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Tuesday, May 24th 2022

The ACP Legal Association

  • OHADAC and ACP Legal

    The partisans of this project, called OHADAC (Organisation for the Harmonisation of Business Law in the Caribbean), decided to meet within the framework of the association ACP Legal, to help interested Caribbean States to implement the project.

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  • OHADAC in brief

    This brochure has been published by the ACP Legal Association.

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OHADAC PRINCIPLES ON INTERNATIONAL COMMERCIAL CONTRACTS

Article 3.4.1

Defects of consent

The defects of consent are mistake, fraud, threat and undue influence.

Caribbean legal systems converge in the fact that, under some circumstances, the contract may be avoided when any one of the parties has expressed its consent defectively. According to the proposed classification, mistake, fraud, threat and undue influence are defects of consent. The defect categories proposed are based on the same criteria of neutrality as all the provisions that govern these Principles. These defect categories mentioned above are aimed at creating a space that is large enough to embrace current doctrines and institutions in Caribbean legal systems which pursue similar purposes.

The classification adopted brings together the significant contractual situations related to defects of consent in all Caribbean legal systems. With this grouping and this legal comparison, the Principles claim not only to contribute to knowledge and clarification about the regulations on defects of consent in Caribbean legal systems as well as to verify and propose the possible points of convergence as against the harmonising view in a multicultural framework.

The OHADAC Principles follow the classification of defects of consent which include those found in the traditional codes, as well as undue influence characteristic in English equity law to the defects usually envisaged in the civil codes of the 19th century. The concept of undue influence derived from Anglo-American law has generally been adopted in different ways in European and international texts on contract law harmonisation. Therefore, this classification is related to that followed in other legal texts, which also have to harmonise different institutions in order to propose a useful legal framework for both common law and civil law cultures, such as the UP, the PECL, the DCFR or the CESL.

While UP refer to error, fraud, threat and gross disparity as causes of contract avoidance (Articles 3.2.1 a 3.2.7), under a general chapter on validity, PECL deals with mistake (Article 4:103), fraud (Article 4:107), threats (Article 4:108), excessive benefit or unfair advantage (Article 4:109) and unfair terms that have not been individually negotiated (Article 4:110). DCFR lists as defects of consent: mistake (Article II-7:201), fraud (II-7:205, coercion or threats (Article II-7:206) and unfair exploitation (Article II-7:207); CESL also alludes to mistake (Article 48), fraud (Article 49), threats (Article 50) and unfair exploitation (Article 51).

The OHADAC Principles, all the while following the trend of the above-mentioned texts and referring to their treatment in the various Caribbean legal systems, have excluded defects such as personal duress or violence (vis absoluta) which, unlike others defects of consent, imply a complete absence of consent. The legal treatment of these situations will be found in Article 3.1.1.

The categories proposed do not present any particular difficulties in civil law systems. These usually consider mistake, duress, threat and fraud as defects of consent (Article 1.556 of the Honduran Civil Code; Article 1.116 of the Panamanian Civil Code; Article 1.217 of the Puerto Rican Civil Code). There is a wide array of expressions [Articles 2.455, 2.457 and 2.460 of the Nicaraguan Civil Code uses the term “fuerza” (force) as synonymous of “violence”, and “miedo grave” (serious fear) in cases of threat; Articles 69 and 71 of the Cuban Civil Code uses “fraude” (fraud) in cases where other legal systems commonly uses “dolo”; Articles 1.015 to 1.020 of the Costa Rican Civil Code list as defects of consent: “error” (mistake), “fuerza o miedo grave” (duress or serious fear), “intimidación” (threat) and “dolo” (fraud)]. Lastly, most legal systems frequently put together duress and threat under a generic concept of violence (Articles 1.109 and 1.112 of the French and Dominican Civil Code; Article 904 of the Haitian Civil Code; Articles 1.812 and 1.819 Mexican Civil Code; Articles 1.146 and 1.151 Venezuelan Civil Code) or force (Article 1.508 and Article 1.513 of the Colombian Civil Code). Given the general trend, it appears trivial to mention that the Cuban Civil Code has, formally at least, no rule on duress or threat, and that the Guatemalan Civil Code also includes simulation as a defect of consent (Article 1257), and Saint Lucian Civil Code (Article 925 Civil Code) includes injury together with error, fraud, violence and fear.

The classification adopted also draws on the Dutch system. According to Article 3:44 of the Dutch and Suriname Civil Code, a contract may be avoided once there is duress, fraud and undue influence. It may also be avoided for error under Article 6:228.

The proposed classification takes into consideration the existing divergence between common law and civil law in relation with the understanding of “error” and mistake, which are not perfectly equivalent. “Mistake” embraces different cases which fit in different defects in the light of the OHADAC Principles and of the analysis of legal effects of each kind of case.

English authors distinguish between common mistake, mutual mistake and unilateral mistake. In common mistake cases, the agreement of the parties is grounded in an error, so that generally these cases fit in the rule of Article 3.4.3. However, in view of their consequences (absolute nullity or non-existence of the contract), mistake related to a res extincta, which affects the object of the contract when it has perished without the parties knowledge before the contract's conclusion [Couturier v Hastie (1856), 5 HL Cas. 673; Strickland v Turner (1852), 155 ER 919], and mistake of the buyer who does not know that it already owns the object sold, or “res sua” mistake [Abraham v Oluwa (1944), 17 NLR 123], are considered in the OHADAC Principles as cases of initial impossibility (Article 3.1.3). The same treatment applies to the mutual mistake, which is characterised by a misunderstanding between the parties who negotiate, each with a different thing or deed in mind. Given that the consequence of these kinds of mistake in common law countries is the absolute nullity or non-existence of the contract [Raffles v Wichelhaus (1864), 2 H. & C. 906; Scriven Brothers & Co v Hindley & Co (1913), 3 KB 563], the OHADAC Principles characterises it as cases of non-existence of consent (Article 3.1.1). Finally, a unilateral mistake occurs where only one party makes a mistake, while the other does not but it is aware of the facts or should have been aware of it. In the light of its legal treatment in common law, this sort of mistake fits into the legal regime of mistake in Article 3.4.3.

The proposed characterisation facilitates the legal treatment of the common law institution named “misrepresentation” as cases of error or fraud as they are understood in civil law systems, depending on its characterisation as innocent or fraudulent misrepresentation. Both situations entitle the aggrieved party to avoid the contract (Article 1 Misrepresentation Act of 1967; Article 2 Bermuda Law Reform Act of 1977; Section 164 Restatement (Second) of Contracts).

In cases of documents erroneously signed or signed with a content quite different to that intended, common law also allows, although exceptionally, that contract was considered as void if they have been signed by blind or illiterate persons [decision of the High Court of Trinidad and Tobago in Seepersad v Mackhan (1982), No 533 of 1977 (Carilaw TT 1982 TT 27); decision of the Supreme Court of Bahamas in Gordon v Bowe (1988), Carilaw BS 1988 SC 75]. Although error in declaration is subject, under Article 3.4.4 of these Principles, to the same regime as mistake as a defect of consent, these cases are not included in the scope of application of this Section because of the special seriousness of circumstances causing the error and they must be considered as cases of absence of consent.

Violence and threat in civil law systems can be characterised as cases of duress in common law. Like in Caribbean legal systems inspired by French and Spanish law, duress exists where a party is victim of threats or intimidation (vis compulsiva).

In the Caribbean civil law systems, there is no specific defect similar to undue influence over one party in order to induce it to conclude a contract. If this happens, contract may be voided providing that the consent of the aggrieved party is not freely expressed because the other party has taken advantage of the situation of trust, necessity, dependence or psychological weakness of the party whose will has been wrongfully determined. Courts in equity have developed the doctrine of undue influence in order to give effect to defects in consent which do not fit in the category of “duress”. However, some cases of undue influence may be considered as threat, as mentioned below in the commentaries on Articles about threat and undue influence.

Commentary

Article 3.4.2

Mandatory character of the provisions

1. The provisions on fraud, threat and undue influence are mandatory.

2. The provisions on mistake shall be applicable unless the parties agree otherwise.

1. Meaning of the mandatory character of the rules governing defects of consent

In most legal systems within the OHADAC, the legal regime of defects of consent is not subject to the freedom of parties, that is to say that it is mandatory. Even if the mandatory character of the legal regime of fraud, threat and undue influence under these Principles reflects domestic solutions, it must be considered as distinct methodological parameters. It must be stressed that the OHADAC Principles are only proposals of contractual clauses that can be integrated into the contract and parties may decide not to use some of its provisions. Aside from this point, by affirming the mandatory character of the rules governing defects of consent, these Principles aim at ensuring the fairness of the contract by imposing these rules over clauses agreed upon by the parties. Given that the aim of regime of defective consent intends to guarantee a declaration free and non-vitiated consent, excluding these provisions would be contrary to international public policy and basic contract morality. The application of the Principles therefore introduces a self-monitoring aspect into the contract which is fully consistent with its grounds of enforceability.

This is a self-monitoring system that is consistent with equivalent tools in all the Caribbean legal systems with respect to defects of consent. In this way, these Principles only serve as a reminder that Caribbean legal systems do not allow contract parties to limit or waive the application of the rules governing defect of consent by virtue of freedom of contract. Although this rule is expressed in some legal systems (e.g. Article 1.021 of the Costa Rican Civil Code; Article 1.822 of the Mexican Civil Code; Article 2.461 of the Nicaraguan Civil Code), the same principle may be easily inferred in any other legal system, given the scope of defects of consent in modern contract law. This mandatory character implies that the OHADAC Principles cannot prevent the application of domestic law applicable to the contract. Indeed, the mandatory regime of defects of consent is finally the one required by the law applicable to the contract by virtue of the parties' choice, in accordance with the recommendation made in the comments on the Preamble of these Principles. Failing that, this regime shall be imposed by the law applicable in the absence of choice under private international law rules. Consequently, the rules proposed in this Chapter do not intend to affect the mandatory application of domestic law, but to contribute to clarify and provide points of contact among Caribbean legal systems, at the same time observing the mandatory rules of domestic laws of the OHADAC countries.

