用戶:Hinnia/Mistake

Mistake at Common Law

Introduction

Definition and Nature

• A contract may be held defective
  • If one or both parties enter into it under some misapprehension or misunderstanding
  • But would not have done so had they known the true position.
• Objective approach to agreement (What a reasonable person would infer from conduct)
  • Mere subjective mistake is insufficient to set a contract aside.
• Central Policy Tension
  • Law must balance certainty in transactions (favouring a narrow doctrine)
    • Against the desire to protect a party from a bargain radically different from what was intended (favouring a wider doctrine).
• Terminological Confusion: Terms are used inconsistently.
  • Common Mistake: Both parties make the same mistake (e.g., both believe a painting is an original).
  • Unilateral Mistake: Only one party is mistaken.
  • Mutual Mistake: Both parties are mistaken, but about different things (they are at cross-purposes). This term is ambiguous and often avoided.
• Key Distinction: Void vs. Voidable
  • Void (ab initio): Contract is a nullity from the start
    • Produces no legal effects.
    • Crucial for third-party rights (if A's contract with B is void, B gets no title and cannot pass title to C).
  • Voidable: Contract is valid until the aggrieved party chooses to set it aside (e.g., for fraud).
    • Until avoided, a rogue can pass good title to an innocent third party.

Brennan v Bolt Burdon [2004] EWCA Civ 1017

• Establishes that for common mistake to void a contract,
• Mistake must render the contract impossible to perform.
• Mistake about the state of the law (e.g., the effect of a court judgment) does not necessarily satisfy this test if the contract remains performable.

Absence of Genuine Agreement

A mistake can prevent the formation of a contract if there is no true meeting of minds (consensus ad idem).

• Raffles v Wichelhaus (1864) 2 H & C 906
  • Facts: Contract for cotton "ex Peerless from Bombay".
    • Two ships named Peerless.
    • Buyer meant October ship
    • Seller meant December ship.
  • Issue: Was there a binding contract
  • Held: No contract formed due to latent ambiguity
    • The parties were at cross-purposes.
    • An objective appraisal can reveal no agreement was reached.
  • Reasoning:
    • The agreement suffered from a latent ambiguity.
    • Words used were the same the parties attached them to different subject matters.
    • No true consensus ad idem (agreement to the same thing).
    • Mutual mistake (both mistaken, but about different things) preventing formation.
• Scriven Bros. & Co. v Hindley & Co. [1913] 3 K.B. 564
  • Facts: Auction of two lots (hemp and tow) with identical shipping marks.
    • Buyer bid for both, thinking they were both hemp.
    • Auctioneer’s fault created the confusion.
  • Issue: Was a binding contract formed for the sale of tow?
  • Held: No contract for the tow.
    • A party at fault in inducing or failing to notice the other's mistake
      • Cannot enforce the contract against the mistaken party.

Common Mistake

A shared fundamental mistake that nullifies consent. The modern, narrow test is from Great Peace.

Mistake as to the Existence of the Subject Matter

• Couturier v Hastie (1856) 5 HLC 673
  • Facts: Sale of a cargo of corn. Unknown to both, it had perished and been sold before the contract.
  • Held: Buyer not liable for the price. Rationalised as a contract void for common mistake. Codified in S.6 Sale of Goods Act 1979.
• McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 (HCA)
  • Facts: Sale of a non-existent tanker. Buyer (McRae) incurred salvage expenses.
  • Held: Commission liable in damages. The contract was NOT void for mistake.
    • Construction: The Commission had warranted the tanker's existence (they assumed the risk).
    • Fault: The mistake was induced by the Commission's own fault (no reasonable grounds for belief).
• Key Takeaway: Shows the importance of construing the contract to see if one party has assumed the risk of the mistake. If they have, the contract stands.

Mistake as to the Possibility of Performance

• Sheikh Brothers Ltd v Ochsner [1957] AC 136
  • Facts: Licence to cut sisal based on a fundamental assumption the land could produce 50 tons/month. It could not.
  • Held: Contract void. The assumption was the "very basis of the contract"; its falsity rendered the contractual adventure impossible.
• Cooper v Phibbs (1867) LR 2 HL 149
  • Facts: A agreed to lease a fishery from B. Unknown to both, A already had a life interest in it.
  • Held: Agreement set aside. A contract to transfer a right one already owns is legally impossible (naturali ratione inutilis).
• Griffith v Brymer (1903) 19 TLR 434
  • Facts: Hire of a room to view the King's coronation procession. Contract made minutes after the irrevocable decision to cancel, but before parties knew.
  • Held: Contract void for mistake.
    • Common fundamental assumption (procession would happen) was false at the time of contracting.
    • Analogous to frustration, but the frustrating event had already occurred.

