Contract Law Notes

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CONTRACT LAW REVISION NOTES:
THE AGREEMENT
o contract =
o actionable promises
o Involves at least 2 parties - promisor + promisee
o Involves outward expression of common intention + expectation as to the
assurance in the promise
OFFER + ACCEPTANCE
o Need to establish that both offer + acceptance have been definitely concluded
Unilateral offer:
o Offer of promise for an act: when A offers reward for B doing certain thing, which
being done, promisor is bound to make good the promisee.
 e.g. B returns (knowing of offer) dog to A, who offered £25 reward to
anyone who could bring dog home safely. Act is done = A is bound to
pay.
 Here, it is the performance on one side which makes the promise
obligatory on the other.
 Outstanding obligation is all on one side.
Bilateral offer:
o Offer of a promise for a promise - When B accepts A's offer by doing promise, the
contract consists of an outstanding obligation of both sides - so A has obligation too.
 e.g. C promises to pay D £10, if D promises to do gardening within a
certain time. Both sides accepting they are to be bound to promises.
 Here, each party is obliged to some act or forbearance.
 Outstanding obligation on both sides.
Promises in deeds:
o exceptional situation where it's clear a contract can come into existence without
'offer and acceptance'
 e.g. wealthy person, by his deed, promises to pay a school £100,000
 Promise = binding, no need for an acceptance or even knowledge of
promisee.
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Inferences from conduct:
o Agreement may be inferred from conduct alone - aside from verbal or written
communication.
o Acceptance need be inferred from context of situation.
 e.g. person boarding bus undertakes to pay fare, even though no
express promise is made
 e.g. B putting coin into machine, here B (supplier) has entered
contract with customer - even though 0 words exchanged.
o BUT - when more than 2 parties involved, not always definite O + A.
o e.g. Clarke v Earl of Dunraven - 2 yacht owners entered in club regatta, rules
of regatta stipulated competitors make good any damage caused by fouling.
o D fouled and sank V boat.
o Held: although immediate relationship between boat owners and club, it was
held a contract existed between C and D + the clamant could recover
damages.
Test of intention:
o Objective test
o thus a person may be held to have made an offer without appreciating one was
being made.
o Same objective test to acceptance - although offeree intentions are taken into
consideration.
THE OFFER
o Willingness to enter into a legally binding contract + in its terms expressly or

impliedly indicated that it is to become binding on offeror as soon as it has been
accepted.
Offers and Invitations to Treat:
o Offer = An invitation communicated by one party to another to enter into a legally

binding contract on certain specified terms = capable of acceptance
o Invitation to treat = An invitation to enter into negotiations (not binding) with a view
to creating an offer = mere invitation to offers
o Statement of Fact = Cannot constitute as offer, merely supplying information,

therefore no acceptance can occur + t/f no valid contract created.
 E.g. 1. Harvey v Facey - Stating 'lowest price' does not constitute an
offer
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o E.g. 2. Gibson v Manchester City Council - stating "we may be prepared to sell"
equates to an invitation NOT offer to sell.
Advertisements:
o Generally - adverts in newspapers that the advertiser has goods for sale are not
offers.
o Nor are catalogues or price lists.
o Prevents advertisers from being obliged to sell to every person who accepted such
'offer'
o A display of goods marked at certain price by a shopkeeper in shop window does not
bind the shopkeeper to sell at that price or at all.
o = merely invitation to treat.
o It is for customer to offer to buy the goods
 e.g. Fisher v Bell = Display of an article with a price on it in a shop window
was only an invitation to treat and not an offer - display of illegal flick knife.
Displays of goods for sale:
o Displays of shelves in self-service shops: Invitations to treat.

o Where goods are sold on a self-service basis, the customer makes an offer to buy
when presenting the goods at the cash desk - shopkeeper may accept or reject offer.
o Display cannot be offer - otherwise moment item placed in basket, would be seen as
accepting offer + customer wouldn't be able to change mind.
e.g. Pharmaceutical Society v Boots Cash Chemists
o Self-service shelf display of medicine was an advertisement for

bilateral contract.
o t/f merely invitation to treat
o The offer was made by customer when they placed goods at cash desk
+ offer was accepted by the shop at cash desk
o t/f displaying of goods is not offer.
 However, ...
o Where display clearly states that the goods will be sold to a person who pays the
required price - likely to be held as offer.
o e.g. Notice stating " we will beat any Wifi price by £20 on spot" = continuing offer +
t/f liable.
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Transactions by Machine:
o Re Charge Card Services - an open offer to sell at pump prices was held to have been
accepted by a motorist putting petrol in task.
Carriage of Persons:
o A statement in railway timetable that a certain train will run at certain time has been
said to be seen an offer capable of acceptance by passenger who goes station to buy
a ticket.
Tenders:
o Announcement inviting tenders = not normally offer.