2. Non-mandatory character of the legal regime on mistake

Although there is no legal statement to this effect, the analysis of Caribbean legal systems reveals that in this regional area, as in European systems, there is a non-mandatory legal regime for mistake as a defect of consent. Incidentally, there is only one legal system outside the sphere of OHADAC systems where the regime is mandatory (Article 218 of the Peruvian Civil Code). In compilations of contract law rules, the trend is also to assign a prescriptive character to the mistake regime [Article 3.1.4 UP; Article 4:118 (2) PECL; Article I-7:215 DCFR; Article 56 CESL].

The non-mandatory character of mistake in domestic laws generates two kinds of consequences. Firstly, where parties choose the OHADAC Principles, its legal regime on mistake replaces that established in the applicable domestic law. This is a broad substitution that extends to the definition of the situations concerned by the significant mistake to determine the termination of the contract as well as the defining of the limits to rescind the contract as established in Article 3.4.3 of these Principles. Secondly, the non-mandatory character of the legal regime of mistake in the Principles themselves enables parties to agree the substitution or modification of that regime. Thus, parties may, for example, declare that they will not apply this regime, which will be replaced with a national regime more familiar for them. It is also possible that parties modify the proposed rules through specific clauses as those proposed in clauses recommended in the comment on Article 3.4.3.

Once the parties have opted for the Principles, but prefer, with respect to the legal regime of mistake as well as the defect of consent, to apply a different law, including a law that they have chosen based on recommendations, it is advisable to confirm this with the insertion of a special clause.

Commentary

Article 3.4.3

Mistake

1. A party may avoid the contract if, at the time the contract was concluded, it made a relevant mistake either of fact or of law, which determined its consent and if:

  1. the other party caused the mistake or made the mistake possible due to its silence contrary to legal duties to inform; or
  2. the other party made the same mistake; or
  3. the other party knew or ought to have known of the mistake, and it was contrary to reasonable commercial standards of fair dealing to leave the mistaken party in error.
  4. 2. The mistake is relevant if it was of such importance that a reasonable person in the same situation as the party would not have concluded it.

    3. However, a party may not avoid the contract if:

  5. it was grossly negligent in committing the mistake (inexcusable mistake); or
  6. the mistake relates to a matter in regard to which the risk of mistake was assumed or, having regard to the circumstances, should be borne by the mistaken party.

1. Scope of the legal regime of mistake

The purpose of this rule is to offer parties a legal regime of mistake able to adapt to the existing legal tradition in the Caribbean, to incorporate the most advanced developments concerning this legal regime and to include the specific requirements of commercial contracts liable to apply to these Principles.

Mistake as a defect of consent is well-known in civil law systems (Articles 1.509 to 1.512 of the Colombian Civil Code and Article 900 of the Colombian Commercial Code; Articles 1.015 to 1.016 of the Costa Rican Civil Code; Article 70 of the Cuban Civil Code; Article 1.110 of the French and Dominican Civil Code; Articles 1258 to 1260 of the Guatemalan Civil Code; Article 905 of the Haitian Civil Code; Article 1.557 of the Honduran Civil Code; Article 6:228 of the Dutch and Suriname Civil Code; Articles 1813 to 1.814 of the Mexican Civil Code; Articles 2.455 to 2.456 of the Nicaraguan Civil Code; Article 1.117 of the Panamanian Civil Code; Article 1218 of the Puerto Rican Civil Code; Articles 1.147 to 1.149 of the Venezuelan Civil Code). In common law systems there is a body of rules, particularly in case law, on mistake and misrepresentation [Article 2 Law Reform Misrepresentation and Frustrated Contracts of Bermuda; Sections 152 to 154 (mistake) and 159 to 165 (misrepresentation) Restatement (Second) of Contracts]. A legal regime of mistake also exists in countries characterised by a hybrid legal culture (Article 926 of the Saint Lucian Civil Code).

These provisions of these Principles aim at offering a very simple and modern regime of mistake compared to what exists in most Caribbean legal systems, but without contradicting local legal cultures. In the following analysis the most significant divergences and similarities between Caribbean legal systems will be emphasised. These will be worth knowing, not only when the applicable law is that of a Caribbean legal system, but also when a doubt or ambiguity arises during the application of these Principles has to be resolved through interpretation.

The rule in Article 3.4.3 must be applied in all contractual situations in which the mistake is a defect of consent. This includes most cases in civil law systems, which are grouped under the following typologies: “error as to the thing”, “error as to the substance”, “error as to the person” or “error of law”. In the OHADAC Principles, special attention must be paid to the error of sum or calculation. It must be governed by the same rule as the one applicable to the error in declaration included in Article 3.4.4. This will make it possible to avoid difficulties linked to the determination of the time when the error occurred, which could be the tile when the declaration was made or a time prior to the calculation or computing stage.

Given the special regime of common law systems, it is necessary to specify typical cases to which the rules in this provision will apply. As mentioned in the comments on Article 3.4.1, some kinds of mistake in common law are not included in the scope of Article 3.4.3, insofar as the fundamental legal problem is treated in other provisions of these Principles because of the very different legal consequences of these situations.

Although cases of common mistake are generally governed by the provisions of Article 3.4.3, two particular kinds of mistake are excluded. First, mistakes on res extincta that is, according to common law, where the object of the contract has perished at the time when the contract is made without the knowledge of the parties (Section 6 Sale of Goods Act of 1979; Section 8 Sale of Goods Act of Montserrat; Section 8 Sale of Goods Act of Antigua and Barbuda; Section 8 Sale of Goods Act of Bahamas; Section 8 Sale of Goods Act of Trinidad and Tobago; Section 8 Sale of Goods Act of Belize; Section 7.1 Sale of Goods Act of Jamaica), is considered in the OHADAC Principles as a case of initial impossibility (Article 3.1.3); mistake made by the buyer which does not know that it is already the owner of the goods sold, or “res sua” mistake [Abraham v Oluwa (1944), 17 NLR 123] is also excluded from the Article 3.4.3 and considered, on the same ground, as a case of initial impossibility subject to Article 3.1.3.

From this point of view, as mentioned in commentaries on Article 3.1.3, the OHADAC Principles propose a distinction between the legal regime of initial impossibility and that of mistake which is not clear enough in international texts on contract law harmonisation (Article 3.1.3. UP; Article 4:102 PECL; Article II-7:102 DCFR).

Neither is Article 3.4.3 applicable to cases where parties did not know or could not foresee the impossibility of the object or of the performance of the contract. Although this ignorance is considered in most Caribbean legal systems as a case of nullity due to mistake (e.g. Article 1.518 of the Colombian Civil Code; Articles 627 and 631 of the Costa Rican Civil Code; Articles 1.599 and 1.601 of the French and Dominican Civil Code; Article 1.564 of the Honduran Civil Code; Article 1.827 of the Mexican Civil Code; Article 1.832 of the Nicaraguan Civil Code; Article 1.123 of the Panamanian Civil Code; Article 1.224 of the Puerto Rican Civil Code), the OHADAC Principles have opted for subjecting these situations to the rules applicable to impossibility of performance. This uniform legal treatment avoids the need to determine between two different legal regimes, that of mistake and that of the effect of non-performance, for situations whose characterisation may often be difficult.

Example: A Colombian firm is the owner of a painting by Picasso and decides to sell it to a private Spanish museum, not knowing that the painting has been destroyed by fire some hours before the conclusion of the contract. If this case is characterised as mistake, the moment of the destruction must be determined, because depending on whether it is prior or subsequent to the conclusion of the contract, the case should be considered respectively as a mistake or as a case of impossibility of performance. The OHADAC Principles avoid such a difficulty and subject both cases to the same rules.

This Article is also not applicable to mutual mistakes, where there is a misunderstanding between the parties as to each other's intentions and they are at cross-purposes. Given that this kind of mistake in common law systems results in the absolute nullity or non-existence of the contract [Raffles v Wichelhaus (1864), 2 H. & C. 906; Scriven Brothers & Co v Hindley & Co. (1913) 3 KB 563], the Principles consider cases of mutual mistake as cases of absolute lack of consent (Article 3.1.1).

This Article is applicable to cases of unilateral mistake, where only one party is mistaken, while the other party is aware or ought to be aware of the real facts. It is also applicable to many cases characterised in common law systems as innocent or negligent misrepresentation, where the mistake is induced by the other party but there is no bad faith or fraud. As mentioned above, this Article is not applicable to cases of documents erroneously signed or signed with a content quite different to that intended, which in common law are considered as void if they have been signed by blind or illiterate persons [decision of the High Court of Trinidad and Tobago in Seepersad v Mackhan (1982), No 533 of 1977 (Carilaw TT 1982 TT 27); decision of the Supreme Court of Bahamas in Gordon v Bowe (1988), No 346 of 1975 (Carilaw BS 1988 SC 75)].

The legal regime of mistake in the OHADAC Principles pivots around two elements. The first is the definition of relevant mistake that empowers a party to avoid the contract. A relevant mistake must accomplish two conditions. It must always be an essential mistake and must be accompanied by at least one of the following circumstances: the mistake has been caused by the other party; it is a common mistake; the other party knew or ought to have known the mistake. The second element to take into consideration refers to circumstances which limit the right to avoid the contract: amongst them, the fact that the mistake is due to negligence of the aggrieved party (inexcusable mistake); or the fact that the risk of mistake had been assumed by the aggrieved party or this party ought to bear that risk.

