher/Greenwood, p 193 (fraudulent misrepresentation); Hun Art 210 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; 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); Per Art 210 CC; Png Tennant, para 69; Qat Art 134(1) CC; Rom Art 960 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.

5  Art 4:107(2) PECL; Art 3.2.5 PICC; Vogenauer/Kleinheisterkamp/du Plessis, Art 3.8 (2004), para 10; Common Law (UK) Chitty on Contracts, paras 6-006, 6-015; Arg Arts 931, 933 CC refer to positive fraud and negative fraud respectively, Alterini, p 366; Aus The Laws of Australia/Vout, para 35.2.410; Che Schwenzer, para 38.03; Cri Brenes Cordoba/Ramírez/Trejos, p 81; 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; Per Art 212 CC; Phl Art 1339 CC; Pry Art 290 CC; Ukr Art 230 CC; Zaf van Huyssteen, para 236.

6  Vogenauer/Kleinheisterkamp/du Plessis, Art 3.8 (2004) 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’ (note this is now Art 3.2.5 in PICC 2010); Afg Art 573 CC.

7  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.

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

10  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.

11  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.

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

13  General Kramer/Probst, § 178; PICC Vogenauer/Kleinheisterkamp/du Plessis, Art 3.8 (2004), para 13; Common Law (Gbr) Dimmock v Hallett (1866) LR 2 Ch App 21, Chitty on Contracts, para 6-006; Cri Brenes Cordoba/Ramírez/Trejos, p 84; Gtm Aguilar Guerra, pp 264, 265; 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(2) CC; Nzl Burrows/Finn/Todd, p 307; Phl Art 1340 CC.

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

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

19  Art 4.107(1) PECL; Art 3.2.5 PICC; Vogenauer/Kleinheisterkamp/du Plessis, Art 3.8 (2004) PICC, 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, para 38.03; Deu Palandt/Ellenberger, § 123, para 5; Dza Art 86 CC; Egy Art 125(2) CC; Fra Art 1116 CC; Geo Art 81 CC; Hrv Art 284 CO; Irq Art 123 CC; Ita Art 1439; Jor Art 144 CC; Kwt Art 152 CC; Lby Art 125(2) CC; Mda Art 231 CC; Prt Art 253 CC; Qat Art 134(2) CC; Rom Art 960 CC; Syr Art 126 CC; Tkm Art 106 CC; Ukr Art 230 CC.

20  Vogenauer/Kleinheisterkamp/du Plessis, Art 3.8 (2004) PICC, para 14; Ind Shrisht Dhawan (Smt) v Shaw Brothers MANU/SC/0295/1992.

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

22  Che Schwenzer, para 38.06; Deu MünchKommBGB/Kramer, § 123, para 16, Leipold, § 19, para 6; Dza Filaly, Al Nazria Al Ama Al Aqd, p 128; Fra 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); Kwt Abdel Reda/Al Nakas, pp 89–90; Sau Rayner, pp 215, 229.

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

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

27  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.

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

29  Art 4:107(3) PECL; see also Vogenauer/Kleinheisterkamp/du Plessis, Art 3.8 (2004) PICC, paras 19, 21.

30  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.

31  Arts II.-3:101–II.-3:109 DCFR.

32  See paras 18.22 et seq below.

33  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; 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; Qat Art 134(2) CC; Syr Art 126 CC; Tha Art 162 CCC; Ukr Art 230 CC.

35  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).

36  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).

37  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).

38  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).

39  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; Civ 3, 17 January 2007, no 06-10.442.

40  Art 4.107 PECL; Art 3.2.5 PICC; Vogenauer/Kleinheisterkamp/du Plessis, Art 3.8 (2004), para 6; Common Law (UK) Chitty on Contracts, para 6-010; Afg Art 570 CC; Are Art 185 CC; Arg Art 931 CC; 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 1116 CC; Geo Art 81 CC; Hun Art 210 CC; Ind s 17 Contract Act (1872); Shrisht Dhawan (Smt) v Shaw Brothers MANU/SC/0295/1992; 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 228 CC; Mrt Art 72 CO; Nld Art 3:44 CC; Per Art 210 CC; Png Tennant, para 69; Qat Art 134(1) CC; Rom Art 960 CC; 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.

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

42  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.

43  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.

44  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.

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

46  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 931 CC; Aut Koziol et al/Bollenberger, § 870, para 1; Bel Art 1116 CC; Bhr Art 89 CC; Can Waddams, para 419; Che Art 28 CO, Schwenzer, 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 1116 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 Art 210 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; 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; Per Art 210 CC; Png Tennant, para 69; Qat Art 134(1) CC; Rom Art 960 CC, Dincă, para 1176; 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  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.

49  See for the PICC the Official Comment 2 on Art 3.2.5 PICC; Vogenauer/Kleinheisterkamp/du Plessis, Art 3.8 (2004), para 9.

50  General Beale et al, p 437; Afg Art 570 CC; Aut Koziol et al/Bollenberger, § 870, para 1; Bhr Art 89 CC; Che Schwenzer, 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 Art 1116 CC, Cass Com, 27 November 2001, no 99-17.568, Contrats, conc, consom 2002, comm 45, obs L Leveneur; Ind s 17 Contract Act (1872); 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); Qat Art 134(1) CC; Syr Art 126 CC; Tun Art 56 CO; Yem Art 179 CC.

51  Aut § 875 CC; Che Art 28 CO; Schwenzer, para 38.11; Deu § 123(2) CC, Palandt/Ellenberger, § 123, para 12; Egy Art 126 CC; Hun Art 210 CC; Ita Art 1432 CC; Jpn Art 96 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 Dincă, para 175; Tkm Art 108 CC; Tun Art 56 CO; Ven Art 1154 CC.