o Unless accompanied by words indicating lowest/highest tender will be accepted.
o When a large organization, e.g. company/ hospital / government needs supplier of
goods/ services, it advertises for tenders.
o Companies wishing to secure the business then reply to the advertisement, detailing
the price at which they are willing to supply the goods or services, and the advertiser
chooses whichever is the more favourable quotation.
o Tenders can also be invited for the sale of goods, in much the same way as bids are
made at an auction.
o As a general rule, a request for tenders is regarded as an invitation to treat (Spencer
v Harding (1870)), so there is no obligation to accept any of the tenders put forward.
o The tenders themselves are offers, and a contract comes into existence when one of
them is accepted.
Auctions:
o Advertisement of auction = not offer, but rather an Invitation - Harris v Nickerson

(1873), where the plaintiff failed to recover damages for travelling to an auction
which was subsequently cancelled - no need to indemnify - Payne v Cave
o When goods are put of for sale by advert 'without reserve' = auctioneer indicates to
prospective buyers that the bid of highest bona fide bidder will be accepted + goods
will not be removed.
o Auctioneer who removes goods on grounds that reserve price has not been met, if
item was advertised as 'without reserve' = held liable for contract breach, Warlow v
Harrison - claimant sought damages for being highest bona fide bidder.
o Held: if advertisement includes ‘without reserve’ = it becomes an offer, from the
auctioneers to the public at large, that if the auction is held they will sell to the
highest bidder (though it does not oblige the auctioneers to hold the sale in the first
place)
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o Barry v Davies
o Auctioneers (D) instructed to sell 2 engine analysers, (specialist machines used in the
motor trade).
o Claimant was told sale would be ‘without reserve’.
o New machines would cost £14,000 each.
o Auctioneer attempted to start the bidding at £5,000, then £3,000, but the claimant
was the only person interested in the machines and placed a bid of just £200 for
each machine.
o Auctioneer refused to accept that bid and withdrew the machines from the sale.
o The claimant sought damages for breach of contract and he was awarded £27,600.
o The defendants’ appeal was dismissed and the case of Warlow v Harrison was
followed.
 t/f = A contract existed between the auctioneer and the bidder that
the auction would be without reserve, and that contract had been
breached.
 Holding an auction without reserve is an offer by the auctioneer to
sell to highest bidder = contractually bound to sell to C
o However, Sale of Goods Act 1979 s.57 (2) - Inconsistent principle to the whole liable
for retracting a 'without reserve' offer.
 SOGA - suggests it is clear that a bid at an auction is only an offer
which can be retracted at any time prior to fall of hammer.
 This rule is in SOGA - No contract for the sale of the goods in the
auction, t/f comes into existence until a bid is accepted by the
auctioneer.
o SO - where goods are advertised for sale 'without reserve', until the auctioneer
accepts by the fall of hammer no contract of sale is concluded with buyer.
o t/f with regards to remedies in auctions:
 if auctioneer withdraws goods prematurely, you cannot have
action on any contract of sale because no contract has come
into existence.
 Rather, you do what court held in Warlow v Harrison.
 Claimant was not suing upon contract of sale, but upon a
collateral contract with auctioneer.
o When auctioneer put up 'without reserve' - he
contracted that this would be so + contract would be
made with highest 'bona fide' bidder + this was broken
when bid was made on behalf of owner
* Conflicting point here - if an advert for auction sale equates to invitation, how can the
stipulation of 'without reserve' amount to offer.
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GENERAL OFFERS:
o Offer does not need to be made to ascertained person but no contract can rise
unless accepted by ascertained person.
 e.g. company offers reward to person who finds + returns a valuable
diamond brooch insured by them.
 X, who knows of offer, finds + returns brooch = she is entitled to claim
reward.
o An offer - by way of advertisement of a reward rendering of certain services,
addressed to public at large, prima facie creates a power of acceptance in every
person to whom it is made or becomes known (unilateral offer)
o BUT - the contractual obligation to actually pay the reward only comes into existence
when an individual person performs the stipulated services, NOT before!
o Usually offer is exhausted once an offeree has supplied the sought
information/items (offeror clearly does not intend to pay numerous times,
usually held that person who first did act is entitled to reward)
o Some offers have nature of being accepted by more than one person
o Here - acceptance is signified by performance on the terms.
o e.g. Carlill v Carbolic Smoke (communication of acceptance waived)
o D argued it was not possible to make offer to world at large
o Held: the advertisement did constitute an offer to the world at large, which became
a contract when it was accepted by Mrs. Carlill using the smoke ball and still getting
flu = t/f entitled to £100
o Due to being unilateral offer - no need for acceptance to provide notification for
acceptance
 Moreover, argument that the alleged offer was mere puff which no
reasonable person would take to be serious - rejected = since advert
stated that £1000 had been deposited to meet demands = evidence of
sincerity of offer.
COMMUNICATIONS OF OFFER:
o An offer is effective only when it is communicated to the offeree.