2. Relevant mistake

The application of the legal regime of mistake presupposes the existence of a relevant mistake. A mistake is considered as relevant where if it did not exist the contract would not have been concluded. The limitation envisaged in the Principles in relation with relevant mistakes is in accord with civil law systems, where such an approach is more or less present (Article 1.511.2º of the Colombian Civil Code; Article 1.015 of the Costa Rican Civil Code; Article 73 of the Cuban Civil Code; Article 1.110 of the Dominican and French Civil Code; Article 1258 of the Guatemalan Civil Code; art, 905 of the Haitian Civil Code; Article 6:228 of the Dutch and Suriname Civil Code; Article 1.557 of the Honduran Civil Code; Article 1.813 of the Mexican Civil Code; Articles 2.462 y 2.463 of the Nicaraguan Civil Code; Article 1.117 of the Panamanian Civil Code; Article 1.218 of the Puerto Rican Civil Code; Articles 1.147 and 1.148 of the Venezuelan Civil Code). This trend is also palpable in Article 40 of the Proposals for Reform of the French law on obligations of 2013.

In common law systems, the notion of common mistake only includes mistakes on fundamental facts (fundamental mistake) or on basic aspects of the contract, without which parties cannot reach an agreement [Bell v Lever Brothers Ltd (1932), AC 161, 206; Galloway v Galloway (1914), 30 TLR, 531). Likewise, under U.S.A. law a non-fraudulent misrepresentation leads to contract avoidance only when it is fundamental (Section 162.2 Restatement (Second) of Contracts).

The same approach is found in international texts on contract harmonisation, which tend to restrict the relevance of the mistake to cases where it has proved decisive in the conclusion of the contract (Article 3.2.1 UP; Article 4:103 PECL; Article 48.1 CESL; Article II-7:201 DCFR).

The displacement of the focus of the mistake from the object of the error to its fundamental character makes possible to streamline and simplify this legal regime, so that traditional typological distinctions on the object of the mistake are no longer pertinent (error in corpore, in persona, in negotio or in substantia), although because the French (Article 1.110 of the French and Dominican Civil Code) and Spanish influence (Articles 1.266 and 1.267 of the Spanish Civil Code) they still survive in most Caribbean civil codes (Articles 1.510-1.512 of the Colombian Civil Code; Article 69 of the Cuban Civil Code; Articles 1.259 and 1.260 of the Guatemalan Civil Code; Article 1.557 of the Honduran Civil Code; Articles 2.455 and 2.467 Nicaraguan Civil Code; Article 1.117 of the Panamanian Civil Code).

The proposed rule only preserves the distinction between mistakes of fact and mistakes at law, the purpose of which is to dispel doubts about the possibility of an error on legal rules. Amongst Caribbean legal systems, only Mexico in Article 1.813 Mexican Civil Code such a simpler distinction is evident. Apart from that, it is also envisaged in international texts on contract law harmonisation, which generally admit any relevance of mistake of facts or of law which are both equally treated (Article 3.2.1 UP; Article 4:103 PECL; Article II-7:201 DCFR; Article 48.1 CESL). The same consideration is found in Article 39 of the Proposals for Reform of the French law on obligations of 2013.

It must be stressed that some Caribbean legal systems have solutions that do not fall within the scope of mistakes at law (e.g. Article 1.509 of the Colombian Civil Code). Given the significant legal inequality liable to be generated between the parties to the contract, these Principles provide that the parties can include a specific clause about their intention to restrict the scope of mistake of law. This may be made by adding a specific clause to the terms mentioned below.

The Principles give an objective consideration of the relevance of the mistake, based on the way a reasonable person situated in the same place and under the same circumstances as the parties making the mistake would have acted. Taking in account the requirements of international trade, the Principles opt for a mere objective perspective according to trade relations, where there is no room for subjective considerations. Then the elements that can determine the relevance of mistake are those established by the trade itself. For example, in trade of works of art the authenticity of a painting, particularly if is attributed to a famous painter, is relevant. If the buyer believed it was acquiring a Picasso but the painting is not really from this artist, this is a relevant mistake under the OHADAC Principles, insofar as a reasonable person, in the same situation, would not have concluded the contract.

Far from being innovative, the option envisaged epitomises the development in most Caribbean legal systems, where subjective approaches (Article 73 of the Cuban Civil Code; Article 1.813 of the Mexican Civil Code) have given way to case law interpretations which pay more attention to trade requirements. This is also the case of French law.

This development also supports the option of the Principles, grounded therefore on two pillars: a remarkable case law evolution and an approach towards trade requirements. The proposed rule has the advantage of being in accord with the interests of international trade.

Moreover, the rule is similar to that in Article 3.2.2 (1) UP. Otherwise, PECL and CESL adopts as the focal point the knowledge by the party which has made the mistake of the fact that the party making the mistake would have not concluded the contract if it had known about the mistake.

3. Induced mistake

The existence of a relevant mistake is not sufficient to create a right to avoid the contract. This right is recognised, first, when the mistake has been induced by the other party. The induced mistake comprises two cases: on the one hand, it is possible that one party has unwittingly produced defective information; on the other hand, the mistake may be induced by the non-performance of a duty to inform. Although the Principles do not deal with this kind of contractual duties, they may be required in mandatory rules applicable to contract. Both cases deal with induced mistake without intention to mislead the other party, which implies misrepresentation (Article 3.4.6).

The importance given to induced mistakes is also shared by common law systems. In addition to the variations specific to the case law configuration of misrepresentation, the most common cases of wholly innocent or non-fraudulent misrepresentation occur where one party declares inexact facts and this information has determined the contract's conclusion, so that the right to avoid the contract is justified [Section 2 Law Reform (Misrepresentation and Frustrated Contracts) Act of Bermuda; Section 162 Restatement (Second) of Contracts].

The need for an induced mistake as a condition for the right to avoid the contract is also present in Dutch and Suriname law [paragraph 1 (a) Article 6:228 Civil Code]. There is however a limitation: the right of contract avoidance ceases to exist if the other party would have accepted to conclude the contract despite the erroneous information. This requirement is not so clear in civil law systems. Nevertheless, in practice, the excusable nature of the mistake may lead to similar results.

Moreover, the rule established in these Principles remains consistent with the solutions provided in international texts on contract law harmonisation [Article 3.2.2 UP; Article 4:103 (1) (a) (i) PECL; Article II-7:201 DCFR; Article 48.1 (b) (i) CESL].

4. Common mistake

The OHADAC Principles also permit a party to avoid the contract when a mistake is made by both parties. A similar rule exists in most international texts on contract law harmonisation [Article 3.2.2 (1) (a) UP; Article 4:103 PECL; Article II-7:201 (I) (b) (iv) DCFR; Article 48.1 (b) (iv) CESL). This rule is also known in all Caribbean legal traditions. In common law systems, the regime of common mistake in equity law has played an important role in granting the right to parties to avoid the contract, especially, taking into account the restrictive approach of assessing this option in common law cases. In a strict application of common law, the decisions rendered did not consider the contract to be void despite the existence of a common fundamental mistake [Bell v Lever Brothers Ltd (1932), AC 161; Leaf v International Galleries (1950), 1 All ER 693; Frederick E Rose Ltd v William H Pim Fur & Co Ltd (1953), 2 All ER 739]. On the contrary, in equity law cases the existence of common fundamental mistakes has justified the contract's avoidance [Solle v Butcher (1949), 2 All ER 1107; Galloway v Galloway (1914), 30 T.L.R. 531] and this approach is also represented in Caribbean case law [judgment of the Court of Appeal of Anguilla in Dammer v Wallace (1993), ECS (Anguilla) Civ App No. 1 of 1991 (Carilaw AI 1993 CA 3); decision of the Court of Appeal of Jamaica in Stuart v National Water Commission (1996) Civ App No. 3 1995 (Carilaw JM 1996 CA 31); Johnson v Wallace (1989), (Bahamas) 1 Carib Comm LR 49].

It must be stressed that this last approach has been strongly criticised by the English Court of Appeal, which has considered that the interpretation in the Solle v Butcher case, insofar as it opens the way to avoid the contract on the ground of a common mistake based on a basic assumption by all parties, could not be reconciled with the interpretation in Bell v Lever, and this undermined the security of the contract [Great Peace Shipping Ltd. Tsavrilis Salvage (International) Ltd (2002), 4 All ER 689].

The fact that it is currently not possible to know the influence of this restrictive interpretation of the common mistake on Caribbean judges seems a significant factor to be taken into account when choosing the configuration of mistake from the ones set out in the Principles.

Mistakes are also treated under similar conditions in Section 152.1 of the Restatement (Second) of Contracts. The common mistake is also considered as important in Dutch and Suriname law (paragraph 1 of Article 6:228 of the Civil Code), but only as a subject to complex and significant exceptions. In civil law systems there is no reference to common mistake as a requirement to avoid the contract. However, there is a trend to include the existence of a common mistake in the concept of relevant mistake.

