Concept and significance of fraudulent intent and fraudulent misrepresentation
The terms fraudulent intent und fraudulent misrepresentation are central legal terms in German civil law and play a particularly important role in the contestation of declarations of intent and in liability for damages. Both terms encompass intentional acts aimed at deception, which are intended to induce another person to behave in a way that they would not have exhibited without the deception.
Definition of fraudulent intent
Fraudulent intent describes behavior in which a person deliberately and with the intent to deceive makes false or misleading statements or conceals essential circumstances in order to induce another person to take, tolerate, or refrain from a specific action. In the legal sense, fraudulent intent requires that the actor at least accepts the error of the deceived party and expects, or at least considers it possible, that the deception will influence the will formation of the deceived.
Concept of fraudulent misrepresentation
Die fraudulent misrepresentation is regulated in Section 123 paragraph 1 of the German Civil Code (BGB). According to this provision, a declaration of intent made as a result of fraudulent misrepresentation can be contested. This means that contracts or other legal declarations which have come about through fraudulent misrepresentation can be rescinded retroactively by the deceived party.
Legal basis of fraudulent misrepresentation
Fraudulent misrepresentation according to Section 123 BGB
Pursuant to Section 123 (1) BGB, a person may contest a declaration of intent if they were induced to make the declaration by fraudulent misrepresentation or by duress. Fraudulent misrepresentation, alongside unlawful duress, is one of the most important grounds for contestation in German civil law.
Requirements for fraudulent misrepresentation
In order for a declaration of intent to be successfully contested due to fraudulent misrepresentation, the following requirements must be met:
- Deceptive conduct: There must be deception regarding facts or the concealment of essential circumstances.
- Causality: The deception must be causal for the issuance of the declaration of intent, meaning that without the deception, the deceived party would not have made the declaration or would not have made it in this form.
- fraudulent intent: The deceiver must act intentionally, whereby conditional intent (dolus eventualis) is sufficient.
- No justification: The deception must not, exceptionally, be justified by the circumstances of the individual case.
Form of deception
Deception can occur by active conduct (e.g., false information), but also by culpable omission (concealment of facts requiring disclosure). In the case of a duty to inform, even the conscious concealment of a fact already constitutes deceptive conduct.
Effect of contestation in case of fraudulent misrepresentation
The contestation of a declaration of intent due to fraudulent misrepresentation leads to nullity ex tunc (from the beginning), meaning that the contract or legal transaction is considered void from the outset. The parties must return any performances already rendered.
Contestation period
The contestation is permitted according to Section 124 BGB only within one year. The period begins upon discovery of the deception.
Legal consequences of fraudulent misrepresentation
Unwinding and compensation for damages
After a successful contestation, any benefits obtained and received performances must be returned (Section 812 BGB). In addition, the deceived party can claim damages under certain circumstances, especially if damage was caused by the deception. This regularly arises from Section 826 BGB (intentional immoral harm) or from Sections 280 et seq. BGB (breach of contractual duties).
Rights of third parties
If third-party rights are affected—for example, in the case of an acquisition in good faith after deception—such rights may be protected under certain circumstances. Acquisition in good faith is particularly relevant in property law.
Areas of application and typical case groups
Real estate law
In contracts for the purchase of real estate, fraudulent misrepresentation plays a role especially in concealed defects or false statements about the condition of the building. If a hidden defect is intentionally not disclosed, the buyer can contest the contract and demand reversal.
Sales law and general contract conclusion
In general sales contracts, leasing contracts, and other contractual relationships involving obligations, false statements—for example, about the condition or origin of an item—can constitute fraudulent misrepresentation.
Inheritance law and law of gifts
Fraudulent misrepresentations can also occur in inheritance and gift law, for example if false facts are presented regarding the value or existence of items in the estate.
Employment law
In employment law, fraudulent misrepresentation is relevant, for example, during the application process for a job. False statements concerning qualifications or criminal records may lead to the contestation of the employment contract.
Distinction from other legal terms
Deception without fraudulent intent
There are also deceptions without an intentional character (thus without fraudulent intent) which, as a rule, do not provide grounds for contestation under Section 123 BGB. Merely negligent false information is not sufficient.
Mistake and duress
A mistake (Section 119 BGB) must be distinguished from fraudulent misrepresentation, as there is no deliberate influence involved. Contestation due to unlawful duress (Section 123 BGB), on the other hand, requires a situation of coercion.
Burden of proof and judicial enforcement
The burden of proof for the existence of fraudulent misrepresentation generally lies with the contesting party. They must present and, if necessary, prove that fraud occurred and that this conduct was causal for the declaration of intent given. The requirements for the evidence are regularly high and often lead to difficulties of proof, especially in cases of deception by concealment.
