Legal Blog

Tuesday, December 03, 2013

Challenging the validity of a contract

Based on error, fraud or undue influence

The validity of a contract can be challenged on various grounds, including error, fraud or undue influence. In the case to be discussed here a contract was entered into by an intermediary. Appellants in cassation (Van Eendenberg) were owners of the parcels on which a preferential right was established pursuant to the (Dutch) Municipalities (Preferential Rights) Act.

In view of the sale of those parcels, in so far as municipalities should need them for house construction, they had entered into a brokerage agreement with Agromak BV. Its director then acted as an intermediary in the sale between Van Eendenberg and ABOW (respondent in cassation), a private project developer who was not affiliated with the government and in which Agromak’s director had a substantial interest and in fact determined the policy. Parties differ in opinion on the question whether in the context of this mediation a contract was concluded. For the realization of the building plans ABOW wanted to proceed with the purchase of the parcels from Van Eendenberg who refused their cooperation.

The lower Court rejected the appeal on error, fraud or undue influence based on its opinion that Van Eendenberg did not substantiate with sufficiently concrete facts that they would not have proceeded to conclude the contract if ABOW, respectively her director, would have informed them of the latter’s interest in ABOW.

According to the Dutch Supreme Court (4 September 2009, NJ 2009/398), for an appeal on the grounds for nullification, mentioned in Sections 3:44 and 6:228 of the Civil Code, it is not required the person relying on this has been prejudiced by concluding the contract as a result of the vitiated consent. Required is that the party involved would not have concluded the contract or would not have concluded the contract under the same conditions, if the error, the fraud or undue influence had not taken place. 

In this case – whereby based on the existing relations between the intermediary and the other party it must be assumed that the intermediary at the realization of the contract has also taken care of the interest of the other party without his client’s approval in this - it cannot be expected furthermore of the party that appeals to the referred grounds of nullification that he will indicate exactly on which different conditions he would have concluded the contract if he would not have acted as a result of error, fraud or undue influence but it is sufficient that he states – and in case of a (sufficiently reasoned) challenge he makes it plausible -, that in that case he would not have concluded the contact, or that he would not have concluded it under the actually agreed conditions. 

Moreover, in such a case aggravating requirements must be set to the motivation of the challenge by the other party.

Filed under: Commercial by Karel Frielink.



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