11.2 The second dividing line: causal and abstract systems

Choosing between causal and abstract?

Unlike the dividing line between tradition and consensual systems the dividing line between causal and abstract systems seems not to have been mitigated and seems as real as ever. If this viewpoint were correct, harmonization of European civil law systems on this point would involve choosing either the causal or the abstract system. Below we will see that in reality even the distinction between causal and abstract systems has been blurred and that a midway solution would be possible.

The most important practical consequence of such a choice will undoubtedly be the different protection of the parties to the transfer against insolvency of the other party. Yet, a satisfactory protection against insolvency cannot be obtained merely by opting for a certain transfer system. For that reason in­solvency arguments should not be decisive in making this choice. We should con­centrate on systematic, that is, dogmatic, arguments. In doing so it should be possible to opt for a transfer system that is consistent in its treatment of defects of will, such as error and fraud.

Internal inconsistency of the abstract theory

When confining oneself to systematic arguments it is to my mind obvious that the abstract transfer system in its purest form, proposed in the 19th century by Friedrich Carl von Savigny and his pupils, has inconsistencies. Like the adherents of the causal system also Savigny and his followers stress the importance of consensus for the passing of ownership. However, according to the abstract theory the transfer of ownership is valid even when one of the contracting parties has entered into the contract under the influence of mistake, fraud, or any other defect of will. Clearly there is no real consensus here. That is the very reason why the party who acted under the influence of a defect of will is given the power to avoid the contract.³⁷ He should be able to undo the entire transaction. Yet the abstract theory is far from consistent here: the victim, it is true, has the power to avoid the contract, but the avoidance does not affect the transfer based on this contract. The transfer is regarded as a neutral legal act uninfluenced by any possible defects in the parties' will. In doing so the abstract system in reality disregards the parties' will. By ignoring the true will of the parties where there is a defect of will Savigny negates the importance of the parties' will and negates one of the foundations of his own theory.

The principle of abstraction makes an artificial segregation between two legal acts which economically and in the mind of the parties are part of one and the same transaction. The transfer takes place for a certain reason, to make a gift, a loan, or to fulfil some obligation. These legal motives cannot be disregarded. When a party in reality did not consent to the contract in question, he certainly did not want the transfer of ownership based on it.³⁸

As we have seen, modern German law has mitigated the principle of abstraction on a large scale. Many defects of will lead to voidability of both the contract and the transfer. In addition there are many other cases in which a legal norm leads to voidness or voidability of both contract and transfer. What remains is a different definition of abstraction. Under the old definition abstraction meant that voidness or avoidance of the contract could not lead to voidness of the transfer, because the transfer is independent of the underlying contract. Now, in modern German law it would be more suitable to say that abstraction merely means that the validity of the transfer is judged independently of the validity of the contract. Under this new definition voidness or avoidance of the contract no longer excludes voidness of the transfer. In many cases voidness and voidability will affect both the contract and the transfer. The definition simply stresses that the transfer should be judged separately.

In the causal systems of Dutch and French law no similar mitigation can be found. In these causal systems voidness or avoidance of the contract necessarily leads to voidness of the transfer.

More importantly however, the above analysis of German law shows that the question whether the abstract/causal divide has important differences in practice will depend on just how abstract the transfer system in question is – on how it treats defects of will. When voidness or voidability is based on statute, the effect on the transfer often depends on the formulation of the particular statute. Statutory provisions enabling an administrator in insolvency to avoid transactions made by the insolvent in fraud of his creditors do not always distinguish between the contract and the transfer based on the contract, or they even explicitly provide that both legal acts may be avoided.³⁹ Similarly, statutory voidness, such as voidness for acting ultra vires, will often affect both the contract and the transfer. On the other hand, in the case of incapacity, for example minority, it might happen that the contract was made when the party in question was still a minor and that the transfer took place later, after the minor came of age. Is this then a good example of where the abstract system takes a wholly different approach from the causal system? The answer is probably no, for a causal system might say that, by transferring ownership after coming of age, the transferor implicitly affirms the voidable contract. If so, he cannot afterwards avoid the contract and make ownership re-vest in him.

A midway solution

The above shows that we are not forced to choose between two extremes of causal and abstract. The division into these two seemingly uncompromising transfer theories is of relatively recent date: the beginning of the 19th century. In the period before the 19th century the learned law had no transfer theories whatever. When examining the different interpretations of the iusta causa requirement proposed in this period it appears that these do not fit into the division causal/abstract. So, from a historical point of view there is no valid reason to confine our choice to the extremes of causal and abstract. Nor is there any dogmatic argument for doing so.