Private international law and fraudulent intent
In private international law, the law of the country whose legal system is applicable to the legal relationship in question applies. In many jurisdictions, fraudulent misrepresentation is regulated similarly, but differences exist in details, such as with regard to deadlines, requirements, or legal consequences.
Summary
fraudulent intent und fraudulent misrepresentation are central concepts in German civil law which are intended to ensure the protection of freedom of will and contractual fidelity. Anyone who is induced to make a declaration of intent by an intentional act of deception can generally contest it and reverse the legal transaction. In the enforcement of corresponding claims, the provision of evidence plays a particularly crucial role.
Further reading and references
For more in-depth discussion of the topic, reference is made to the relevant statutory texts, commentaries, and case law, including:
- Civil Code (BGB), in particular Sections 119 et seq., 123, 124 BGB
- Case law of the Federal Court of Justice (BGH)
- Standard works on civil law
This article provides a comprehensive overview of the legal aspects of fraudulent intent and fraudulent misrepresentation in German law.
Frequently Asked Questions
What are the legal consequences of fraudulent misrepresentation at the time of contract conclusion?
Fraudulent misrepresentation at the conclusion of a contract generally entitles the deceived contracting party to contest the contract pursuant to Section 123 BGB (German Civil Code). The contestation must be made within one year of discovering the deception. In the case of a successful contestation, the contract is considered void from the outset (Section 142 BGB), and both parties must return the performances rendered. In addition, the deceived party may, under certain conditions, claim damages under Section 826 BGB due to intentional immoral harm, especially if it can be proven that the deceiver’s behavior caused harm. Outside the contractual relationship, tortious claims may also arise, for example from unlawful acts. In serious cases, fraudulent misrepresentation may also be of criminal relevance, for example as fraud under Section 263 of the German Criminal Code (StGB).
How does fraudulent misrepresentation differ from simple deception or mistake in the legal sense?
Legally, fraudulent misrepresentation is distinguished from simple deception or mere mistake by the necessary element of intent. While a simple mistake is merely an unintentional, blameless error and, in principle, does not entail further legal consequences beyond rescission for mistake (Section 119 BGB), fraudulent misrepresentation requires targeted conduct: the deceiver must consciously pretend false facts or conceal true facts in order to induce the other party to make a declaration of intent. Moreover, the deceiver must accept, or at least consider possible, that the other party will be motivated to declare their intent by this deception, which they would not have done otherwise.
What duties of disclosure exist in connection with fraudulent misrepresentation?
As a general rule, German civil law does not provide for a general duty to actively and comprehensively inform contracting parties about all relevant circumstances during negotiations. However, a duty of disclosure exists where there is a so-called ‘fact requiring clarification’ which is obviously of significant importance for the other party’s decision and whose disclosure can be expected based on good faith (Section 242 BGB). If such a fact is deliberately concealed, this may be considered fraudulent misrepresentation. The extent of the disclosure obligations is determined by customary practice, the respective subject matter of the contract, and the information obligations of the other party.
What burdens of proof apply to asserting fraudulent misrepresentation?
The duty to present and prove the existence of fraudulent misrepresentation generally lies with the person invoking it, usually the party contesting the contract. They must specifically present and prove that the contracting partner not only gave false information or omitted clarification, but did so with fraudulent intent, i.e., intentionally. Difficulties of proof exist particularly with regard to the internal will (intent) of the deceiver. Indications such as special knowledge, conspicuous behavior, or available documents and correspondence can contribute to the court’s formation of conviction.
How long can fraudulent misrepresentation be asserted in law?
Claims arising from fraudulent misrepresentation are subject to different deadlines. The right of contestation according to Section 124 BGB must be exercised within one year of discovery of the deception. Independently, claims for damages generally become time-barred within three years from knowledge of the damage (Sections 195, 199 BGB). The maximum limitation period for damages due to fraudulent misrepresentation can, however, be up to ten years in certain cases or, in the case of transactions involving real estate, up to thirty years (Section 199 paras. 3 and 4 BGB), depending on when the facts giving rise to the claim become known or should have become known.
Are there special provisions for certain contract types regarding fraudulent misrepresentation?
Yes, certain contract types such as sales, rental, or work contracts have special provisions or consequences in the event of fraudulent misrepresentation. For example, in the case of fraudulently concealed defects in real estate sales, fraudulent intent according to Section 438 (3) BGB suspends the regular warranty period; instead, a longer limitation period for damages or subsequent performance applies. In tenancy law, fraudulent misrepresentation regarding significant characteristics of the rented property can likewise entitle the tenant to contestation or claim damages. In insurance contracts, violation of the pre-contractual duty of disclosure with fraudulent intent is also regarded as a special ground for contestation or withdrawal.