Since the subjective reasons that lead parties to conclude a contract are not usually expressed and are therefore not affected by common mistakes, the rule on mistakes set out in these Principles does not attribute any value to mistakes resulting from these subjective reasons. This approach does not only correspond to the need for certainty in trade relations, but is also consistent with the various Caribbean legal systems. However, these Principles do not mean that no importance is attached to the reasons expressed or known by the parties when the contract is concluded. In this case, it will be a common mistake on the reasons or a recognisable mistake. If the buyer makes a mistake in valuing a painting that belonged to his ancestors, there is no error that is liable to allow the avoidance of the contract, because the subjective reasons are not relevant in this case. However, if the other party becomes aware or ought to be aware of the mistake because of the reasons expressed and known by said party, the reason takes on a causal relevance that leads to the recognition of the legal consequences of the mistake. Although legal provisions rules to mistake on the reasons are rare, Article 42 of the Proposals for Reform of the French law on obligations of 2013 has provided a similar rule.

5. Knowledge of the mistake and duty to inform

Like most recent texts on contract law harmonisation [Article 3.2.2 (1) (a) UP; Article 4:103 (1) (a) (ii) PECL; Article II-7:201 (1) (b) (ii) DCFR; Article 48 (1) (b) (iii) CESL], the OHADAC Principles recognise the right to avoid the contract due to relevant mistake where this is known or could be known by the other party. Apart from cases of induced and common mistake, where the mistake was not and could not be known by the other party there is no right to avoid the contract. The rule about the recognisable nature of the mistake implies an implicit duty to unmake the mistake. If a party were in a position to inform the other party of the mistake, but fails to do so, it must assume the consequences of the contract avoidance. While in cases of induced mistake there is a legal duty to inform, this is not the case here, although it might be required by trade practice, for instance.

In common law systems there are some precedents giving significance to unilateral mistake. Thus, this is the case if parties agree a sale of fruit under of a certain price per pound, when the other party knows that the offer intends to refer to a price per unit. According to trade practice in this branch of commerce, which corresponded to mode of conclusion of the negotiations, the contract was considered as void [Hartog v Colin and Shields (1939), 3 All ER 566; Webster v Cecil (1861), 54 ER 812]. The result of these rulings is that the declaration of nullity results from the fact that the other party that did not make the mistake knew or ought to have known about the other party's mistake.

Aside from cases where the mistake can be obvious, this rule poses the problem of knowing what degree of information must be disclosed. To determine this volume of information, contract law harmonisation international texts use diverse elements. While the CESL refers to duty to inform according to contractual good faith, the UP relates this duty with reasonable commercial criteria of contractual fair dealing. For its part, the PECL directly mention a silent attitude “contrary to good faith” while the DCFR also takes into account good faith and fair dealing. The OHADAC Principles also opt for a legal concept based on trade requirements, and therefore requires the taking into account of duties to inform resulting from “reasonable commercial standards of fair dealing”.

The OHADAC Principles acknowledge that these proposals are very innovative for operators used to Caribbean common law systems, where, apart from exceptional cases, the notions of mistake and misrepresentation do not include cases where the parties have concealed or simply have not mentioned relevant contractual circumstances. Under these systems, there is no duty to mutually inform about essential aspects of the contract. Indeed, pursuant to the caveat emptor, the seller is not obliged to reveal defects of immovable assets or goods sold [Keates v Lord Cadogan (1851), 138 ER 234; Smith v Hughes (1871), L.R. 6 Q.B. 597] and usually there is no relationship of trust between seller and buyer from which duty of inform could be inferred, so that the reluctance to inform cannot be considered as a fraud [Walters v Morgan (1861), LR 2 Ch App 21]. Silence is considered as misrepresentation only in exceptional cases, particularly in uberrimae fidei contracts such as insurance. In US law, silence and concealment of information are considered as misrepresentations in exceptional cases established in Section 161 Restatement (Second) of Contracts. Basically, this is to avoid that previous assertions do not lead to conclude that the contract has been vitiated by a mistake. The situation is different in civil law systems, where courts usually recognise mutual duty to inform at the time of concluding the contract, despite some limitations.

In the light of this diversity of approaches between common and civil law systems, parties that opt for a legal regime of mistake closer to common law traditions are advised to include a clause in their contract in the terms mentioned at the end of the comment of this article, the purpose of which is to reject contract avoidance if there is a mistake of which the other party knew or could have known, but had no legal duty to inform the other party.

6. Exceptions to the right to avoid the contract

Despite the existence of a relevant mistake accompanied by some of the circumstances mentioned in paragraph 1 (induced mistake, common mistake, known or recognisable mistake), the contract may not be avoided if the party that makes the mistake has not acted with required diligence or, in other words, it is an inexcusable mistake.

In civil law systems, avoidance of the contract is usually excluded if the mistake is inexcusable. The excusable nature of the mistake, as a necessary condition for contract avoidance, is rarely expressed in written law (an exceptional example is the Article 1.146 of the Venezuelan Civil Code). In French law, this condition was created by case law pursuant to the doctrine of mistake as a defect of consent. The condition however appears in Article 39 of the Proposals for Reform of the French law on obligations of 2013.

Under the doctrine of non-excusable mistake, each party must be informed and defend its own interests and cannot trust in the protection of the law or of judges in any circumstance. Each party, therefore, should be informed of the relevant aspects of the contract before its conclusion. Currently, there is an increasing unanimity in case law in the sense that inexcusable mistakes do not require a gross negligence: normal negligence is sufficient. In order to establish the inexcusable nature of a mistake, factors such as age, profession and professional experience are considered.

In common law systems, the notion of fault of the mistaken party plays the same role in avoiding the contract vitiated by mistake. The mistaken party's fault appears as a condition which prevents the power of avoidance, is considered both in court decisions in Caribbean countries [decision of the Court of Appeal of Anguilla in Dammer v Wallace (1993), ECS (Anguilla) Civ App No. 1 de 1991, Carilaw aI 1993 CA 3] and in USA law [Section 157 Restatement (Second) of Contracts]. In international texts on contract law harmonisation, serious fault of the mistaken party or inexcusable mistake are also set out as conditions that limit the possibility of avoiding the contract [Article 3.2.2. (2) (a); UP; Article 4:103 (2) (a) PECL; Article II-7:201 (2) (a) DCFR).

The OHADAC Principles establish a second exception to contract avoidance when the mistaken party has assumed or should bear the risk of the mistake. Thus, the OHADAC Principles align with most advanced legal treatments of mistake, which also inspire other international texts on contract law harmonisation [Article 3.2.2 (2) (b) UP; Article 4:103 (2) (b) PECL; Article II-7:201 (2) (b) DCFR; Article 48 (2) CESL]. This rule works if the mistake is considered as a problem of distribution of risks and that there are several criteria to be considered. The risk of the mistake may be attributed to the mistaken party by virtue of the agreements or according to trade usages. Other criteria, such as the capacity of the mistaken party (expert, obliged to inform, etc.), must be taken into account. The rule is expressly set out in Article 6:228 of the Dutch and Suriname Civil Code. There are also provisions in common law systems that meet these criteria (Section 154 of the Restatement (Second) of Contracts).

CLAUSES ON MISTAKE

Exclusion of mistake of law

“The parties are not entitled to avoid this contract or any of its clauses due to mistake of law.”

Discharge of the duty to inform

“The Parties renounce their right to avoid the contract or any of its clauses on the grounds of mistake as provided by sub-paragraph c) of paragraph 1 of article 3.4.3 of the OHADAC Principles on international commercial contracts which govern this contract.”

Commentary

Article 3.4.4

Error in expression or transmission

The mistake regime, mentioned in the previous article, is applicable to cases of error or inaccuracy in expression or transmission of a declaration, without prejudice to the rules related to interpretation contained in Chapter 4.

1. Application of the general legal regime of mistake

There is no special treatment of mistakes in expression is the OHADAC Principles; the applicable regime is therefore the same as in the previous. However, the legal regime of error in expression or transmission may be modified by the application of general rules on contract interpretation included in section 1 of Chapter 4 of these Principles.

The application of the general regime of mistake in expression or transmission does not correspond to the majority of Caribbean legal traditions, the legal basis of which, at least in the beginning, depend on the same voluntaristic concepts that established the legal systems. Therefore, civil law systems also distinguish between mistake as a defect of consent and error in declaration (error obstativo, error-obstacle). While mistakes empower a party to avoid the contract under some circumstances (e.g. relevant mistake, common mistake, inexcusable mistake), an error in declaration automatically makes the contract void or inexistent due to the lack of the will which is necessary to conclude the contract.

Development of legal systems, particularly through case law, reveals the ineffectiveness of preventing the recourse to exceptions against avoidance contained in the defect of consent mistake regime. Aside from the fact that the results may turn out to be obviously unfair, the diversity of regimes for the different mistakes raises characterisation issues. For example, if a seller mistakenly states the wrong price on an article when he makes the offer, that is an error in expression and the seller may invoke error obstacle to demand the avoidance of the contract. Conversely, if the mistake occurred not only at the time the price was given, but before that, through a calculation mistake during the offer preparation phase, and this mistake is not detected when the offer is made, the contract may be avoidable under certain conditions.

The difficulties that arise at the time these appreciations are made have demonstrated the need for the error regime to be governed by more flexible models that take into account risk theories. This would make it possible to highlight the fact of whether the seller assumed the risk of a miscalculation or, in other words, if allowing the other party to demand the contract performance could be deemed contrary to good faith, rather than referring to the time the mistake was made.

International texts on contract law harmonisation clearly opt for this new approach by considering error in expression as equivalent of a mistake made by the party which mistook the expression or the declaration (Article 3.2.3 UP; Article 4:104 PECL; Article II-7:202 DCFR Article 48.3 CESL).

2. Application of the rules on contract interpretation

The last paragraph of this commented Article reminds us that error in declaration can be considered under the rules of contract interpretation included in Section 1 of Chapter 4 of these Principles. It is rare to find in written law express links between error in expression and rules on contract interpretation. However this link in self-evident, insofar as the rules on interpretation often lead to dissipate the error and therefore to prevent contract avoidance since the error has ceased to exist. Obviously, such a consequence is easier to achieve when the rules on interpretation are focused on the true intent of the parties, but it is also usual in objectivistic systems where the meaning of the declarations is distinguished from the intention and determined under objective and reasonable parameters.