o In general, acceptance cannot be ignorant of an offer.
Cross offers:
o The necessity for the communication of the offer + for its consequent acceptance,
appear to be the reason why 2 identical cross-offers do not ordinarily make a
contract.
o 2 manifestations of a willingness to make the same bargain do not constitute a
contract unless one is made with reference to the other.
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o e.g. Tinn v Hoffman + Co:

 Acceptance must be unconditional
 An acceptance must accept the precise terms of an offer.
 Here, A offered to sell B 1,200 tons of iron.
 It was held that the other party’s order for 800 tons was not
an acceptance.
 No contract resulting of the 2 simultaneous offers since each
made in ignorance of the other.
OFFER BY RENDERING SERVICES MUST BE COMMUNICATED
o rendering services can constitute as an offer

o BUT - where offer is not communicated to party whom its intended - they have no
opportunity of rejection/ no presumption of acceptance
o e.g. If A does work for B, without B's knowledge, A can only sue in contract for value
of the work where there's evidence of an acceptance/recognition of work by B.
o e.g. Taylor v Laird
o C sought to be remunerated for the services he rendered - services he had done
without knowledge of D.
o Held: Could not recover.
 D never had option to accept/reject the services while they
were being rendered + he repudiated them when he became
aware.
 T's offer was uncommunicated = C could claim no contractual
rights.
o However, in exceptional cases, say if the services rendered are necessary, there may
be liability.
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THE ACCEPTANCE:
o For contract to be formed - offeree must accept offer.

o Acceptance of offer is: the expression, by words or conduct, of assent to the terms
of the offer in the manner prescribed or indicated by the offeror.
OFFER AND ACCEPTANCE MUST CORRESPOND:
o The intention of the offeree to accept must be expressed without leaving any doubt
o 'Mirror image' rule = acceptance must be absolute + must correspond with terms of
offer.
o Acceptance must be distinguished from i) counter offer ii) rejection iii) acceptance
with some variation of terms
COUNTER OFFER + REJECTION:
o Counter offer = amounts to rejection of offer = brings offer to end.

o e.g. Hyde v Wrench
o Counter-offer rejects/ destroys initial offer
o t/f initial offer can no longer be accepted.
o However, court highlighted that if C had instead made an inquiry whether offeror
would modify terms = does not necessarily amount to counter-offer.
o Stevenson, Jacques & Co v Mclean - Held that offeree could still accept an offer of
goods, even though he had telegraphed to the offeror requesting information as to
possible terms of credit.
 Held: not counter-offer, rather a 'mere inquiry' - which should have
been answered + not treated as rejection to offer.
CHANGE IN TERMS:
o A purported (falsely appearing to do something) acceptance of an offer may

introduce terms at variance with or not comprised in the offer.
o But ( in exceptional cases) an acceptance may be seen as acceptance with an offer
to enter a further contract - generally no contract is made in these cases, since the
offeree effectively rejects offer + makes counter-offer.
o But generally:
o Jones v Daniel
o A offered £ for property belonging to B.
o In a letter accepting the offer, B enclosed a contract for the signature of A.
o Document contained various terms as to payments
o Held: no contract
o B had no accepted A's offer but made counter-offer.
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"BATTLE OF FORMS"
o Occurs in modern commercial practise