52  Art 4:111(2) PECL; Art 3.2.8(2) PICC; Vogenauer/Kleinheisterkamp/du Plessis, Art 3.8 (2004), para 29; Scandinavia s 29 Contracts Acts; Afg Art 574 CC; Are Art 190 CC; Aut § 875 CC; Bhr Art 91 CC; Che Art 28 CO; Deu § 123(2) CC; Dza Art 87 CC; Hun Art 210 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; Syr Art 127 CC; USA Restatement (2d) of Contracts, § 164(2); Yem Art 180 CC.

53  Ita Art 1439 CC; Lbn Art 209 CO; Mar Art 52 CO; Prt Art 254 CC; Tun Art 56 CO.

54  Art 3.2.8(2) PICC; Vogenauer/Kleinheisterkamp/du Plessis, Art 3.11 (2004), para 19; Art 4:111(2) PECL; Antoniolli/Veneziano/Iamiceli, p 227.

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

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

57  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; 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, 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; Geo Art 81 CC; Gtm Art 1262 CC, Aguilar Guerra, p 266; 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; Qat Art 134(1) CC; Rom Dincă, para 177; Syr Art 126 CC; Tun Art 56 CO; Yem Art 179 CC; Zaf van Huyssteen, para 239.

58  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  Vogenauer/Kleinheisterkamp/du Plessis, Art 3.8 (2004) PICC, 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.

61  Arg Art 934 CC; Alterini, p 366; Bel Art 116 CC; Bol Art 482 CC; Bra Art 93 CC; Chl Art 1458 CC; Cri Brenes Cordoba/Ramírez/Trejos, p 83; Ecu Art 1501 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 Aguilar Guerra, p 267; 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.

62  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.

63  Vogenauer/Kleinheisterkamp/du Plessis, Art 3.8 (2004) PICC, para 24 preferring this interpretation; PECL Antoniolli/Veneziano/Iamiceli, p 207 suggesting it can be reasonably inferred.

64  See eg Vogenauer/Kleinheisterkamp/du Plessis, Art 3.8 (2004) PICC, para 25.

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

66  However see PICC Vogenauer/Kleinheisterkamp/du Plessis, Art 3.8 (2004), para 2 noting that during the drafting of the PICC there was support for the view that fraud could occur without mistake, however suggesting that the need for mistake is preferable; see also Kramer/Probst, §§ 11-159–11-161.

67  Bol Art 482 CC; Cub Art 71 CC; Gtm Art 1261 CC, Aguilar Guerra, p 263; Mex Art 1815 CC, León Tovar, p 81; Per Art 210 CC; Prt Art 253 CC. But see also Chn Zhang, p 174.

68  See eg General Beale et al, p 434; Aut Koziol et al/Bollenberger, § 870, para 1; Che Art 28 CO; Deu MünchKommBGB/Kramer § 123, para 13; Fra Civ 3e, 21 February 2001: where mistake has been caused by fraud by omission, mistake is always deemed excusable; USA Williston, § 69:16.

69  Art 3.2.6 PICC; Art 4:108 PECL; Common Law (UK) Chitty on Contracts, para 7-003; Are Art 176 CC; Arg Art 936 CC; Aus The Laws of Australia/Vout, para 35.7.10; Aut § 870 CC; Bel Art 1109 CC; Bhr Art 94 CC; Bol Art 473 CC; Bra Art 98 CC; Che Arts 29, 30 CO; Chn Zhang, p 175; Chl Art 1451 CC; Deu § 123 CC; Dza Art 88 CC, Filaly, Al Nazria Al Ama Lil Aqd, p 134; Egy Art 127 CC, Al Sanhuri/Al Maraghy, p 128; Esp Art 1265 CC; Eth Art 1706 CC; Fra Art 1109 CC; Geo Art 85 CC; Grc Art 150 CC; Hun Art 210 CC; Irq Amin, p 125; Ita Art 1427 CC; Kwt Art 156(1) CC, Abdel Reda/Al Nakas, p 93; Lby Art 127 CC; Lux Art 1109 CC; Lva Art 1463 CC; Mar Art 46 CO; Mda Art 232 CC; Mex Art 1648 CC; Nga Yakubu, Law of Contract, p 213; Nld Art 3:44 CC; Nzl Burrows/Finn/Todd, p 342; Per Art 214 CC; Phl Art 1335 CC; Qat Art 137(1) CC; Syr Art 128 CC; Tkm Art 110 CC; Tun Art 50 CO; USA Williston, § 71:4; Ven Art 1146 CC; Zaf van Huyssteen, para 243.

70  Common Law Pao On v Lau Yiu Long [1980] AC 614, [1979] 3 ALL ER 65, PC (on appeal from Hkg); Mys Mohn Fariq Subramaniam v Naza Motor Trading Sdn Bhd [1997] 3 CLJ Supp 249; Nzl Pharmacy Care Systems v Attorney General (2004) 2 NZCCLR 187 and see also Burrows/Finn/Todd, p 348 describing re-emergence of theory as unfortunate; Sgp Third World Development v Atang Latief [1990] SLR 20 at 27, Lee Kuan Yew v Chee Soon Juan [2003] 3 SLR 8, Goh Chok Tong v Chee Soon Juan [2003] 3 SLR, Halsbury’s Laws of Singapore/Phang/Hamid, para 80.127. But for contrary see Common Law (Gbr) DPP of Northern Ireland v Lynch [1975] 1 AC 653, Chitty on Contracts, para 7-004; Aus Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40, Deemcope Pty Ltd v Cantown Pty Ltd [1995] 2 VR 44. See also Aus Carter, Contracts, para 23-020 citing case references and noting that the victim of duress does have the ability to choose not to enter into the contract, and seek a legal remedy instead.