Rules on contract interpretation in Section 1 of Chapter 4 may resolve some problems relating to error in expression. Under the first rule, in claris non fit interpretatio, a contract term shall not be considered to be clear if, in the light of the contract's context, that term is considered as the consequence of a manifest error. The interpretative rule of Article 4.1.2 opts for an objective approach whereby the intents of the parties are taken into account, regardless of whether they are known or ought to be known. If the other party knows of the intention of the mistaken party, this interpretative rule enables judges and arbitrators to resolve the question of error in expression by reshaping the contract to suit the intent of the aggrieved party. When the contract can be interpreted exclusively on objective criteria, its content may be analysed to determine whether there was an error in expression.

Solutions envisaged in some Caribbean civil codes on error of sum or calculation, which do not grant the right of avoidance of the contract, but rather the right of rectification (Article 1.016 of the Costa Rican Civil Code; Article 1.557 of the Honduran Civil Code; Article 1.814 of the Mexican Civil Code; Article 2.456 of the Nicaraguan Civil Code), suggest the same principle, in the sense of preferring the application of rules of contract interpretation to this kind of error in expression.

Common law systems do not usually provide a right to avoid the contract in cases of error in declaration. However, rules on equity offer remedies in this respect, such as the action for rectification [Oyadiran v Bagget (1962), LLR 96; decision of the High Court of Saint Vincent and Grenadines in Gonsalves v Cordice (2012), No. 339 of 2006]. In the case usually considered as the leading case on rectification doctrine [Craddock Brothers v Hunt, (1923) 2 Ch. 136], although parties had orally agreed, in a sale contract of an immovable property, the exclusion of an adjacent courtyard, the written contract included that courtyard due to error. According to ordinary rules on common mistake, the aggrieved party has no right because it is not a mistake on a basic element of the contract. However, the Chancery Court ruled that the content of the contract had to be rectified in accordance with the agreement made and the true intent of the parties. Rectification is usually only available when there is a common mistake. However, it has been also recognised in cases of unilateral mistake when the other party knew the mistake and took advantage of it [Roberts v Leicestershire County Council (1961), 2 All ER 545]. In U.S.A. law, rectification is envisaged in Section 155 Restatement (Second) of Contracts.

The OHADAC Principles opt for submitting the error of calculation to the rules on error in the expression. In this sense, the legal regime becomes simpler because it does not require that the time when the error occurred be verified, whether it was at the time of the preliminary calculation or at the time of the declaration. Moreover, the proposed rule is not incompatible with other approaches mentioned, for if rectification appears to be the most appropriate solution after applying contract interpretation criteria.

Commentary

Article 3.4.5

Loss of the right to avoid

1. The right to avoid the contract shall be extinguished if, before the mistaken party has exercised the right to avoid the contract, the other party notifies his will to accomplish the contract or accomplish it in the sense it was understood by the party having the right to avoid it. This notification is to take place as soon as possible once the mistake is known. In such a situation, the contract will be considered as concluded under those terms.

2. The notification of avoidance under mistake given by the mistaken party shall be rendered without effect if the other party notifies without delay its acceptance to accomplish the contract in the sense that it was understood by the mistaken party. In such a situation, the contract will be considered as concluded under those terms.

1. Reasons for the loss of the right to avoid the contract by mistake

This Article deals with cases where, despite the existence of mistake under Article 3.4.3, the aggrieved party loses its right to avoid the contract. This provision is based on the fact that, in the light of new circumstances, the protection of the mistaken party is no longer justified. These new circumstances occur when the content of the contract concluded corresponds to what had been agreed upon or to what the aggrieved party had thought when the contract was concluded. In such cases, the aggrieved party is no longer allowed to withdraw from the contract by notifying the other party that the contract has been avoided. This consequence is reminiscent of the abuse of law and estoppel doctrine. When the contract corresponds to what the mistaken party expected, these Principles transfer legal protection to party that wishes to maintain the legal situation created by the contract. This rule does not affect mandatory rules and at the same time provides a way of preserving the contract.

The same approach is found in most international texts on contract law harmonisation that contain provisions aimed at establishing similar limitations to the right of the mistaken party to avoid the contract [Article 3.2.10 UP; Article 4:105 (1) y (2) PECL; Article II-7:203 (1) y (2) DCFR]. On the contrary, a similar rule is rare in Caribbean civil codes, apart from Article 1.149.2º of the Venezuelan Civil Code.

In order not to interfere with freedom of contract, the OHADAC Principles have omitted a legal regime applicable to adapt the contract when parties have made the same error. These cases are governed by the general legal regime on mistake included in Article 3.4.3.

2. Preservation of contracts vitiated by a mistake

The application of this Article depends on whether the terms agreed upon by the party authorised to avoid the contract is known. This is the only condition under which this article will apply. If there is no certainty on this point and a new agreement is necessary to clarify the contract, this provision will not be applicable.

Where the terms are known, the Principles allow the contract to be preserved in the terms according to which the contract was understood by the mistaken party before notifying the contract's avoidance or even afterwards. Before this notice, the other party may, once the mistake is discovered, notify its intention to perform the contract. It may also perform the contract in the terms understood by the mistaken party, so that the contract is considered as modified in this sense. But preservation of contract is also possible after the notification of avoidance if the other party gives notice without delay of its intention to perform the contract in the sense understood by the party declaring the contract's avoidance.

Commentary

Article 3.4.6

Fraud

A party may avoid the contract if it has been induced to conclude the contract by the other's party fraudulent misrepresentation.

1. Objective of the legal regime of fraud

The inclusion in the Principles of a provision relating to fraud as a defect of consent must be understood in the light of the methodological criteria set out in the comments of the Preamble and Article 3.4.2. Given the mandatory nature of fraud in Caribbean legal systems, the OHADAC Principles have chosen not to make inapplicable the mandatory rules of the domestic law that governs the contract. The rules proposed by these Principles will apply only within the limits defined by the national mandatory rules. This explains why there is no intention to establish a legal system that will replace Caribbean legal systems. Knowledge of these limits for the freedom of choice of operators in relation to fraud, enables the shared construction on issues not included within these limits, which in practice may be of interest for parties. The knowledge of these limits demonstrates, for example, the convergence of Caribbean legal systems around the rule included in the Principles, which enable the aggrieved party to avoid the contract through a mere non-judicial notice, as mentioned in Article 3.5.1.

Fraud as a defect of consent is well-known in civil law systems (Articles 1.515 and 1.516 of the Colombian Civil Code; Article 900 of the Colombian Commercial Code; Article 1.020 of the Costa Rican Civil Code; Article 71 of the Cuban Civil Code; Article 1.116 of the Dominican and French Civil Code; Articles 1.261 to 1.263 of the Guatemalan Civil Code; Article 909 of the Haitian Civil Code; Article 3:44.3 of the Dutch and Suriname Civil Code; Articles 1.560 and 1.561 of the Honduran Civil Code; Articles 1.815 to 1.817 of the Mexican Civil Code; Article 2.460 of the Nicaraguan Civil Code; Articles 1.120 and 1.121 of the Panamanian Civil Code; Article 1.221 and 1.222 of the Puerto Rican Civil Code; Article 1.154 of the Venezuelan Civil Code). In common law systems, there is also a body of rules on misrepresentation resulting from case law rather than legislative (Article 2 Law Reform Misrepresentation and Frustrated Contracts of 1977 of Bermuda; Section 164 Restatement (Second) of Contracts) and this legal regime is also available in countries with a hybrid legal culture (Article 927 of the Saint Lucian Civil Code).

Within the limits imposed by the mandatory nature of fraud in national legal systems, this Article pursues other aims. Firstly, during negotiations it tries to prevent acts that will lead to misrepresentations, such as the providing of inaccurate information or the concealing of relevant information with the aim of misleading the other party. The Principles also try to contribute to legal comparison and to promote the knowledge of the legal regime of fraud in Caribbean legal systems in order to facilitate the application of the fraud doctrine by judges and arbitrators in cross-border cases. In this sense, the effectiveness of the mandatory nature of these rules is reinforced.

The treatment of fraud is especially relevant in cases when Principles are considered as the only law applicable on the merits. This will be the case, for example, if the dispute is submitted to arbitration and parties have chosen the OHADAC Principles as the law applicable on the merits with no reference to a domestic law. In such cases, the mandatory character of this Article stated in Article 3.4.2 is significant insofar as parties cannot exclude the application of Article 3.4.6.

2. Fraud in Caribbean legal systems

In Caribbean legal systems there are different rules which enable the aggrieved party to avoid the contract. In civil law systems these cases are generally considered under the “dolo” doctrine. Article 71 Cuban Civil Code, however, uses the term “fraud” (fraude) instead of dolo, but both expressions are synonymous.

Fraud also fits in the common law concept of misrepresentation. Misrepresentation itself is a broader concept than fraud because it includes all false representations of reality made by one contract party (made intentionally), or a negligent or even innocent representation, which may be direct or indirect, that is personally or through a third person.