o The situation which arises where one or both parties attempt to rely on their standard
terms.
o e.g. Firm my offer to buy goods from company on a form which contains its standard
conditions of trade.
o The seller 'accepts' that offer by confirmation on a form which refers to its (sellers)
standard conditions of trade.
o These may be different to buyer - but the 2 parties have conflicting standard terms.
o It may then deliver the goods.
o But question is: I) is there a contract? ii) if so- do the buyer's or
seller's conditions prevail?
o Possible solution: 'First shot' approach:
 the seller-offeree, by purporting to accept buyer-offeror's
offer, effectively waived it's own conditions of trade = t/f
contract concluded is subject to buyer's conditions.

o e.g. Butler Machine Tool Co Ltd v Ex Cell-o Corporation
o However, in this case, court held that 'mirror image' rule needed to be
applied + stated that seller's confirmation amounts to counter-offer.
o This is capable of acceptance by buyer.
o The buyer may indicate that it accepts the counter-offer made to it by some
performance
o e.g. the receipt and acceptance of the goods, or the return of an 'acknowledgement
form' containing the seller's conditions = last shot approach
o In our e.g. (Butler) - this sort of acceptance would have concluded a contract subject to
seller's conditions, since it was the seller who fired the 'last shot' in the battle of the
forms.
o Tekdata Interconnection Ltd v Amphenol - Court here confirmed L Denning's more

'flexible' approach to Battle of Forms situation - suggesting that one should look at
whether the documents revealed an 'agreement on all material points'
o Case: supported majority view of Butler.
o Except where there is a long-term clear course of dealing between the
parties on particular terms, the normal rules of offer + acceptance
must be applied + applying those rules - the standard result will be
that the party which sends its terms last (last shot) will win because
that will be the offer which is regarded as accepted by the other
party's conduct.
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EQUIVOCAL OR QUALIFIED ACCEPTANCE:
o Acceptance must assent unequivocally & without qualification to the terms of the offer.
o e.g. the reply ' your order is receiving our attention' = too indefinite to amount to
acceptance.
o Acceptance may also be qualified by reference to the preparation of a more formal
contract or by reference to the terms which have still to be negotiated.
o In this case - agreement = incomplete + no binding contract.
COMMUNICATION OF ACCEPTANCE
MENTAL ASSENT = INSUFFICIENT
o Acceptance - in general means communicated acceptance, which must be something

more than mere assent.
o A tactic formation of intention is insufficient.
Acceptance by conduct:
Brogden v Metropolitan Ry Co
o Acceptance may be inferred from conduct without it being expressly communicated.

o B (coal supplier) altered coal supply draft agreement sent to him by M
o He returned it signed & marked 'approved'.
o M's agent put it in drawer (without acknowledging changes).
o The parties appear to have ordered + supplied coal upon the terms states but, a
dispute having arisen, B contended he was not bound by agreement.
o B argued that since the railway had never acknowledged the altered draft, which was
counter offer = there was no contract.
 Held: there was valid contract between parties
 BUT - it had not come into existence at time M's agent acquired in the
offer by putting letter in drawer, but later - either when coal was
ordered by M or supplied by B (conduct).
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COMMUNICATION TO THE OFFEROR
o Even if there's overt speech/act to give evidence of the intention to accept, English
law stipulates, in addition, that acceptance is normally not complete unless and until
it is communicated to the offeror.
o t/f if an offer's made by telephone + in middle of reply line goes dead - the offeror
does not hear words of acceptance = no contract.
o If an offeree shouts from far away acceptance, but offeror does not hear = no
contract + offeree must repeat acceptance in order for contract to be effective.
COMMUNICATION OTHER THAN BY OFFEREE
o Justification for the rule that - 'communication is required' = is that the offeror is
entitled to know whether a binding contract has been concluded by acceptance.
o t/f in principle - seems to be no reason why contract should not come into existence
if the offeror is made aware of acceptance - even though acceptance is not
communicated to offeror by offeree.
 But...
o e.g. Powell v Lee: Suggests that it is necessary that acceptance be communicated by
the offeree or by his duly authorised agent.
 Case facts: school managers resolved to appoint C as head
teacher of a school.
 One of the managers, acting on his own, informed C of what
had occurred
 he received no other communication + then later resolution
was rescinded.
 Held: no contract
 On basis that since not all the managers authorised the
communication, implied they meant to reserve power to
reconsider their decision.
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EXCEPTION TO GENERAL RULE THAT COMMUNICATION MUST BE COMMUNICATED TO

