Tuesday, 16 March 2010

Hungarian Vigour in the Common Law

I have always been convinced that my fellow-countrymen can make it to the top in whatever field they want. But I must admit that the common law tradition was among the last areas to be conquered by Hungarians I would have thought of.

corpus iuris civilis Hungarian lawyers have a strong aversion to the case law approach. Law students usually have serious difficulties with learning the subjects in which it plays some role, namely international and European law. These difficulties are caused by the fact that mastering a complete system of rules, which is the ultimate goal of Hungarian legal education, is not enough here. Law faculties in Hungary concentrate on pouring the full content of as many statutes and regulations into the students’ head as they can. These statutes and regulations are usually based on an elaborate conceptual structure, which makes them easy to visualize: It is like a refined architecture built out of basic notions, distinctions, general rules and exceptions. University text books see their task in drawing the distinctions even more precisely, making the system look even clearer and repairing its possible ruptures. Of course written laws and text books intend to have something in common with the reality they pertain to, but even if they succeed, law students are not aware of how reality is reflected by this legal dogmatics. As a result, they finish university with a neat picture in their head of Hungary’s legal system but without basic skills of applying this knoknowledge to real cases.

Laws and promises

The main difference between continental legal systems (like that of Hungary) and the common law tradition does not consist in the source of law courts found their decisions on. What really matters is not that judgments on the continent are based on statutes of the legislation, while in the common law on court precedents. The private law of Hungary was first codified by the legislation in 1959. Up to then lawsuits were decided according to a kind of customary law formed mainly by court practice. And yet, Hungarian customary law did not resemble English common law. It used the same logic as Hungarian jurisprudence nowadays. And it is exactly this logic that makes all the difference: The common law has never aimed at constructing a comprehensive system of legal institutions that is easy to visualize. All it has aspired after is to derive firm principles from real cases brought before courts that may be useful in deciding similar lawsuits in future. But these principles can certainly be understood only if the underlying facts are kept in mind – this is what makes case law so hard to learn.

If there is a complete system of rules to cover all possible cases, then theoretically every situation in life can be qualified in legal terms even before an authority would be involved in the matter. Continental legal systems try to regulate every kind of relationship between people in advance and in this sense penetrate the whole life of citizens. Everything people do is either allowed or forbidden by law, either lawful or unlawful in itself, and in the case of a lawsuit the court should not do more than declare the legal value already assigned to the situation in question. Savigny's definition of contract – adopted by Hungarian legal dogmatics – corresponds to this understanding: According to this, a contract is a „mutual and concordant declaration of will of the parties, aiming at a legal effect”. The intention of the contracting parties is to achieve a „legal effect”, that is to modify the established legal relations between them. In other words, a contract is itself a lawful tool to change what is allowed and what is forbidden for the parties by law.

court of justice In contrast, common law regards contracts as mutual promises. A contract in this sense is a natural way of attaining a common end by two or more people who each can offer something to the others in exchange for the help received from them. Contracts are entered into outside the realm of law, as there is no omnipresent set of rules regulating every action people might take. People can make promises whenever they find it useful and are prompted to comply with their promises many ways. Law comes into play only when they do not: If one of the parties breach their promise, the other can ask a court for remedy. Promises can be enforced by the law as last resort. But the question courts face in a lawsuit is not how to apply abstract rules to the particular case but whether the promise in question should be enforced or not. The case law approach is based on the notion of a largely self-regulating society that needs an intervention of authorities only if things get off the right track. Common law is therefore not a coherent set of rules that pervades every corner of people’s lives but simply a set of principles that helps courts decide when to interfere with private transactions.

Life is a lottery 

The most important principle of common law is the doctrine of consideration. It means that a promise should be enforced when it was given to the promisee in exchange for something. In other words, the promise will be enforced by the court if the plaintiff shows that „he has bought the defendant’s promise either by doing some act in return for it or by offering a counter-promise”. However, this doctrine has proven too rigid during the twentieth century: Courts have encountered several cases in which the interest of a promisee to have enforced a promise was worth protection despite the fact that he had given no consideration for it. Courts justified their decisions by acknowledging also reliance as a basis for the enforcement of promises. The new principle held a promise enforceable if it was intended to be acted upon and was in fact acted upon by the promisee, that is, if the promisee justifiably relied on it.

Celebration at Buffalo City Hall.
© Visit Buffalo Niagara. Credit: Jim Bush.
And this is the point when Hungarians enter the stage. But, having just discussed the irreconcilable differences between continental legal systems and the common law tradition as well as the formidable difficulties Hungarian law students have with the case law approach, it would seem very surprising if a Hungarian lawyer had ever contributed to a common law doctrine. To be sure, they did not. It was not a lawyer. It was a brave young man of Hungarian origin, living in Canada. His name is Budai. Nothing else is certain about him except for one thing of great importance: He carried on a lawsuit against the Ontario Lottery Corporation in 1982 which is since cited as a classical example of the doctrine of reliance in contract law text books. And this is not everything. The case Budai v. Ontario Lottery Corporation has more bearing on Hungary than simply the origin of the plaintiff. Mr Budai managed to bring the Hungarian national character, the famous Hungarian vigour (magyar virtus) into the heart of common law. The book Contracts. Cases, Notes and Materials by John Swan and Barry J. Reiter (Toronto, 1991) describes the case as follows (p. 249.): „The plaintiff, being told by the defendant that he had won $835.40 in a lottery, spent $480.00 that night on a binge in Buffalo with his friends. The next day he was informed that the lottery corporation’s computer had made an error and that his actual prize was worth only $5. At trial in the Provincial Court, Small Claims Division, the plaintiff was awarded $835.40. The defendant appealed to the Divisional Court and the judgment was varied to $480.”

As a Hungarian I cannot but endorse the reliance doctrine.

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