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If a party labors under a fundamental error when concluding a contract, they are not bound by that contract (Art. 23 CO). Subsequently, the distinction between fundamental and petty errors takes on significance, on account of their legal consequences. If you have any questions about the conclusion of a contract, our lawyers for contract law will be glad to help you.
A declarative error is a wrong or incomplete impression about one’s own declarative or explanatory conduct. Someone declares something that they do not want to declare. The error lies in their declaration, say, if the person explaining an element of the contract mistypes. The error of declaration is divided into different forms: a content error (e.g. translation error of the declarant), the error in the act of declaration (e.g. prescribing) and the error of transmission, according to Art. 27 CO where the offer has been incorrectly communicated.
An error in a declaration can only be challenged if it is material, i.e. fundamental. The definition of an error as fundamental is set out in Article 24 CO. It considers when a party acts in error by concluding a contract relating to subject matter or a specific person, other than the one they intended or when a party erroneously promises a significantly greater performance. A fundamental error requires that the mistaken party would not have concluded the contract with the wrongly declared content (subjective materiality) and that the discrepancy between the declaration and the real will of the mistaken party is significant when viewed objectively (objective materiality).
The mistake of intent refers to the reason for concluding the contract. A party forms its intent to the conclusion of a contract on the basis of a wrong or incomplete idea about the facts. An error of intent is in principle not material and therefore cannot challenged (Art. 24 para. 2 CO).
The fundamental error is a qualified error of intent, which, in contrast to the error of intent, is considered essential (Art. 24 para. 1 item 4 CO). The fundamental error requires an objective and subjective component in order to be recognized as such.
A fundamental error is deemed objectively material if the error was a fundamental and necessary basis for the conclusion of the contract. The decisive factor is whether a substitute in the position of the mistaken person would also not have concluded the contract with knowledge of the true facts. Subjective materiality is when the erroneously presented facts were instrumental for the concrete conclusion of the contract at hand.
Pursuant to Art. 24 para. 3 CO, invoicing errors do not prevent the contract from being binding for the parties involved. They must however be corrected.
The contract is not binding on the party who was fundamentally mistaken when the contract was concluded (Art. 23 CO). The party influenced by the error (acting under error, fraud or duress) must inform the other party within one year that the contract does not hold. Otherwise, the contract is considered ratified according to Art. 31 para. 1 CO. According to Art. 31 para. 2 CO, the time limit starts from the time the error was discovered or the duress ended. Contributions in kind can be reclaimed by means of vindication (Art. 641 para. 2 CC). Other benefits can be compensated according to the law of unjust enrichment (Art. 62 ff. OR). Payments that have not yet been made do not have to be made.
If the person making the mistake is responsible for his own negligence, he may be liable for damages to the other party to the contract (Art. 26 para. 1 CO).