TAKE EFFECT:
1. WAIVER OF COMMUNICATION
o The general rule that an acceptance of an offer made, ought to be notified to the
offeror is for the benefit of the offeror, who may expressly or impliedly waive the
requirement of notification + agree that an uncommunicated acceptance will suffice.
o T/f acceptance may (sometimes) be held to have been made, even though it has not
yet come to offeror ( EQAUTES TO UNILATERAL OFFER)
 There are 2 things necessary for this:
 1. must be an express/impliedly intimation from the offeror that a
particular mode of acceptance will suffice.
 2. Must be some overt act/conduct on the part of the offeree which is
evidence of an intention to accept + which conforms to the mode of
acceptance indicated.
o e.g. Carlill v Carbolic Smoke:

o The manufacturers advertised inviting performance of
a condition
o Held: it was sufficient for the purposes of binding them
that Mrs C had performed the condition without
communicating to them the acceptance of offer.
o The nature + terms of offer need to be considered carefully to ascertain whether
they entitle the offeree to dispense with notice of acceptance.
ACCEPTANCE BY POST
Distinction drawn between instantaneous methods e.g.
 telex
 telephone
 fax
 email (most likely)
o And acceptance by non-instantaneous methods:
 post
o Instantaneous methods - since acceptor will generally receive immediately + can try
again if they haven't got immediately - subjects to general requirement that
acceptance must be communicated to the offeror.
o non-instantaneous (post) - where it is reasonable for the offeree to notice
acceptance by post - acceptance is completed when letter is posted.
 Offeror is bound from that time although acceptance has not
been delivered or may never be delivered.
 postal rule only apply's to acceptance of offers + not
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revocation
 Letter of acceptance must be posted
 Acceptance by most must have been requested by offeror +
acceptance by most must be normal/reasonable/anticipated
means of acceptance (Re London & Northern Bank)
o Postal rule established in Adam v Lindsell:
o A wrote to B, offering to sell wool & added 'receiving your answer in post of
course'.
o B sent letter on same day, but arrived late.
o But in the interim A had gone and sold wool.
o B sued for breach of contract.
o Held: Offer is accepted when it is posted
 Not when letter if received by offeror because otherwise B
ought not to be bound until confirmation that A had received
his acceptance letter = lead to ad infintum situation = not
reasonable)
OFFEROR MUST BEAR RISK OF ACCEPTANCE LETTER BEING DELAYED/LOST:
o Fire and Carriage Accident Insurance Co Ltd v Grant

o D offered to buy shares in C company.
o C sent acceptance letter but it was lost in post + never arrived.
o Liquidator of company sued D for the money owing for the shares.
 Held: an acceptance of post was valid when sent
 D was bound by contract to pay for shares.
o Where the delay or loss is fault of acceptor - e.g. putting wrong
address/insufficiently stamped = acceptance will only take effect once
actually received by offeror (given that this occurs within a reasonable time
of acceptance)
o Holwell Securities v Hughes [1974

 Postal rule must not have been expressly excluded in offer.
 Held: an offer which required acceptance 'by notice in writing'
indcating he wanted it in his hand, regardless of when letter
had been posted to him)
 this meant that actual communication of acceptance must
reach the offeror and as such the claimants could not rely on
the postal rule to assert the existence of contract.
 The use of postal rule must not create 'manifest inconvenience
of absurdity'
 Held: By requiring 'notice in writing', Dr Hughes had specified
that he had to actually receive the communication + t/f
excluded postal rule.
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Postal rule still applies if:
1. acceptance letter is received after notice of revocation of the offer has been sent
(Henthorn v Fraser) (acceptance had already been posted prior to revocation)
2. If acceptance letter is never received by offeror (Household Fire Insurance Co v Grant)
PLACE OF CONTRACTING:
o Whether postal rule applies or not = this will decide where contract is made
o By letter - contract is made at point of posting.
o Other cases (general) - contract made when/where the acceptance is received.
RATIONALE OF POSTAL RULE
o post office = agent of offeror NOT an agent who acceptance can be communicated to
o the rule is pragmatic means of preventing offer being revoked before letter is
received, even when offeror has promised not to revoke.
o Criticism: offeree will have full knowledge of what position they are in, knowing
whether or not acceptance has been posted - whereas offeror is ignorant to all this.
STIPULATED METHODS OF ACCEPTANCE:
o Generally - acceptance can be in any form, as long as it's communicated to the

