Error is a defect of will whereby a party has contracted based on a false representation of facts. In our practice, we see claims based on error primarily in M&A, technical installations, and collaborations. Under Dutch law, the doctrine of error is broadly applicable; under common law, hardly at all. Anyone contracting internationally must know which route applies.
What is the legal problem?
Error requires a false representation that has led to different conduct. Internationally, requirements vary: essential error, causality, knowability to the counterparty, and one's own duty of investigation. An awkward appeal to error can have a rebound effect: missed deadlines, damage claims, or loss of confidence in future relationships.
What does the law say?
Under Dutch law, Article 6:228 of the Civil Code governs error based on disclosure, concealment, or mutual error. The error must be discernible to the other party. Under French law, erreur is considered essential under Article 1132 of the Code Civil. Under German law, Section 119 of the BGB governs Irrtum with a short annulment period. Under English law, mistake is recognized to a very limited extent; misrepresentation is recognized more broadly under the Misrepresentation Act 1967.
The Vienna Sales Convention contains no explicit rules on error; National law supplements via Article 4(a) of the CISG.
What risks do companies face?
A claim based on error may be rejected due to a duty of investigation or delayed invocation under Article 3:52 of the Dutch Civil Code. Annulment reverses performances, with logistical and fiscal consequences. The counterparty may claim damages for wrongful annulment under Article 6:162 of the Dutch Civil Code. Proof of error requires documentation. Thresholds vary internationally — a successful claim of error in the Netherlands may fail in England.
Practical example from our practice
We advised a Dutch company on the acquisition of an Italian company based on financial figures that later proved to be incorrect. The claim based on error under Italian law was rejected due to insufficient internal due diligence (Article 1431 of the Codice Civile). For the following M&A, we incorporated: a strong warranty package with indemnities, materiality scrape, R&W insurance with AIG, and Dutch choice of law. After the new transaction, the client was able to claim €1.6 million under warranty claims without limitation on error.
What can you do?
Conduct due diligence and document knowledge at signing. Incorporate warranties and indemnities to formalize statements of fact. Send a declaration of nullification quickly in case of suspected error. Align the choice of law with a system that recognizes error more broadly. Combine error with alternative grounds (fraud under Section 3:44 of the Dutch Civil Code, breach of contract). See also our article on Representations & Warranties explained.