Mistake as to a Quality of the Subject Matter

• The mistake must make the subject matter "essentially different from the thing it was believed to be" (Lord Atkin in Bell).
• Bell v Lever Brothers, Ltd [1932] AC 161 (Leading Case)
  • Facts: Lever Bros paid large sums to terminate directors' service contracts
    • Unaware the directors had committed prior breaches that would have allowed termination for free.
  • Issue: Was the compensation agreement void for common mistake?
  • Held: NO. The mistake related to the quality (terminability) of the service contracts, not their existence.
    • The subject matter (the service contracts) still existed.
    • The fact Lever Bros would not have contracted if they knew the truth was irrelevant.
  • Principle: Sanctity of contract prevails. A bad bargain is not voidable for mistake.
  • Strict Test: Mistake must render the item essentially different.
• Scott v Coulson [1903] 2 Ch 249
  • Facts: Sale of a life insurance policy. Both parties believed the assured was alive. He was dead, making the policy more valuable.
  • Held: Contract set aside for common mistake.
  • Principle: A policy on a living life is fundamentally different from a policy payable on a death that has already occurred.
    • The subject matter of the bargain was fundamentally altered.
• Associated Japanese Bank (International) Ltd v Credit du Nord S.A. [1989] 1 WLR 255
  • Facts: Guarantee given for lease payments on four machines. The machines did not exist.
  • Held: Guarantee void for common mistake.
    • A guarantee for a lease of non-existent machines is "essentially different" from a guarantee for a lease of existing ones.
    • Also held a party cannot rely on a mistake where they had no reasonable grounds for their belief.
• Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2002] EWCA Civ 1407
  • Facts: Hire of a ship (Great Peace) to escort a vessel in distress
    • Based on a mistaken belief they were 35 miles apart
    • Was actually 410 miles.
  • Issue: Was the contract void for common mistake?
  • Held: NO. The contract was not impossible to perform; services could still be rendered, just later.
    • The mistake was not fundamental enough.
  • Principle
    • Contract must be impossible to perform due to the common mistake.
    • Impossibility must not be attributable to the fault of either party.
    • Must be no warranty (express or implied) by either party that the assumed state of affairs exists.
      • i.e. the risk of the mistake must not have been allocated by the contract.
    • Doctrine is narrow. Cases will be "few and far between".
    • Overrules the separate equitable jurisdiction for common mistake (see Part II).

Unilateral Mistake

Mistake as to the Promise

• Smith v Hughes (1871) LR 6 QB 597
  • Facts: Hughes thought Smith's oats were old. Smith knew Hughes thought this, but had not said they were old.
  • Issue: Was the contract void because of Hughes’ mistake?
  • Holding: Contract was binding.
  • Principle: Distinction between:
    • Mistake as to a term you hope for (buyer hopes oats are old) -> No relief
    • Mistake as to a term actually offered (seller promises oats are old) -> May be relief.
  • Mere knowledge of the other's subjective mistake is not enough to avoid the contract.
• Hartog v Colin & Shields [1939] 3 All ER 566
  • Facts: Negitiation of hare skins
    • Seller offered goods at a price "per pound" by mistake
      • Trade custom was "per piece"
    • Buyer tried to accept.
  • Holding: No contract.
  • Principle: The buyer must have realised the offer contained a mistake.
    • A party cannot “snap up” an offer which they know was not intended.
    • The objective interpretation is tempered where one party knows the other is mistaken as to a term.

Mistake as to Identity

Distinction between written/distance contracts and face-to-face contracts.

Face to face: Law presumes a person intends to contract with the person physically in front of them.

Contract is voidable for fraud, not void for mistake (protects innocent third parties).

Written/Documented Contracts: Where identity is crucial and reduced to writing, extrinsic evidence is not generally admissible to contradict the document. Mistake can render the contract void.

• Cundy v Lindsay (1878) 3 App. Cas. 459
  • Facts: A rogue, Blenkarn, wrote from 37 Wood St, signing his name to resemble “Blenkiron & Co”
    • Reputable firm at 123 Wood St. Lindsay
    • Sent goods on credit to “Messrs Blenkiron & Co., 37 Wood St”.
  • Issue: Was there a contract between Lindsay and the rogue Blenkarn?
  • Held: No. The contract was void for mistake.
  • Reasoning: Through written correspondence
    • Lindsay intended to deal exclusively with the entity Blenkiron & Co.
    • No consensus ad idem with Blenkarn.
    • Rogue obtained no title, so could pass none to an innocent third party (Cundy).