offeree ( other than in case of unilateral offers)
o Where offeror stipulates specific method of acceptance, e.g. 'by return or post' or
'fax' + the offeree uses a different method = could lead to there being no contract,
shown in Eliason v Henshaw - if offeror clearly states that only the stipulated
method of acceptance will suffice.
o If the offeree uses an equally expeditious method of acceptance to that stipulated =

it should be sufficient.
o e.g. Tinn v Hoffmann = Offeree told to accept by 'return of post' - Held that it doesn't
necessarily mean have to be by post, could be verbal or telegram as long as the
alternative means arrives no later than a letter written by return of post.
o T/F acceptance which meets the offeror's objective in prescribing a method of
acceptance (albeit not by the method prescribed) will remain valid.
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ACCEPTANCE BY SILENCE
Even if offeror has waived communication by indicating that acceptance by silence

will suffice - it is clear the offeror would have i) no power to reject offer or ii) be
unwillingly subject to contractual obligation by reason of failure to reply.
Even if a time limit has placed on - silence beyond this point can not constitute as
acceptance.
 Lord Denning in Entores v Miles Far East Corporation:
 when considering a case where two people made a verbal contract,
supposed A shouts his acceptance across courtyard, but plane fly's
over and so B does not hear = no contract at that moment
 Not until B has heard the answer is there a contract.
Entores v Miles:
Case:
Claimant (in England) sent telex message to D ( in Holland) offering to purchase

goods.
D sent back telex (from Holland) accepting offer.
Where was point of acceptance?
If acceptance was effective from time it was sent in Holland - Dutch law would apply.
If acceptance was effective when telex received in London - English law rules apply.
Held:
 To amount to effective acceptance, the acceptance needs to
be communicated to the offeree.
 T/f the contract was made in England + subject to English law
Since acceptance must be communicated = silence can never constitute as

acceptance.
Felthouse v Bindley:
 F offered by letter to buy his nephews horse for £30 and put 'if I hear
no more about him I shall consider the horse mine at £30'
 No answer was given to letter.
 BUT - Nephew told auctioneer to keep horse out of sale as he
intended to reserve for uncle.
 Auctioneer sold horse by mistake
 F sued auctioneer for conversion of his property.
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 Held: Nephew never signified acceptance of offer before auction

happened
 Wiles J 'uncle had no right to impose sale upon
nephew'
 No contract since nephew never
communicated his intention to accept to his
uncle or 'done anything to bind himself'
In modern times this can be seen with people sending unsolicited goods.
e.g. 'If you do not return the book I have sent you by certain day, I will assume you
choose to keep' = WRONG - cannot impose contract on unwilling recipient.
t/f 1971 Unsolicited Goods and Services Act introduced - whereby recipients of
unsolicited goods could, in certain circumstances class the item sent as an
'unconditional gift' + suppliers may be guilty of criminal offence if they
demand/threaten legal proceedings for payment.
 However, situation may be different where previous dealings between

parties have occurred - where silence could then legitimately be
presumed by silence - e.g. previous dealings between parties, orders
for goods have been have been fulfilled by seller without any
notification of acceptance other than despatch of goods.
 Also - recent dicta - Re Selectmove Ltd - suggests that when
necessary intention to accept can be proved, there's no convincing
reason to why contract should not come into existence, especially
when offeree has relied on the terms of offer + it is the offeror who
denies there's a contract.
o "where the offeree himself indicated that an offer is to
be taken as accepted... see no reason in principle as to
why that should not be an exceptional circumstance
such that the offer can be accepted by silence."
o But this is just dissenting views,
but could use for counter-
argument in essay.
ACCEPTOR MUST HAVE KNOWLEDGE OF OFFER
o If A promises for an act and B does the act in ignorance of the offer, can B claim
performance of the offer on becoming aware of its existence?
o Answer appears to be: If B has not heard of the offer before doing the act, he
cannot be said to be accepting the offer.
o Gibbons v Proctor: (outcome of this case largely unaccepted)
 Held: police officer entitled to claim reward for providing information
that he did not know there would be reward for it.
o Fitch v Snedaker (NYC case) - laid down principle that reward cannot be claimed by
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one who did know that it had been offered.

