The law and economics of mistake in European Sales Law

This article forms part of a special edition of the Common Market Law Review.

Publishers Abstract:
Contract law distinguishes between at least four types of mistake situations: unilateral mistake, mutual mistake, non-disclosure, and fraud. The Common European Sales Law (CESL) differentiates between "Mistake" and "Fraud" in two separate articles. Under Article 48 CESL (titled "Mistake"), a mistaken party may avoid the contract for both unilateral fundamental mistake and mutual fundamental mistake. Under Article 49 CESL (titled "Fraud"), a mistaken party may avoid the contract even if the mistake is not fundamental, as long as the conclusion of the contract was induced by either active misrepresentation or non-disclosure made by the other party.

This article proceeds as follows. Section 2 analyses the unilateral mistake and non-disclosure doctrines. Section 3 discusses the first three inconsistencies between efficiency and the CESL described above, all of which relate to unilateral mistake, non-disclosure, and fraud doctrines. Section 4 analyses the mutual mistake doctrine and explains why the CESL's concept of the doctrine is incompatible with efficiency considerations. The conclusion at Section 5 wraps up the discussion.