• King's Norton Metal Co. v Eldridge (1897) 14 T.L.R. 98
  • Facts: A rogue, Wallis, used the entirely fictitious name “Hallam & Co” in written correspondence.
    • The plaintiffs sent goods to “Hallam & Co”.
  • Held: Contract was voidable for fraud, not void.
  • Reasoning: The plaintiffs intended to deal with the writer of the letters.
    • There was only one entity (the rogue), albeit under an alias. Identity was not crucial.

• Phillips v Brooks Ltd [1919] 2 K.B. 243
  • Facts: A rogue in a jeweller’s shop claimed to be Sir George Bullough.
  • The jeweller checked a directory for the address and let him take a ring on credit.
  • Issue: Was the contract void for mistake?
  • Held: No. The contract was voidable for fraud.
  • Reasoning: The presumption applied. The jeweller intended to deal with the person in the shop.
    • Identity was not of vital importance compared to creditworthiness.

• Ingram v Little [1961] 1 Q.B. 31
  • Facts: A rogue claiming to be “Mr Hutchinson” bought a car from two sisters.
    • Checked a phone directory for his name and address before accepting his cheque.
  • Issue: Was the contract void?
  • Held: Yes. Contract void.
  • Reasoning: The detailed verification steps rebutted the presumption
    • Showing the sisters intended to deal only with the genuine Mr Hutchinson, not the person present.

• Shogun Finance Ltd v Hudson [2003] UKHL 62 (The Modern Authority)
  • Facts: Rogue went to a dealer to buy a Mitsubishi Shogun on hire purchase
    • Used a stolen driving licence to complete a hire-purchase agreement in the name of Mr. Patel.
    • Shogun Finance authorised the hire purchase agreement and the rogue drove away.
    • Rogue then sold the car to Mr Hudson
  • Issue: Was the hire-purchase agreement with the rogue void (so Hudson gets no title)
    • Or voidable (so Hudson, an innocent private purchaser, is protected by statute)?
    • Mr Hudson relied on section 27 of the Hire Purchase Act 1964
    • Statutory exception to the common law principle that "nemo dat quod non habet"
      • (nobody can pass better title than he has)
    • Non-trade buyer of a car who buys in good faith from a hirer under a hire purchase agreement becomes the owner.
  • Held: VOID.
    • No contract of hire purchase
    • Car was not Mr Hudson's.
  • Reasoning:
    • Followed the principle established in Cundy v Lindsay
    • A contract where identity is of key importance is void if the purchaser lies about their identity.
    • Face-to-face exemption established by Phillips v Brooks Ltd did not apply
    • Seller was not the dealer but the finance company.
  • Exam Gold: This case cements the distinction.
    • For exam problems, first ask:
      • Is the contract written/formalised with a specific identity
      • Or is it face-to-face/oral? Apply the presumption for face-to-face dealings.

Mistake in Equity

When it Occurs

Historical Position (Solle v Butcher):

• Equity could provide relief for a wider range of mistakes than common law.
• A contract valid at law could be voidable in equity and set aside on terms.

• Solle v Butcher [1950] 1 K.B. 671 (OVERRULED)
  • Facts: Lease granted based on a shared mistake that the flat was not rent-controlled.
  • Holding (Denning LJ):
    • Lease not void at law, but equity would rescind it on terms (tenant could choose to pay correct rent or leave).
  • Principle (Historical):
    • Equity had a separate, more flexible jurisdiction for a "common misapprehension" that was "fundamental".

The End of the Doctrine

• Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2002] EWCA Civ 1407
  • Holding: The Court of Appeal expressly overruled Solle v Butcher.
  • Reasoning: The equitable doctrine was inconsistent with Bell v Lever Bros.
  • The House of Lords in Bell could not have overlooked a wider equitable right to rescind.
• Modern Principle
  • NO separate equitable doctrine of common mistake
  • Test for common mistake
  • Same in law and equity
  • Strict Bell/Great Peace test
  • Contract is either valid or void at common law

Effect of Mistake in Equity

Historically (Solle): Equity could make a contract voidable and grant rescission on terms, giving flexible remedial outcomes.

Since Great Peace: The equitable jurisdiction to rescind for common mistake no longer exists.