 This principle largely accepted and seen as correct
 A person who does an act for which a reward has been offered in
ignorance of the offer cannot say either that there was a consensus of
wills with the offeror, or that the act was done in return for or in
reliance on the promise offered.
PRESCRIBED MODE OF ACCEPTANCE:
 Departure from usual or suggested method of communication would probably throw

upon the offeree the risk that acceptance would be delayed.
 In English Law: An offeror, who by the terms of the offer insists upon its acceptance
in a particular manner, is entitled to say that he is not bound unless acceptance is
communicated in that precise way.
 Moreover - unless as a matter of construction that prescribed mode of acceptance is
mandatory, another mode of acceptance which is no less advantageous will suffice.
REVOCATION OF ACCEPTANCE:
o General rule = acceptance is not complete until it has been communicated to offeror
o t/f an acceptance can be revoked at any time before this occurs - provided
that revocation occurs before acceptance arrive
o In relation to postal acceptance = acceptance is at point of being posted, a telephone
call revoking acceptance would be inoperative, thought call reached offeror before
letter.
o This prevents offeror from revoking offer after letter being posted.
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TERMINATION OF THE OFFER
o Once acceptance has been communicated to offeror - cannot be recalled/ undone.

o BUT - until offer's accepted - it creates no legal rights + it may be terminated any
time.
o Termination of offer may:
o be revoked before acceptance
o offeree may reject offer
o an offer may lapse by the passage of time
o death of offeree/offeror
REVOCATION OF THE OFFER
o Two rules:
1. an offer may be revoked at any time before acceptance
2. an offer is made irrevocable by acceptance.
REVOCABLE BEFORE ACCEPTANCE:
o Rule 1 is shown here:

o Offord v Davies
o The court held that this offer could be withdrawn within the specified time period,
which in this case was twelve months unless the agreement had been acted upon.
o The court also held that the withdrawal of such an offer should be communicated
effectively, otherwise this would not be valid and the opposing party would still be
capable of accepting the offer.
IRREVOCABLE AFTER ACCEPTANCE
o Rule: offer is made irrevocable by acceptance

o Great Northern Railway Co v Witham
o Once an offer is placed then the party who submitted the tender (the offer) is bound.
UNILATERAL CONTRACTS
o Act is done in return for a promise

o Traditionally - acceptance is complete only when the act has been completely
performed - up until this point it can be revoked. (Errington v Errington)
o Father made unilateral promise of giving kids his house is return for their act of
paying instalments - could not be revoked once the couple entered on performance
of the act, but it would cease to bind him if they left it incomplete and unperformed.
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REVOCATION MUST BE COMMUNICATED
o Revocation = must be communicated

o The doing of an act may constitute as acceptance e.g. posting letter or the doing of
an act.
o BUT the revocation of an offer cannot be constituted the same way, by the way of
posting a letter of revocation, or by the sale to A of an article offered to B to
purchase but must be brought to the notice of the offeree.
o The law for this established by Byrne v Van Tienhoven:
 D posted letter revoking his offer
 Letter was delayed (but C had already accepted offer, since
revocation did not reach him till after)
 Held:
 1. revocation was inoperative until communicated
 2. revocation of an offer was not communicated by the mere
posting of a letter.
o It is acknowledged that revocation must be 'brought to the mind' of the offeree.

