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Mistake Under the Common European Sales Law

Ariel Porat

Tel Aviv University; University of Chicago - Law School

June 2012

Common Market Law Review, Forthcoming
University of Chicago Institute for Law & Economics Olin Research Paper No. 604

The Common European Sales Law (CESL) sets the conditions in which the mistaken party is entitled to rescission and compensation from the other party. Some of the CESL’s provisions, however, are inconsistent with efficiency.

First, under the CESL, as long as the mistake is essential, for the mistaken party to be allowed to rescind the contract, it is sufficient that the other party caused the mistake. From an efficiency perspective, however, causation is not enough to allow rescission for mistake. Second, the CESL permits rescission when one party failed to disclose information to the other party that would have revealed to the latter his essential mistake and the former party knew or could be expected to have known the mistake. In contrast, under efficiency, not all essential mistakes made by the one party that the other party knew or could have known about constitute grounds for rescission. Third, the CESL allows rescission for fraud, which includes non-disclosure of information. The CESL provides a list of considerations that should be taken into account in deciding whether a duty of disclosure arises. In contrast, under efficiency, there are far more concrete guidelines for determining whether a duty of disclosure arises, and in fact, under certain conditions, intentional (“fraudulent”) misrepresentations are even permitted. Fourth, the CESL allows a contract to be rescinded when both parties made the same essential mistake. Yet efficiency considerations entail that this should not always be the case and that some mutual mistakes should not be grounds for rescission.

Number of Pages in PDF File: 24

Keywords: Mistake, fraud, non-disclosure, disclosure, mutual mistake, unilateral mistake, Common European Sales Law, comparative law

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Date posted: June 17, 2012  

Suggested Citation

Porat, Ariel, Mistake Under the Common European Sales Law (June 2012). Common Market Law Review, Forthcoming; University of Chicago Institute for Law & Economics Olin Research Paper No. 604. Available at SSRN: https://ssrn.com/abstract=2085274 or http://dx.doi.org/10.2139/ssrn.2085274

Contact Information

Ariel Porat (Contact Author)
Tel Aviv University ( email )
Ramat Aviv
Tel Aviv 69978, IL
972-3-6408283 (Phone)
972-3-6407260 (Fax)
HOME PAGE: http://www.law.tau.ac.il/Heb/?CategoryID=357&ArticleID=388
University of Chicago - Law School ( email )
1111 E. 60th St.
Chicago, IL 60637
United States
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