Misrepresentation can be fraudulent, negligent or innocent. A misrepresentation is fraudulent when it is made consciously, and the perpetrator knows that it is not true and acts, not out of mere carelessness but dishonesty with a clear intent to deceive [Derry v Peek (1889), 14 App Cas. 337; decision of the Court of Appeal of Jamaica in Bevad Ltd Oman Ltd (2008), Civ App No. 133 of 2005 (Carilaw JM 2008 CA 54)]. Negligent misrepresentation implies a special relationship between the parties, which means that if a careless representation by one party is likely to result in the conclusion of a contract, that party is held [Hedley Byrne & Co v Heller & Partners Ltd (1963), 2 All ER 575; Section 3 (1) Misrepresentation Act (Ch 82:35) of Trinidad and Tobago]. Innocent misrepresentation does not imply a fault. Contracts induced by misrepresentation may be voided in any case. However, written law on misrepresentation usually empowers judges to substitute avoidance through due compensation. In case of fraudulent misrepresentation, the aggrieved party has the right to avoid the contract as well as to damages by misrepresentation. Innocent and negligent misrepresentation can be considered as cases of mistake within the meaning of Article 3.4.3 of these Principles, while fraudulent misrepresentation is included in this Article.

Caribbean systems inspired by Dutch law also recognise the right to avoid the contract in case of fraud (Article 3:44.3 Dutch and Suriname Civil Code).

3. Relevant situations considered as fraud

Although all Caribbean legal systems consider that fraud is a cause to void the contract, definitions of “fraud” are not always convergent. The lowest common denominator requires two conditions: the fraudulent behaviour of a contract party able to induce the other party to conclude the contract.

In civil law systems, fraud implies an error induced by deceit. Fraud may be achieved through words or acts, but omission has the same effect. Fraudulent action and fraudulent omission are both expressly mentioned in some Caribbean codes (Article 1.261 of the Guatemalan Civil Code; Article 1.815 of the Mexican Civil Code). In other cases, legal texts only refer to fraudulent acts (Article 1.560 of the Honduran Civil Code; Article 1.120 of the Panamanian Civil Code; Article 1.221 of the Puerto Rican Civil Code), but case law has also introduced the concept of fraudulent omission. Caribbean legal systems use separate criteria to determine the criterion to use in defining the scope of relevant information. Trade requirements can be taken into account to determine whether or not there was deceit by concealing the relevant information. Caribbean systems inspired by Dutch law provide a similar solution. Article 3:44 of the Dutch and Suriname Civil Code expressly refers to inexact information and intentional concealing of any significant fact.

In practice, some situations may arise and raise doubts about the existence of a contractual situation of fraud (because relevant contractual information may have been omitted), a contractual situation of known or recognisable mistakes (because an important duty to inform was not performed with respect to fair dealings in trade). The case of fraud by omission may often coincide with that of the recognisable mistake. To distinguish the two situations (recognisable error and fraud by omission), it is necessary to pay attention to the intention likely to have caused the mistake and to check the existence of the deceit. This interpretative difficulty disappears when parties include the recommended clause, and avoid the application of sub-paragraph (c) of paragraph 1 of Article 3.4.3.

In Caribbean common law systems, this kind of delimitation is not necessary. Usually, silence is not considered as representation, and mere fact of concealing the facts is not fraudulent misrepresentation [Keates v Lord Cadogan (1851), 138 ER 234; Walters v Morgan (1861), LR 2 Ch App 21; Section 161 Restatement (Second) of Contracts]. Misrepresentation occurs when a false image is created actively, with the aim of deceiving the other party. Fraudulent behaviour by omission, due to the silence kept around required or relevant information, is only exceptionally recognised. According to the misrepresentation doctrine, misrepresentation does not only consist of the mere fact of concealing information if it is not a legal obligation. In accordance with this rule, it must be stressed that in the preliminary legislative texts concerning French law, fraudulent omissions are also restricted to cases of the non-performance of the duty of legal information (Article 44 of the Proposals for Reform of the French law on obligations).

4. Relevant fraud to avoid the contract

Fraud is not sufficient to void the contract. Many Caribbean legal systems associate the effect of the avoidance of the contract only to cases where the deception is particularly serious. Like French law (Article 1.116 of the French and Dominican Civil Code), most Caribbean legal systems distinguish between dolus causam dans and dolus incidens. While the first empowers the aggrieved party to avoid the contract, the dolus incidens only gives the right to damages (e.g. Article 1.515 of the Colombian Civil Code; Article 1.020 of the Costa Rican Civil Code; Article 73 of the Cuban Civil Code; Article 1.116 of the French and Dominican Civil Code; Article 909 of the Haitian Civil Code; Article 1.561 of the Honduran Civil Code; Article 1.816 of the Mexican Civil Code; Article 2.466 of the Nicaraguan Civil Code; Article 927 of the Saint Lucian Civil Code; Article 1.154 of the Venezuelan Civil Code). Although this distinction is not specified in common law, under these legal systems avoidance of the contract is possible only if the representation that led to the deceit, was determinant at the time consent was given (Section 164 Restatement (Second) of Contracts).

Likewise, in legal systems inspired by Dutch law, only serious fraud determining the contract's conclusion can be a cause to void the contract (Article 3:44 Dutch and Suriname Civil Code). On the contrary, declarations on general terms, even false, are not necessarily fraudulent. In this sense, Article 1.821 Mexican Civil Code provides that general considerations of the parties on profits and prejudices presumably resulting of the contract's conclusion, which do not imply deception or threat, are not considered in order to characterise fraud or duress.

Furthermore, fraud shall not justify contract's avoidance if it has been caused by both contract parties (Article 1.020 of the Costa Rican Civil Code; Article 1.261 of the Guatemalan Civil Code; Article 1.561 of the Honduran Civil Code; Articles 1.816 and 1.817 of the Mexican Civil Code; Article 2.460 of the Nicaraguan Civil Code; Article 1.121 of the Panamanian Civil Code; Article 1.222 of the Puerto Rican Civil Code; Article 927 of the Saint Lucian Civil Code; Article 1.154 of the Venezuelan Civil Code).

5. Scope of freedom of contract in relation with fraud

The OHADAC Principles provide that the aggrieved party may avoid the contract through a mere notification. This is consistent with the mandatory legal character of rules on fraud and fraudulent misrepresentation in Caribbean legal systems.

Otherwise, the non-mandatory character of some aspects of fraud in the OHADAC Principles contrasts with the usual trend in international texts on contract law harmonisation (Article 3.2.5 UP; Article 4:107 PECL; Article II-7:205 DCFR; Article 49 CESL). The OHADAC Principles opt for a greater respect for legal traditions, promoting legal convergence through freedom of contract. As far as it does not contradict mandatory rules on fraud, the OHADAC Principles enable parties to extend the legal regime on fraud in relation with silence and concealing of relevant information contrary to good faith and fair dealing. The following clause is proposed in this respect:

Extended clause for fraud:

The parties agree that not only positive actions but also non-disclosure of circumstances, which according to reasonable commercial standards of fair dealing and good faith a party should have previously disclosed, shall be considered as fraudulent.

Commentary

Article 3.4.7

Threat

1. A party may avoid a contract when it has been induced to conclude the contract by the other party's unjustified threat of an imminent and serious wrong.

2. The threat is unjustified if the act or omission with which the party has been threatened is illegal in itself or it is an illegal means to accomplish the conclusion of the contract.

The inclusion in the Principles of a rule relating to duress as a defect of consent remains, like the legal regime of fraud, conditional upon the mandatory nature of its legal regime in Caribbean legal systems. If the parties opt for the OHADAC Principles to govern their contract, the provisions concerning duress cannot be amended by consent of the parties. Like the other contractual clauses, the OHADAC Principles do not affect mandatory rules of domestic law applicable to the contract. Therefore, the OHADAC rules on duress are not intended to create an independent legal regime derived from the convergence of Caribbean legal systems. This Article pursues, therefore, the same purposes as fraud according to the commentaries on the preceding Article.

Caribbean legal systems converge in allowing contract avoidance when there is duress, violence or duress. Under these concepts, there are two types of possible situations where pressure is exerted on the contracting party. In the first case, absolute physical violence totally inhibits the other party's will, for example where one party signs a contract because the other party forces it to do so. As mentioned above, these situations are regulated by Article 3.1.1, insofar as they must be understood as cases of absolute lack of consent.

Aside from this case, the pressure exerted on the contracting party will normally fall under duress. Duress implies a warning of a future personal, economic or moral wrong, which the aggrieved party would suffer if the contract is not concluded. With duress, psychological pressure is exercised to obtain the conclusion of a contract, which appears as a means of avoiding the expected wrong (Article 72 of the Cuban Civil Code; Article 1.513 of the Colombian Civil Code; Articles 1.018 and 1.019 of the Costa Rican Civil Code; Article 1.112 of the French and Dominican Civil Code; Article 1.265 of the Guatemalan Civil Code; Articles 906 and 907 of the Haitian Civil Code; Article 1.558 of the Honduran Civil Code; Article 2.468 of the Nicaraguan Civil Code; Article 1.219 of the Puerto Rican Civil Code; Articles 928 to 933 of the Saint Lucian Civil Code).

These civil codes establish some common conditions of duress: firstly, one party must provoke a rational fear of suffering an imminent and serious wrong in the other party. Such an imminent and serious wrong must not obey the normal course of events, but acts of the threatening party or which this party has the control. Such acts must be illegal, in the sense that they are illegal in the essence (causing death or injuries) or because it is illegal to have recourse to it to force the other party to conclude a contract (e.g. denouncing a crime). Although some legal systems do not have rules in this respect, generally the normal exercise of a right cannot be considered as threat (Article 1.267 of the Guatemalan Civil Code).

