Schneider, Nicole, Uberrima fides

Schneider, Nicole, Uberrima fides. Treu und Glauben und vorvertragliche Aufklärungspflichten im englischen Recht (= Schriften zur europäischen Rechts- und Verfassungsgeschichte 46). Duncker & Humblot 2004. 251 S.

„Good faith forbids either party by concealing what he privately knows, to draw the other into a bargain, from his ignorance of that fact, and his believing the contrary“. With these words, Lord Mansfield in Carter v Boehm (1766) 3 Burr 1905, 1910; 97 ER 1162, 1164) opened the door for good faith to act as the foundation of pre-contractual duties of disclosure in the common law. But, as with some other of the revolutionary notions of this great Scottish-born judge, who had a deep understanding of the civil law, this idea did not fall on fertile soil. Nowadays it is said that one of the most fundamental differences between Continental European and English law is that the former recognizes a general principle of good faith while the latter does not.

However, to Nicole Schneider the time clearly is ripe for a re-evaluation of this position. European Community Guidelines now force English lawyers to work with the notion of good faith, and this has prompted discussion on whether it should also be regarded as a general principle of the common law of contract. That there should be some aversion to such a development is understandable: a system which traditionally prides itself on pragmatic, piecemeal development, and which is instinctively suspicious about abstract standards, can be expected to be skeptical about the notion that the need to promote good faith could, for example, justify imposing general pre-contractual duties of disclosure. But is such aversion justified? Schneider’s approach is to use historical analysis to determine what is concealed behind the façade that good faith cannot fulfill such a function. To further this end, she directs her attention to the complex and amorphous category of contracts that in the common law are labelled uberrimae fidei.

The approach of Lord Mansfield in Carter v Boehm and that of the contemporaneous civil law share certain features: in accordance with the principle of good faith, one party should not defraud another through non-disclosure of material circumstances. Schneider then observes that under both common law and equity, fraud was interpreted broadly to include a variety of cases where certain standards of appropriate conduct were violated - especially when a party to negotiations remained silent about a material fact which the other party could not inform himself, and then through such silence intentionally lead the other party to conclude the contract on an erroneous assumption as to this fact. An important feature of this duty to disclose is then said to be that it arose from situations of unequal access to information. It is true, of course, that the common law had by then also recognized the principle of caveat emptor, according to which parties generally do not have to disclose unrequested information. But to Schneider, this principle is not in conflict with the duties of disclosure arising from good faith: whereas caveat emptor obviously could be applied to relatively simple transactions of sale, where the purchaser had the opportunity to inspect the merx but failed to do so, the principle did not apply in cases of fraudulent non-disclosure where there was unequal access to information.

However, over time an important development took place that would have a lasting effect on this relatively simple approach. It came to be believed that a party could not be held liable due to fraudulent non-disclosure unless there was some positive act of concealment. The need then apparently existed to identify exceptional contracts that did not fall under this regime – a need that was satisfied with the recognition of the category of contracts uberrimae fidei. The classic example was the contract of insurance. It had been settled for some time in English law (as on the European Continent - cf the Preußische Allgemeine Landrecht II § 2026 -), that when dealing with contract, duties of disclosure could be imposed even without any fraudulent intent being present. The problem with the category of uberrimae fidei contracts, though, is, that the duties to disclose varied according to the contract at hand, which made it very difficult to discern any underlying principle. This brings us to an important message of the book. To Schneider, the historically haphazard development of the category of uberrimae fidei contracts went hand in hand with a regrettable loss of the link between imposing duties of disclosure and the principle of good faith. She strongly emphasizes, though, that imposing such duties on the basis of this principle does not mean that courts would now have a free hand to impose such duties at will. The basic point of departure still remains the same: each party bears the primary obligation to inform himself. But where there is unequal access to information, the need to promote good faith may require looking beyond the existing uberrimae fidei contracts, and also by analogy imposing duties to disclose when dealing with contracts that do not fall under this category. By adopting such a course, English law would not only give renewed recognition to the link identified so long ago by Lord Mansfield, but also show that it is much closer to Continental European jurisdictions than thus far has been appreciated.

Even though Schneider does not refer to South African law, the temptation cannot be resisted to refer to suggestions that also have been made in this jurisdiction about the need to place duties to disclose on a sound doctrinal footing. In essence, even though South African law, drawing on its Roman-Dutch heritage, regards all contracts as bonae fidei, it recognized for quite some time, under the influence of English law, that certain contracts, and most notably contracts of insurance, are uberrimae fidei, the implication being that they give rise to special duties of disclosure. However, as in English law, it is not spelt out why some contracts should be called uberrimae fidei and others not. Nothing has been gained when it was held in Mutual and Federal Insurance v Oudtshoorn Municipality 1985 (1) SA 419 (A) that the duties to disclose in the context of insurance contracts arose „ex lege“, and did not flow from the requirement of bona fides (see Reinhard Zimmermann, „Good Faith and Equity“, in Reinhard Zimmermann and Daniel Visser, Southern Cross – Civil Law and Common Law in South Africa (Juta, Cape Town, 1996), pp. 246-248. As in English law, the position at present is therefore still uncertain.

Carter v Boehm dealt with the risk that a fort under English control would be taken over by attackers from Continental Europe. To some, Schneider’s thesis may introduce a comparable risk, namely that of the common law on duties of disclosure being unnecessarily infiltrated by civilian notions of good faith. However, when our attention is drawn to the fact that the common law itself had a tradition of recognizing that such duties could be based on good faith, it becomes apparent that the notion of a civilian threat is not well-founded, and that more room exists for mutual understanding and influence than may thus far have been appreciated.

Nicole Schneider’s Uberrima Fides is a thought-provoking analysis of a complex problem, and provides strong testimony in favour of the argument that looking at the past can assist in understanding the present, as well as indicate what direction to take in future.

Stellenbosch                                                                                                     Jacques du Plessis