Defects of Consent in Swiss Law: Mistake, Fraud, Duress

Introduction

Under Swiss law, a contract is valid only if the parties expressed their will freely and in an informed manner. When consent is vitiated by mistake, fraud or duress, the affected party may invalidate the contract under strict conditions.

Fundamental Mistake (art. 23-24 CO)

Art. 23 CO provides that a contract does not bind the party who was in fundamental error at the time of conclusion. Art. 24 CO defines fundamental error: error as to the nature of the contract (error in negotio), the identity of the counterparty (error in persona), the object (error in corpore) or the quantity (error in quantitate).

Error on motives is not fundamental in principle (art. 24 para. 2 CO), unless the motive constituted a sine qua non condition under good faith. A simple calculation error is not fundamental (art. 24 para. 3 CO) but must be corrected.

Fraud (art. 28 CO)

Fraud occurs when a party was induced to contract by the other party's fraudulent manoeuvres. Unlike mistake, fraud need not concern a fundamental element: even incidental fraud allows invalidation. Fraud may result from false statements, concealment of important facts, or any deceptive conduct. Silence may constitute fraud when the party had a duty to inform under good faith (art. 2 CC). Third-party fraud prevents contract formation if the benefiting party knew or should have known (art. 28 para. 2 CO).

Duress (art. 29-30 CO)

Art. 29 CO: a contract does not bind the party whose consent was extorted by well-founded fear. The fear must be sufficiently serious that a reasonable person would consider the threatened party was exposed to imminent danger. Art. 30 CO: the threat must be unlawful. Exercising a right (e.g. threatening to sue) is not unlawful unless abusive.

Invalidation Procedure (art. 31 CO)

Must be invoked within one year from discovering the mistake or fraud, or from cessation of duress (art. 31 para. 1 CO). Otherwise, the contract is deemed ratified. Invalidation has retroactive effect (ex tunc). The party invoking mistake in good faith may owe damages (art. 26 CO), unless the error is attributable to the other party's negligence.