Secondly, all civil codes require that the imminent and serious threat affects the contracting party or some person closely connected with it. However, the criteria are not always the same for the various codes. The different codes refer to the contracting party's person and property, to the persons and property of their spouse, descendants and ascendants. Others mention the contracting party, the contracting party's spouse or all ascendants or descendants. Some other systems extend the threat to the person and honour of the contracting party, or that of the contracting party's spouse or partner, descendants and ascendants or siblings, with the understanding that the judge could extend this to all other persons (Article 1.265 of the Guatemalan Civil Code; and likewise, exclude siblings, Article 2.464 of the Nicaraguan Civil Code and Article 1.152 of the Venezuelan Civil Code). A broader formula, including threats on the life, honour or assets of the contracting party or any third party, is found in Cuban Civil Code (Article 72). The Mexican Civil Code is more precise, referring to relevant threats that pose a risk to lose life, honour, liberty, health or a significant part of assets of the contracting party, its spouse, descendants, ascendants or collateral relatives until the second degree (Article 1.819 Civil Code).

Thirdly, duress may be interpreted in relation with the qualities of the aggrieved party. Condition and age may be taken into consideration (Article 73 of the Cuban Civil Code; Article 1.118 of the Panamanian Civil Code), as well as gender (Article 1.513 of the Colombian Civil Code; Article 1.018 of the Costa Rican Civil Code; Article 1.112 of the French and Dominican Civil Code; Article 1.558 of the Honduran Civil Code; Article 2.458 of the Nicaraguan Civil Code). Under Guatemalan law, any other significant circumstance must be taken into account (Article 1.266 of the Guatemalan Civil Code).

Finally, fear of disappointing persons to which submission and respect is due is not a reason capable of avoiding the contract (Article 1.268 of the Guatemalan Civil Code; Article 907 of the Haitian Civil Code; Article 1.558 of the Honduran Civil Code; Article 1.820 of the Mexican Civil Code; Article 2.465 of the Nicaraguan Civil Code; Article 1.153 of the Venezuelan Civil Code). A similar solution, less restrictive, is found in Article 1.114 of the French and Dominican Civil Code. However, although this Article only excludes avoidance of the contract only if the threat is from the father, mother or any other ascendant, a broad interpretation is in any event possible.

Legal systems inspired by Dutch law obey usually similar principles. According to Article 3:44 of the Dutch and Suriname Civil Code, duress includes threats of illicit wrongs on the contract party, a third person or their goods. Unlike civil law codes of Spanish tradition, under Dutch law valuation of influence is objectified, so that the impact of threat on a reasonable person must be taken into consideration in order to avoid the contract.

In common law systems “duress” is a common institution. Duress requires that violence consists in threats provoking fear to suffer some wrongs relating to the party, its wife or husband, descendants or other relatives, and determinant of the will to conclude the contract. Particularly, it is required that threat affects personal integrity or freedom [Barton v Armstrong [(975), 2 All ER 465].

Although originally duress did not embrace economic threats focused in goods [Atlee v Backhouse (1838), 3 M & W 633, 650; Skeate v Beale (1840), 11 Ad. & El. 983], in recent times duress of goods is also recognised and contracts avoidance is possible where contract has been concluded under threats of economic damage [B&S Contracts and Design Ltd v Victor Green Publications Ltd (1984), ICR 419; Atlas Express Ltd v Kafko Ltd (1989], 1 All E.R. 641; D&C Builders Ltd vV Rees (1965), 3 All ER 837; Lloyds Bank Ltd v Bundy (1974), 3 All ER 757; Ting v Borelli (2010), 79 WIR 204]. Inclusion of this economic aspect of duress requires a delimitation from other institutions, such as the “inequality of bargaining power” and “undue influence” [judgment of the High Court of Trinidad and Tobago in Stechers Ltd v Cheesman (1977), No. 2614 of 1972 (Carilaw TT 1977 HC 66); judgment of the High Court of Barbados in National Bank v Lehtinen (1992), No. 1410 of 1988 (Carilaw BB 1992 HC 38)], which is not always easy as demonstrated by decisions that have applied all three approaches [Lloyds Bank Ltd v Bundy (1974), 3 All ER 757].

Moreover, for duress to be upheld, the threat must be refer to illegal criminal or civil acts. Hence, a threat to exercise a right usually is not considered as duress. In this sense, the threat of illegal imprisonment is usually considered as duress, while the threat of legal imprisonment is not. Threat of denunciation of a crime actually committed has not been considered as duress [Fisher & Co v Apollinaris Co (1875), 10 Ch. App. 297]. A similar criterion is applied to threats of lawsuits for illegal civil acts.

The OHADAC Principles do not intend to create a legal regime of threat as a defect of consent, unlike other harmonised texts on contract law (Article 3.2.6 UP; Article 4:108 PECL; Article II-7:206 DCFR; Article 50 CESL).

In the frame of freedom permitted by the mandatory rules of national legal systems involved, the OHADAC Principles allow the aggrieved party to avoid the contract through a non-judicial notification.

Commentary

Article 3.4.8

Undue influence

1. A party may avoid the contract or a contract term if the other party, at the time the contract was concluded, had taken unfair advantage of the first party´s dependence, trust, economic distress or urgent needs, or of its ignorance or manifest inexperience.

2. Avoidance can only be invoked if the other party knew or should have known this circumstance and it took advantage of the situation and excessively prejudiced the aggrieved party.

1. Undue influence in Caribbean legal systems and in international texts on contract law harmonisation

The OHADAC Principles opt for including undue influence and dependence among defects of consent. The definition of the outlines of this doctrine comes primarily from common law countries. This equity law doctrine served to overcome limits of mistake, misrepresentation and duress as exclusive defects of contract. Undue influence helps to define equity law together with mistake, misrepresentation and duress. This article aims to prevent a party from taking advantage of its preeminent situation to reach the contract's conclusion, because of trust, dependence, affliction or necessity of the other party, whose will is unduly undermined. The contract may be avoided if this can be proved.

Undue influence comes from US law in Section 177 Restatement (Second) of Contracts. Beyond common law countries, it has also been adopted by Dutch law [Article 3:44 (4) of the Dutch and Suriname Civil Code] and international texts of contract law harmonisation [Article 3.2.7 UP; Article 4:109 PECL; Article II-7:201 DCFR; Article 51 CESL]. It is also envisaged in Article 50 Draft Project reform of the French law on obligations of 2013.

Equity doctrine of undue influence is considered in common law systems where a party not only uses its predominant influence over the other party, but takes advantage of this influence and, as a consequence, the other party suffers a prejudice when it concludes the contract [National Commercial Bank (Jamaica) Ltd v Hew (2003), 63 WLR 183]. The influencing party must be in an objective situation of economic, moral or similar pre-eminence over the other party [Avon Finance Co v Bridger (1985), 2 All ER 281]. According to most current characterisation of undue influence [Barclays Bank plc v O'Brien (1993), 3 WLR 786; Murray v Deubery (1996), 52 WIR 147 (CA, ECS)], two situations must be distinguished depending on whether a particular relationship between the parties existed or not before the contract's conclusion.

2. Cases of undue influence

As cases of undue influence, common law courts have considered the following: determining the contract's consent by means of threats (not illegal, nor made with the purpose of achieving unfair advantages) of denunciation of a crime committed over the contract party, its husband, wife or relative [Williams v Bayley (1866), LR 1 H.L. 200]; coercing the will of a person with limited ability, arguing supernatural powers of the influencing party [Nottidg v Prince (1860), 2 Giff. 246]; taking advantage of the bad condition of a close relative [Mutual Finance Ltd v Wetton & Sons Ltd (1937), 2 KB 389].

Avoidance in cases of undue influence requires that the will of the aggrieved party has been affected by an unfair or inappropriate behaviour of the other party and usually that this party has obtained personal advantages. To be precise, the aggrieved party must prove: that the other party (or any other which has influenced the conclusion of the contract) has the capacity to influence the aggrieved party; that such an influence has been exercised; and that this exercise was a deciding factor in the conclusion of the contract [Bank of Credit and Commerce International SA v Aboody (1990), 1 QB 923]. International texts on contract law harmonisation have not included this kind of undue influence [Article 3.2.7 (1) (a) UP; Article 4:109 PECL; Article II-7:207 DCFR; Article 51 CESL].

In common law systems undue influence is presumed and therefore no proof is necessary where there is a special relationship of trust (father/son, guardian/ward, advocate/customer, doctor/patient, priest/parishioner) which lead to suppose an unfair recourse to that relationship in order to reach the contract's conclusion [e.g. judgments of the Supreme Court of Jamaica in Brown v Dillon (1983), 20 JLR 37; and in Lalor v Campbell (1987) 24 JLR 67]. In such cases, the avoidance of the contract only requires proof of this relationship. The same presumption, however, is not recognised between husband and wife [judgment of the High Court of Barbados in National Bank v Lehtinen (1992), Carilaw BB 1992 HC 38] or between banker and customer [National Commercial Bank (Jamaica) Ltd v Hew (2003), 63 WIR 183]. Otherwise, there is no numerus clausus of particular situations capable to be considered according to the undue influence doctrine; that is why it is submitted that undue influence is applicable whenever influence has been achieved and taken advantage thereof [Smith v Kay (1859), 7 HLC 779].

The direct avoidance of the contract where there is a presumption of undue influence facilitates the parties' right to avoid the contract through a mere private notification. The OHADAC Principles provide the same rule enabling parties to avoid the contract where there is a relationship of trust or dependence, following the line of other international texts on contract law harmonisation, which recognise the right to avoid the contract on the ground of defect of consent in cases of dependence (UP) or of dependence or trust (PECL, DCFR, CESL). Relevant situations for contract avoidance are those mentioned above and any other where a situation of trust or dependence can be inferred. US law also envisages these cases of avoidance (Section 177 Restatement (Second) of Contracts).