Several learned jurists in the period before 1800 seem to opt for some midway solution: their statements fit into a theory which I have call the animus theory. The theory stresses the importance of the animus transferendi dominii, or the will to transfer ownership. The absence of such will should lead to voidability of the transfer. Now, although it is very unlikely that such a theory has ever been current in the past, the animus theory may be a useful compromise for future law to bridge the gap between causal and abstract transfer systems.⁴⁰

In such a theory all defects of will are treated equally. Avoidance of the contract for a defect of will nullifies the transfer as well. To use German terminology, as regards defects of will there should always be identity of defect (Fehleridentität). In the animus theory ownership passes only if there is a genuine will to make the transfer. A valid contract is not needed, however. Where for example the contract is void for illegality ownership could nonetheless pass to the acquirer because there is a true will to make the transfer. It depends on the statutory norm in question whether there is any good reason to render the transfer void as well. Voidness of the transfer should then be judged separately. From a systematic point of view I should say that the animus theory is certainly more consistent than the abstract theory in old form as proposed by Savigny and his pupils. On the other hand, this animus theory would fit remarkably well with the current German interpretation of the abstract transfer system and the way in which the Scottish abstract system is applied.⁴¹

1 Well known instances of original acquisition which are less important in practice are e.g. alluvio (acquisition of sediment on land), treasure trove, finding, appropriation of bona vacantia (things belonging to no one) and expropriation of property by the state.

2 See also S. Bartels, An abstract or a causal system, in: W. Faber and B. Lurger, Rules for the transfer of movables, a candidate for European harmonization or national reforms?, Munich 2008, pp. 59-67.

3 L.P.W. van Vliet, Iusta causa traditionis and its history in European private law, European Review of Private Law 3-2003, pp. 342-378.

4 L.P.W. van Vliet, Iusta causa traditionis and its history in European private law, European Review of Private Law 3-2003, pp. 342-378.

5 See also V. Sagaert, Consensual versus delivery systems in European private law – consensus about tradition?, in: W. Faber and B. Lurger, Rules for the transfer of movables, a candidate for European harmonization or national reforms?, Munich 2008, pp. 9-46.

6 Art. 1138 and 1583 Code civil; s. 18, rule 1 and rule 5(1) Sale of Goods Act 1979.

7 It is a transfer similar to the first transfer and it should accordingly fulfil all requirements every transfer should meet. The causa traditionis of the retransfer is the buyer’s obligation ex unjustified enrichment.

8 For a short and recent overview in English see J.Th. Füller, The German property law and its principles – some lessons for a European property law, in: W. Faber and B. Lurger, Rules for the transfer of movables, a candidate for European harmonization or national reforms?, Munich 2008, pp. 197-215.

9 The exception was §§ 306-308 of the Allgemeines Deutsches Handelsgesetzbuch (Commercial Code) of 1861. The new commercial code of 1897 gives third party protection in § 366.

10 W. Schubert, Die Entstehung der Vorschriften des BGB über Besitz und Eigentumsübertragung, Berlin 1966, p. 26; R. Johow, Entwurf eines bürgerlichen Gesetzbuches für das Deutsche Reich, Sachenrecht, Begründung, vol 2, Berlin 1880, p. 740-750 and 766-767, in W. Schubert (ed), Die Vorlagen der Redaktoren für die erste Kommission zur Ausarbeitung des Entwurfs eines Bürgerlichen Gesetzbuches, Sachenrecht, vol 1, Berlin 1982.

11 Together with acquisitive prescription.

12 § 877 Erster Entwurf (first draft of 1888). See: W. Schubert, Die Entstehung der Vorschriften des BGB, pp. 149-154.

13 See also Staudinger/Wiegand, Kommentar zum Bürgerlichen Gesetzbuch, mit Einführungsgesetz und Nebengesetzen (2004) § 929, Rdnr 27; W. Wiegand, Die Entwicklung des Sachenrechts im Verhältnis zum Schuldrecht (1990) 190 Archiv für die civilistische Praxis, p. 112 et seq., at p. 136; M. Wolff and L. Rai­ser, Sachenrecht, Ein Lehrbuch, 10th ed., Tübingen 1957, p. 238.

14 The abbreviation “BGB” stands for Bürgerliches Gesetzbuch, the German civil code.

15 Staudinger/Wiegand, Kommentar zum Bürgerlichen Gesetzbuch § 929, Rdnr 18 and 28.

16 Staudinger/Wiegand, Kommentar zum Bürgerlichen Gesetzbuch § 929, Rdnr 18-28. For a detailed and recent discussion of the “perforations” of the abstraction principle, see J.Th. Füller, Eigenständiges Sachenrecht, Tübingen 2006, § 3.

17 Staudinger/Wiegand, Kommentar zum Bürgerlichen Gesetzbuch § 929, Rdnr 27.

18 The instances are Geheißerwerb, traditio brevi manu, constitutum possessorium and the assignment of the Herausgabeanspruch. See L.P.W. van Vliet, Transfer of movables in German, French, English and Dutch law, Nijmegen 2000, § 2.4.

