The common error in nomine

Table of Contents

1 Introduction

2 German Law
2.1 Requirements for a valid contract
2.2 The method of the interpretation of a contract (Auslegung) according to §§ 133, 157 BGB
2.3 The distinction between the method of interpretation (§§ 133, 157 BGB) and recission (§§ 142 et seq, 119 BGB) as a remedy
2.4 Falsa demonstratio non nocet

3 English law
3.1 Requirements for a valid contract
3.2 The method of interpretation of a contract
3.3 The distinction between the method of interpretation and recission

4 The common identical error as to the content of the declaration (error in nomine) in German and English law

5 The functionalist test of similar or different results in German and English Law
5.1 German law: The Haakjöringsköd case
5.2 English law’s solution to similar cases
5.3 Conclusion from both national approaches in practice

6 Conclusion

Bibliography

1 Introduction

In this paper it will be made an effort to compare the German and English position in the situation where two parties to a contract have actually reached consensus but gave their agreement an outwards wrong expression by using a wrong name for the subject-matter of contract.

In a first step, the general positions in both jurisdictions will be presented and afterwards, as a practical application of the functionalist approach, it will be sought to determine if the English law would have reached the same outcome if it would have to decide a prominent German court decision by reference to comparable English cases.

2 German Law

2.1 Requirements for a valid contract

German law when determining if there is a valid contract proceeds in several delimitable steps.

In a first step, there must be two declarations of will (Willenserklärungen) from the two contracting parties. The parties must have full legal capacity, must have chosen (if necessary) the right form and must have avoided illegal purposes. The BGB provides no definition of “declaration of will”. The Code does, however, contain numerous provisions which regulate various aspects of the central concept^[1]. The very term “declaration of will” indicates, however, that apart from an internal or subjective element, i.e. the will to bring about a legal consequence, it comprises also the declaration, i.e. the external manifestation of the legal consequences desired by the declarer^[2].

If there are two declarations which are congruent and refer to each other, the content of the declarations is determined in a next step. This happens by using the interpretative rules of §§ 133, 157 BGB as well as some non-codified principles^[3].

In a last step only it is looked upon the question if this interpretation makes sense and matches the parties’ will.

Now, it will be tried to present those mechanisms a little bit more in depth before working the way to the core of the problem.

2.2 The method of the interpretation of a contract (Auslegung) according to §§ 133, 157 BGB

Given that there are two declarations which match the requirements set up in the BGB, the provisions of §§ 133 and 157 BGB read together are the most important in German Civil law that regulate the interpretation of contracts^[4].

§ 133 BGB, by stating that “…the real intention is to be ascertained, and the literal sense of what is expressed is not to be followed”, adopts a subjective focus on the determination of the parties’ will. § 133 BGB when read alone implies that German law prefers an interpretation which refers to the true will of the declaring party. This fits the concept of a natural interpretation (natürliche Auslegung) from the viewpoint of the recipient of the declaration. But when read in combination with § 157 BGB which requires an interpretation to take into account “good faith, having regard to the business custom” and therefore emphasizes objective standards^[5], it becomes clear that neither an entirely subjective, nor a completely objective view is wanted by the legislator.

Thus, the first assumption after a first brief look at § 133 BGB is not always the right one: With regard to the circumstances of the case and the state of interests, also a normative interpretation (normative Auslegung) can be appropriate. Although the normative interpretation does not explicitly flow from the wording of neither § 133 BGB nor § 157 BGB, the general consideration of legal protection for bona fide acts and the §§ 119 et seq BGB require such an interpretation in certain situations as the §§ 119 et seq BGB which contain the rules about different kinds of error and mistake would be redundant if the true will would all the time be the only relevant criterion^[6].

Thus, the German rules how a contract has to be interpreted do not stick to the will theory solely, as § 157 BGB shows by its inclusion of good faith as well as regard to the business custom and thus objective standards.

