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2021-06-08

The German law of contracts

Sometimes an agreement may be legal and may apparently contain all the elements of a valid contract and yet certain factors may in reality be present which render it void or voidable. A void contract is a nullity, and no rights can be acquired under it. A voidable contract is one which may be treated as ineffective by one of the parties, subject to certain conditions. Two such factors which have to be considered by the lawyer are mistake and misrepresentation.
This is the most difficult and controversial branch of the German law of contract. Where an operative (ie legally effective) mistake is established the result is that the contract is void. It will be appreciated that this is a very serious consequence since, amongst other things, third party rights may be jeopardized.
Thus, for instance, to anticipate, it will be seen that if a client in Germany obtains goods from a vendor by means of a fraudulent misrepresentation the contract is voidable by the creditor as long as the debtor has not parted with the goods to a bona fide purchaser; but, provided at least that the seller has not taken steps to set the contract aside, once he has done this the goods will become his, not the debtors.
If on the other hand, whether induced by fraud or not, the creditor can prove that he contracted under some mistake which the law treats as operative, the contract being void, he can give no title to the purchaser - with the unhappy result that, however innocent he is, the German lawyer will have a claim in conversion against him. Such a state of affairs, threatening (as it may) the security of completed transactions, is not therefore easily to be inferred and it will be seen that in consequence the ambit of operative mistake is restricted. Two points need notice at the start. First, in order to be legally operative a mistake must be as to some material or fundamental matter going to the essence of the contract. If a party makes a mistake as to some minor matter the German law will not heed his complaint: for instance if a client in Germany buys a cow under the mistaken impression that she answers to the name of 'Ella' and it turns out that her name is really 'Dana' the customer is not entitled to force the vendor to take her back; that is, of course, provided that the mistake is only in the name and not as to the identity of the delivered goods.
In the second place, people who allege that they have contracted under the influence of a mistake must necessarily be judged rather by their actions than by their innermost thoughts: thus, if whatever a lawyer's real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him.
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