19 For contracts in general the rule is laid down in art. 1138 of the civil code.

20 Absolute future goods are goods which do not yet exist, e.g. next year’s crop of wheat. Relative future goods are goods which already exist, but which have not yet been acquired by the transferor, e.g. goods bought by the seller but not yet delivered to the seller.

21 L.P.W. van Vliet, The transfer of moveables in Scotland and England, Edinburgh Law Review, May 2008, pp. 173-199.

22 L.P.W. van Vliet, Transfer of movables in German, French, English and Dutch law, Nijmegen 2000, § 4.8.

23 L.P.W. van Vliet, Transfer of movables in German, French, English and Dutch law, Nijmegen 2000, § 4.5.

24 The abbreviation “BW” stands for Burgerlijk Wetboek, the Dutch civil code.

25 M. Wolff and L. Raiser, Sachenrecht, Ein Lehrbuch, 10th ed., Tübingen 1957, p. 233; F.H.J. Mijnssen, Geld in het vermogensrecht, Deventer 1984, p. 5.

26 Mijnssen, Geld in het vermogensrecht, pp. 20-23; W.A.K. Rank, Geld, geldschuld en betaling, (thesis Leiden) Deventer 1996, p. 97; HR 9 September 1949, NJ 1950, 595 (Houtappel/De Hoofdgroep Verzekering et al.).

27 Sometimes co-ownership of the money may be a solution, but such a co-ownership can arise only if it is known exactly which banknotes and coins have been mixed. As the principle of specificity applies also to co-ownership all banknotes and coins that are co-owned should be identified. Only in rare cases will the principle of specificity be complied with, for example where monies have been put together in a cash-box.

28 Cf. B.F.L.M. Schim, Giraal effectenverkeer en goederenrecht, Deventer 2006, pp. 133-143.

29 G. Ripert and R. Roblot, Traité de droit commercial, vol 2 by Ph. Delebecque and M. Germain, 17th ed., Paris 2004, nr. 2303-2312.

30 Foskett v. McKeown [2001] 1 AC 102, per Lord Millet; Libyan Arab Foreign Bank v. Bankers Trust Co [1989]1 QB 728, per Staughton J.

31 V. Marcadé, Explication du tit. XX, LIV, III, du Code Napoléon (Préscription), Paris 1854, p. 246 ; G. Baudry-Lacantinerie and A. Tissier, Traité théorique et pratique de droit civil, vol. XXVIII (de la préscription), 3rd ed., Paris 1905, p. 660.

32 A. von Tuhr, Der Algemeine Teil des deutschen Bürgerlichen Rechts, vol. 2.I, Munich/Leipzig 1914, p. 52; M. Wolff and L. Raiser, Sachenrecht, 10th ed., Tübingen 1957, § 69 IV; K.H. Schwab and H. Prütting, Sachenrecht, 32nd ed., Munich 2006, nr. 441.

33 For German law: § 931 BGB); for Dutch law art. 3:95 BW.

34 See for example section 16 Sale of Goods Act 1979.

35 This requirement does not entail that the will of each party as expressed by him should correspond to his true will. In many legal systems a declaration of will that does not correspond with the declaror's true will is nonetheless binding on him, provided the declaree did not know nor should have known that the declaror made a mistake.

36 See also M.P. Hedinger, Über Publizitätsdenken im Sachenrecht, Bern 1987; J.Th. Füller, Eigenständiges Sachenrecht, Tübingen 2006, pp. 276-277.

37 Note that in Savigny's time a sharp distinction between void and voidable legal acts had not yet been fully developed. As a result the terminology was unsettled. Here I use modern terminolo­gy.

38 Cf. Stadler, who acknowledges this relation between the contract and the transfer. She nonetheless remains faithful to the abstract system. See A. Stadler, Gestaltungsfreiheit und Verkehrsschutz durch Abstraktion, Tübingen 1996, p. 179.

39 In the abstract transfer system of South African law, for example, property reverts to the administrator in insolvency when the transaction is annulled: s. 34(1) of the Insolvency Act 24 of 1936 explicitly renders the transfer void. In Roos NO v. Kevin & Lasia Property Investments BK 2002 (6) SA 409 (T), at p. 420-422 the Transvaal Provincial Division rightly draws the conclusion that the abstract system is irrelevant if the transfer itself is declared void. German law, however, takes a different approach: where an insolvent’s disposition is set aside the insolvency administrator has a claim for the retransfer of the asset; ownership does not revert automatically. See § 143 Insolvenzordnung; L. Häsemeyer, Insolvenzrecht, 3rd ed., Cologne/Berlin/Bonn/Munich 2003, nr. 21.12-21.13

40 See for an historical analysis: L.P.W. van Vliet, Iusta causa traditionis and its history in European private law, European Review of Private Law 3-2003, pp. 342-378.

41 See L.P.W. van Vliet, The transfer of moveables in Scotland and England, Edinburgh Law Review, May 2008, pp. 173-199.

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