The German system tries to find a balance between subjective and objective criteria and therefore will theory^[7] and declaration theory^[8] to be prepared for all possible situations that can occur. Sometimes, the objective element is given more emphasize, sometimes the subjective one.

As long as there is an agreement, the fact that the objective sense of the contract differs does not matter^[9]. This is a fair solution as none of the parties is placed at a disadvantage because the true will of both parties counts^[10].

The principle of falsa demonstratio non nocet (“a false description does not vitiate if the thing or person has been sufficiently described”)^[11] then applies. It is not even necessary that the recipient of the declaration has realized the true will of the declaring party^[12].

2.3 The distinction between the method of interpretation (§§ 133, 157 BGB) and recission (§§ 142 et seq, 119 BGB) as a remedy

In order to allow recission due to error in terms of §§ 142 et seq, 119 BGB, an incongruity between a party’s will and declaration of intention is required. German law, in the scope if § 119 BGB knows at least three categories of mistakes: Mistake in the utterance (Erklärungsirrtum) and error as to the content of the declaration (Inhaltsirrtum) in § 119 I BGB and error about quality (Eigenschaftsirrtum) in § 119 II BGB^[13].

The legal sense of the declaration has to be determined first. Relevant in this context is the objective horizon of recipient (objektiver Empfängerhorizont)^[14]. As mentioned in the beginning, the contract therefore has to be interpreted first, before the question of voidability arises. If the declarations of intention can be aligned the will by interpretation already, recission is not possible as the recipient of the declaration does not deserve the special protection he would be entitled if recission would be possible^[15].

The falsa demonstratio cases constitute a particular case of interpretation: The declaration of intention which is necessary to be received (empfangsbedürftig) is interpreted even against its own wording in order not to make possibly any but thee truly wanted legal consequence if the recipient of the declaration has understood the declaration the right way^[16]. This means that also in cases of the falsa demonstratio § 119 BGB becomes redundant because the will is accentuated already by interpretation. As the German Federal Court of Justice (Bundesgerichtshof) in a 1994 judgment on falsa demonstratio non nocet has stated again^[17]: “When interpreting a contract, a mutual will overrides the wording of the contract and also every other possible interpretation”.

[...]

^[1] Brox Allgemeiner Teil des Bürgerlichen Gesetzbuchs 1998 48.

^[2] Larenz Allgemeiner Teil des Deutschen Bürgerlichen Rechts 1989 333

^[3] in German law, a lot of the interpretative rules were developed by case law and in certain doctrines, like the taking into account of prior negotiations, purpose and context.

^[4] Young English, French and German Comparative Law 1998 412.

^[5] see LG Hanau NJW 1979, 72. In this case, a school official ordered “25 ‘gros’ rolls of toilet paper”, mistakenly thinking that this meant large. In fact, it is a dated expression for twelve dozen, which means that the order, interpreted literally, would have covered 3600 rolls of toilet paper. The court ruled that the recipient of the order would reasonably have had to understand the order the way the school official had phrased it and entitled the scool official to rescind the resulting contract for the purchase of 3600 roles of toilet paper.

^[6] Palandt- Heinrichs § 133 7.

^[7] the will theory, according to Van der Merwe et al Contract 19 et seq, basically says that a contractant is legally bound to his contract because, and in so far as, there is an actual meeting of minds.

^[8] the declaration theory, according to Van der Merwe et al Contrac t 34 et seq, regards the contractants bound to their contract not on the basis of their subjective, coinciding intentions but on the basis of their objective, coinciding declarations of will.

^[9] Palandt- Heinrichs § 133 8.

^[10] Brox Allgemeiner Teil des BGB 207.

^[11] Infra 2.2.2.

^[12] BGH NJW 1984 721.

^[13] Brox Allgeimeiner Teil des BGB 132 et seq.

^[14] Medicus Bürgerliches Recht 45.

^[15] BGH NJW 1984 721; Brox Allgemeiner Teil des BGB 131.

^[16] BGH NJW 1994 1528.

^[17] Ibid, headnote number 3.