As the well-known proverb says humans make mistakes. Thus, it can happen that a contract prepared by the employer contains clauses that do not represent his real will. What measures can the employer take in such cases under Hungarian labour law? Is the employee expected to point out the error? The recent judgement of the Hungarian Supreme Court answers these questions.
The employee as the claimant („Employee”) initiated the termination of his employment relationship with the employer as the defendant („Employer”), the Employee did not want to work during the whole notice period.
The Employer’s HR manager asked the Employee to come to the HR office on his last working day and requested the Employee to sign a mutual termination agreement (“Agreement”) prepared by the HR manager. The HR Director signed the Agreement on behalf of the Employer.
According to the Agreement besides the pro rata salary and the amount covering the unused holidays, the Employer pays an agreement fee to the Employee. The Agreement contained the waiver of the Employee, which stated that except the claims specifically mentioned in the Agreement the Employee has no further claims against the Employer.
After the conclusion of the Agreement the Employer filled and handed over to the Employee a so-called decommissioning form which did not contain the agreement fee.
The Employer failed to pay the agreement fee to the Employee claiming that the agreement fee was put in the Agreement from a template used by the Employer because of a clerical mistake.
2. The first instance procedure
The Employee started a litigation against the Employer claiming that the latter failed to pay the agreement fee that was contained by the Agreement prepared by the Employer.
According to the defence of the Employer, the agreement fee was written in the Agreement because of a clerical mistake, the parties have not consulted about it earlier and it would have been expected from the Employee to draw the attention of the Employer that, contrary to the discussions of the parties, the Agreement contains the agreement fee.
The first instance court dismissed the action of the Employee. The court has held that it was not necessary to contest the Agreement, as an obvious clerical error does not fall within the scope of errors of will giving rise to contest. Since the agreement fee was put in the Agreement because of a clerical error, it does not create a payment obligation.
The court pointed out that it could be expected from the Employee to draw the Employer’s attention to the contradiction between the decommissioning form and the Agreement. Given that the Employee failed to do so, his behavior infringes the principles of good faith and fair dealing.
3. The second instance procedure
The second instance court changed the first instance judgement and upheld the Employee’s action.
The court highlighted that the Employer was not mistaken in relation to the agreement fee. Indeed, in case of a mistake the contractual will and the written declaration is identical, and both are erroneous. However, if the content of the written declaration about the contractual will is wrong because of a clerical mistake, and it is disputed by the other party, the provisions on contract interpretation shall apply.
Based on those rules on the contract interpretation the court concluded that the payment obligation set forth by the Employer with a view of concluding the Agreement and making the waiver is fully clear and is in line with the Agreement in its entirety. The agreement fee does not conflict with the other conditions of the Agreement, does not preclude the earlier discussions of the parties and is not unlawful. Based on the generally accepted meanings of the words and the circumstances of the case the Employee could have a legitimate expectation that the offer shared with him by the HR manager is the result of a professional decision-making.
Further, according to the second instance court it is not unlawful and does not conflict the general standards of conduct that the Employee accepted the agreement fee as an advantageous condition, since based on the court practice the consequences of the gross negligence of the contracting party cannot be passed on to the party insisting on the contract.
4. The decision of the Hungarian Supreme Court
According to the Hungarian Supreme Court, in the present case, indeed, the provisions on contract interpretation shall be applicable and the highest judicial forum concurred the findings of the second instance court.
The Supreme Court emphasized that considering the circumstances of the conclusion of the Agreement, the Employee could reasonably conclude that the Agreement represents the Employer’s real will.
The Employee, given especially the hierarchical characteristics of the employment relationship under Hungarian labour law, had no reason to doubt the content of the written Agreement that was controlled by two persons on behalf of the Employer, or to question the intent to provide the benefit.
According to the Supreme Court it cannot be attributed to the Employee that he did not question the reality of the received offer containing the agreement fee. The Employee acted in accordance with the generally expected standard of conduct under the given circumstances when he accepted the offer made by the professional representative of the Employer containing a beneficial condition for him.
Based on the above the Supreme Court upheld the final judgement.
In his judgement the Hungarian Supreme Court confirmed his earlier practice, according to which in case of an obvious clerical error it is not necessary to contest the contract invoking mistake, but the content of the contract shall be reconstructed by interpretation.
In doing so, the circumstances of the contract conclusion shall be taken into account. In this particular case based on these circumstances, the Hungarian labour courts have rightly pointed out that the Employee did not have to doubt that the Employer intended to pay him the agreement fee.
The final judgement of the Hungarian Supreme Court also makes it clear that it cannot be expected from a non-professional employee to recognize the errors of the contract and warn the employer.
Based on the above, as an employer you shall act with careful consideration during the preparation of contracts, since in line with the Hungarian court practice there is a good chance that it will be the employer who shall pay the price of a clerical error under Hungarian labour law.