Only relief is at common law (contract void) or under other doctrines (misrepresentation, undue influence, etc.).

Equitable Relief

Equity still plays a role, but not under a separate "mistake" heading.

Refusal of a Specific Performance

• Equity may refuse this remedy if it would be unjust due to a mistake, even if the contract is valid at law
• Malins v Freeman (1837):
  • Specific performance refused where the buyer bid for the wrong lot at auction due to a catalogue error.
• Tamplin v James (1880):
  • Specific performance granted.
  • A buyer's mistake about the extent of land was his own folly, not induced by the seller.

"a Court of Equity will refuse specific performance of an agreement when the Defendant has entered into it under a mistake, and where injustice would be done to him were performance to be enforced.  The most common instances of such refusal on the ground of mistake are cases in which there has been some unintentional misrepresentation on the part of the Plaintiff or where from the ambiguity of the agreement different meanings have been given to it by the different parties."

Rescission

• For Misrepresentation or Fraud:
  • Remains a core equitable remedy. A contract induced by a false statement can be rescinded.
• For Common Mistake:
  • As per Great Peace, rescission is not available
  • UNLESS mistake makes the contract void at common law.

Rectification (A Key Equitable Remedy)

• Corrects a written document that, due to a mistake, does not reflect the true agreement of the parties.
• Common Mistake Rectification: To reflect what both parties actually agreed.
  • FSHC Group Holdings Ltd v Glas Trust Corporation Ltd [2019] EWCA Civ 1361 (Subjective Test)
    • Court looks at what the parties actually intended, not what a reasonable observer would think.
    • Party seeking rectification must prove, on convincing evidence, that:
      • Parties had a common continuing intention (subjective actual intention) up to the time of the contract.
      • Outward expression of accord (they communicated this intention to each other).
      • By mistake, the written contract does not reflect that common intention.
  • F.E. Rose (London) Ltd v William Pim Jnr & Co. [1953] 2 Q.B. 450
    • Rectification refused.
    • Parties agreed to buy "feveroles".
      • Both mistakenly thought this meant horsebeans.
    • Document correctly recorded "feveroles".
      • No mistake in recording their agreement, only in its commercial effect.
• Unilateral Mistake Rectification:
  • To reflect what one party understood
    • Where the other party knew of the mistake and it would be unconscionable to rely on the document.
  • Unilateral Rectification & Unconscionability:
  • If one party (A) knows the other (B) is mistaken about a term
    • (A) fails to draw attention to it
    • May be unconscionable for A to rely on the document.
    • Rectification may be granted to reflect B's understanding (Commissioner for the New Towns v Cooper).

• Tyne and Wear Passenger Transport Executive v NURMTW [2024] UKSC 37
  • Clarifying Ambiguity: The word "agreement" is ambiguous. It can mean:
    • The transaction itself (the exchange of promises), or
    • The document that records that transaction.
    • Rectification corrects the second where it mistakenly records the first.
  • Jurisdiction is General
    • Power to rectify is not limited to specific types of documents (like contracts).
      • Applies to any document intended to record a transaction [28].
  • Rectification as a "Safety-Valve" Against Objective Interpretation
    • English law uses an objective approach to interpretation
      • (what a reasonable person would understand).
    • Can give a document a meaning different from what the parties subjectively intended and understood.
  • Remedy: Rectification acts as a "safety-valve"
• Prevent injustice where one party could take advantage of objective interpretation that contradicts what both parties intended

Relationship between Common Law and Mistake in Equity

• Associated Japanese Bank (International) Ltd v Credit du Nord S.A. [1989] 1 WLR 255 (Steyn J)
  • Pre-Great Peace View:
  • Proposed a coherent structure:
    • Narrow doctrine of common mistake at law (void) supplemented by a more flexible doctrine in equity (voidable).
    • A court should first consider common law; if the contract is valid at law, it may still be voidable in equity.
• Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2002] EWCA Civ 1407:
  • Modern Position
    • Abolished the supplementary equitable doctrine.
  • The Court of Appeal held that Solle was inconsistent with the House of Lords' decision in Bell v Lever Bros.
  • Only one doctrine of common mistake in English law
    • Strict common law doctrine set out in Bell and refined in Great Peace.
      • A contract is either valid or void.
      • Equitable jurisdiction to rescind on terms for common mistake no longer exists.
• Consequence:
  • Law is less flexible but more certain.
  • Relief for onerous bargains resulting from mistake must be found elsewhere
    • (e.g., misrepresentation, undue influence, or a successful common law plea).