However, the existence of such a relationship is not sufficient to avoid the contract under the OHADAC Principles. There must also be excessive benefit to the influencing party, resulting in a disadvantage to the aggrieved party. This approach is generally observed, with some reluctance, in Caribbean common law systems, which usually require a manifest disadvantage (judgment of the Court of Appeal of Guyana in De Freitas v Alphonso Modern Record Store Ltd (1991), 45 WIR, 245]. The requirement of an excessive advantage or unfair disadvantage is also current in international texts on contract law harmonisation [Article 3.2.7 (1) UP; Article 4:109 (1) (b) PECL; Article II-7:207 (1) (b) DCFR; Article 51 (b) CESL]. This requirement is however slightly different in US law, which refers to acts of the aggrieved party “inconsistent with his welfare” (Section 177 Restatement (Second) of Contracts).

The OHADAC Principles take into account the fact that in a number of legal systems, many cases of undue influence based on a relationship of trust or dependence are expressly excluded from the right to avoid the contract. As it has been pointed out in the comment on the previous article, reverential fear or fear of disappointing persons to whom submission and respect are due do not justify the right to avoid the contract (Article 1.114 of the French and Dominican Civil Code; Article 1.268 of the Guatemalan Civil Code; Article 907 of the Haitian Civil Code; Article 1.558 of the Honduran Civil Code; Article 1.820 of the Mexican Civil Code; Article 2.465 of the Nicaraguan Civil Code; Article 931 of the Saint Lucian Civil Code; Article 1.153 of the Venezuelan Civil Code). The limits to the application of this Article, which also recognise the right to avoid the contract is these cases, depend on the mandatory nature of those exceptions in domestic laws.

In common law systems, the existence of undue influence is also presumed, even if there is no prior relationship between the parties, if one party takes advantage of the inexperience, ignorance or poverty of the other party by means of a catching or unconscionable bargain. If these situations are accompanied by an excessive advantage of the preeminent party and an unfair prejudice of the aggrieved party, the aggrieved party has the right to avoid the contract. In Caribbean courts the doctrine of inequality of bargaining power has been followed in some cases, declaring the voidness of the contract on the ground of unequal bargaining power of the parties regardless of the absence of undue influence or economic duress [Singh v Singh (1978), 25 WIR 410].

This type of situation is addressed specifically by US law through the doctrine of “unconscionability”. Although its application does not result in avoidance of the contract, the final results may be the same if the defect does not allow the judicial performance of the obligations arising from the contract (Section 208 Restatement (Second) of Contracts; Section 2-302 UCC; Williams v Walker Thomas Furniture Co (1965), 350 F2d, 445, DC Cir). The doctrine is based on the lack of true or significant consent and the existence of contract terms that benefit one party in an extraordinary measure, thus giving rise to the distinction between substantive and procedural unconscionability. The unconscionability doctrine is used in cases of unbalanced contracts to prevent the performance of consumer contracts or terms in consumer contracts, where parties have unequal bargaining powers (Muscioni v Clemons Boat (2005) Ohio 4349; Pierce v Catalina Yachts Inc. (2000) Alaska 2 P. 3d 618). But it has also been applied in case of gross disparity between the price and the value of the reciprocal obligation (Repair Master Construction Inc. v Gary (2009), 277 SW 3d 854 Mo. Ct. App).

Aside from common law countries and countries with legal systems based on Dutch law, rules allowing parties to avoid the contract because the other party took advantage of their ignorance or poverty are rather rare. Article 17 of the Mexican Civil Code can be exceptionally cited among civil law systems insofar as it enables poor and ignorant parties induced to conclude unfair contracts to avoid them whenever the other party has obtained a disproportionate profit in relation with its own obligations.

The OHADAC Principles also consider this kind of undue influence, allowing contract's avoidance on the ground of the ignorance, inexperience, lack of bargaining skill, economic difficulties or urgent needs of the aggrieved party. The proposed rule follows to some extent the formula used in UP, PECL, DCFR and CESL (economic distress, urgent needs, improvidence, ignorance, inexperience or lack of bargaining skill).

3. Conditions for invoking undue influence

As from unfair prejudice, application of undue influence doctrine presupposes that the party has taken advantage of the situation of trust or dependence or took advantage of the weakness of the other party, of which it was aware, or could have been aware. Knowledge of the situation of trust or dependence becomes therefore a condition to void the contract imposed by trade requirements. In this respect, the Principles are in line with international texts on contract law harmonisation (UP; PECL; DCFR; CESL).

The rule established by these Principles concerning undue influence does not affect the possibility of demonstrating that there was no undue influence. This could be of interest in the event of a judicial petition by the party that considers that there has been no undue influence asking for the performance of the contract. In such a situation, the interpretative value that could be acquired by the legal regime of presumed undue influence in common law systems cannot be denied.

Where there is a prior relationship between the parties, the presumption will disappear only if there was no coercion or if consent was given freely, making the contract the consequence of the free will of the parties. However, to disprove presumed undue influence, it is not necessary to have been able to benefit from independent advice if this advice was not followed. The conclusion of the contract must result from the exercise of free will, and the party must have had explanations from an independent, qualified person [Inche Noriah v Shaik Bin Omar (1929), AC 127].

In cases of undue influence by inexperience, unequal bargaining power, ignorance or urgent needs, opposition to avoidance requires proving that, despite appearances, the contract has actually been concluded in a correct, fair and reasonable manner [Earl of Aylesford v Morris (1873), L.R. 8 Ch. App. 484]. Although some decisions have followed this approach [Fry v Lane (1888), 40 Ch. D. 312; Evans v Llewellin (1787), 1 Cox 333, 340], it seems questioned in subsequent cases [Pao On v Lau Yiu Long (1980) AC 614; 1979 3 WLR 435; National Westminster Bank Ltd v Morgan (1985), AC 686; 1985 2 WLR 588].

International texts on contract law harmonisation also provide for the adaptation of the contract in cases of undue influence if it is required by the aggrieved party, to adjust the contract according to reasonable criteria of fair dealing [Article 3.2.7 (2) y (3) UP], good faith [Article 4:109 (2) y (3) PECL] or good faith and fair dealing [Article II-7:207 (2) y (3)]. The legal regime established by the OHADAC Principles for this defect of consent does not fall within this scope. This article does not aim to influence the freedom of the parties to decide on the relevance of maintaining an avoidable contract. By the very nature of this defect of consent, it is also not appropriate to propose a clause expressly concerning this type of contract adaptation in the event that the contract is maintained, in order to adjust it after the undue influence.

Commentary

Article 3.4.9

Defects caused by a third person

The party suffering the mistake, fraud, threat or undue influence may avoid the contract when such defects have been caused by a third party, if the other party knew or ought to have known this circumstance.

It is frequent for third persons to be involved in the contract negotiation or conclusion process. These third persons may be responsible for defects of consent of one party. The OHADAC Principles follow in this Article the approach of most international texts on contract law harmonisation, apart from CESL (Article 3.2.8 UP; Article 4:111 PECL; Article II-7:208 DCFR). However, the proposed rule simplifies this approach.

Most Caribbean legal systems contain provisions that attach importance to defects of consent caused by a third person. For example, in the case of fraud, the rule is expressly set out in some civil codes (Article 1.019 of the Costa Rican Civil Code; Article 1.262 of the Guatemalan Civil Code; Article 1.816 of the Mexican Civil Code; Article 927 of the Saint Lucian Civil Code; Article 1.154 of the Venezuelan Civil Code). Likewise, in cases of threat and duress, there are provisions that enable the avoidance of the contract if the defect is due to the conduct of a third person (Article 1.111 of the Dominican and French Civil Code; Article 1.559 of the Honduran Civil Code; Article 1.818 of the Mexican Civil Code; Article 2.459 of the Nicaraguan Civil Code; Article 1.119 of the Panamanian Civil Code and Article 1.220 of the Puerto Rican Civil Code; Article 928 of the Saint Lucian Civil Code; Article 1.150 of the Venezuelan Civil Code; Article 49 of the Proposals for Reform of the French law on obligations of 2013). In common law systems, regulation of misrepresentation usually includes special rules on participation of third persons in representation (Section 164 Restatement (Second) of Contracts), as well as in cases of undue influence (Section 177.3 Restatement (Second) of Contracts).

This Article empowers the aggrieved party to avoid the contract when the defect is caused by a third person. However, given that the participation of a third person need not be manifest, in order to respect legal certainty, the OHADAC Principles limit the right to avoid the contract to cases when the other party knew or should have known these circumstance. This approach converges with the above-mentioned treatment of fraud and is also set out in Article 3:44 (5) of the Dutch and Suriname Civil Code. With respect to the importance that misrepresentation also attaches to the contracting party's knowledge of the third person's actions (Section 164 Restatement (Second) of Contracts), the rule established by these Principles is also consistent with this system.

The OHADAC Principles differ in some respects from current solutions in international texts on contract law harmonisation. Firstly, the Principles do not follow the current distinction on the participation of a third person, depending on whether that person has intervened with the consent or under the responsibility of the benefitting party or not. In this sense, the OHADAC Principles follow the line of national systems and simplify the legal regime. In any case, when the third person has intervened with the consent or under the responsibility of one contract party, it could be often presumed that this party knew or should have known it.

Secondly, the OHADAC Principles extend the rule, making it possible to avoid the contract that may been vitiated by the intervention of a third person, not only for fraud, as in most legal systems, but also for mistakes, threat or undue influence. On this point, they follow the approach adopted by Dutch law.

Lastly, if the defect was not or should not have been known by the other party, no additional option has been provided to avoid the contract if this party has still not performed or reasonably acted in conformity with the contract at the time of avoidance.

Commentary

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