o BUT it is submitted that where it arrives at it's address it will be effective when it
would, in the ordinary course of business, have come to the offeree's attention.
o Where offeree refrains from opening letter or neglects to pay attention to the
telex or fax machine - it should therefore be effective on arrival.
o Requirement that revocation be communicated means that, in law, an offeror may
be bound by an agreement which it does not believe itself to have made
o Dickinson v Dodd:
o Establishes that an offeree who knows that an offer has been withdrawn
cannot accept it even if the communication has not come from the offeror.
o Here A was told of offer revocation, just not by anyone acting under authority
of B. = No contract = court judgement " in this case, beyond all question"
plaintiff new that Dodds was no longer minded to sell the property"
REJECTION OF THE OFFER:
o An offer will be held to have terminated once it has been rejected by the
offeree.
o The rejection needs not be express, provided that the offeror is justified in
inferring that the offeree does not intend to accept the offer.
o It would seem, therefore, that a rejection would not operate so as to destroy
the power or acceptance until it comes to the notice of the offeror.
 e.g. A makes offer to B by letter
 Immediately on receiving the letter B writes a letter rejecting
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the offer.
 Before the rejection arrives, B changes her mind and
telephones her acceptance.
LAPSE OF TIME
Manchester Diocesan Council for Education v Commercial Investments
Claimant sent acceptance to D's solicitor and not address given.
later claimant sent to correct address.
D argued that the time they have received by acceptance by the correct form of
acceptance the offer had lapsed.
Held: no explicit prescribed method of acceptance had been given + equal method of
acceptance is valid.
Contract valid.
DEATH OF OFFEROR
o Bradbury v Morgan
o Principle established:
 If dealing with an implied contract - which has risen out of a request
 = it will be stopped by death of party.
 Death of offeror/offeree= leads to termination of contract.

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MISREPRESENT
ATION
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MISREPRESENTATION:
MR = misrepresentation
One:
o The law of misrepresentation = the law of induced mistake
o Meaning one party is induced into entering a contract as a result of a false
statement made by TP.
o The ground on which relief is sought does not rest on the mistake made by
claimant, but rather rests on fact that mistake was induced by the false statement
of fact that was made to the claimant + which induced him to enter into contract.
Two:
o To make misrepresentation claim, you need to establish that misrepresentation

was made.
o misrepresentation = unambiguous false statement of fact, made to claimant,
which induced him to enter into contact.
Three:
o English law does not usually recognise the existence of duty of disclosure. But, in
certain circumstances, a failure to disclose information my give rise to claim for
misrepresentation.
Four:
o If claimant has been induced into enter contract by a misrepresentation - they are
entitled to set aside, 'rescind' contract.
o Rescission = extremely powerful remedy, because it sets aside a contract for all
purposes.
o Rescission for misrepresentation must be distinguished from the termination of a
contract for breach.
o Rescission for misrepresentation aims to unwind contract so that it is set aside both
retrospectively and prospectively.
o Contrastingly, termination for breach, discharges the contract prospectively but not
retrospectively.
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Five:
o Damages are available as a remedy for misrepresentation.

o Pre-1963, only fraudulent misrepresentation gave rise to claim for damages ( in tort of
deceit)
o The right to claim damages for misrepresentation was extended by HOL in 1963 - it was
recognised that, in certain circumstances, negligent misrepresentation = could give rise
to a claim for damages in tort.
o 1967 - section two of Misrepresentation Act 1967, created a statuatory right to recover
damages in respect of negligent misrepresentation + in respect of some innocent
misrepresentations.
Six:
 Attempt to exclude/restrict liability for misrepresentation are regulated by section 3 of
Misrepresentation Act 1967, which subjects such clauses to a test of reasonableness.
Misrepresentation continued...
 A misrepresentation induces a party to enter a contract, but is often not part of the
contract itself.
 A fraudulent/negligent misrepresentation can give rise to claim for damages in tort + a
personal and (possibly) proprietary restitutionary claim can be brought to recover the
value of benefits conferred under a contract which has been set aside (rescinded) for
misrepresentation.
 A further means of consumer remedial is the Consumer Protection from Unfair Trading
Regulations 2014 - the giving of false information to a consumer may amount to unfair
commercial practise, entitling consumer to unwind contract, obtain discount or recover
damages.
 These rights are additional to those given to consumers by common law (including
equity) but cannot be exercised in combination with such rights.
 The proposition that a misrepresentation induces a party into contract but is often not
part of contract needs further explanation:
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 Not every statement made prior to entry into contract is incorporated into the contract
as a term - therefore difficult to establish whether a pre-contractual statement is a
representation which has induced party to enter contract or whether it is actually a fact
of contract.
 Where the statement is a term of contract - a failure to comply with it (without lawful
excuse) = constitutes as breach of contract + remedies are available.
 BUT - where the representation is not a term of contract, then claimant's claim will be
one for misrepresentation + not for breach of contract.
o BUT - it is possible for pre-contractual statement to be incorporated into contract
as a term - here, claimant will have an action for breach of contract + t/f usual
remedies available.
 BUT ... it may also be possible for claimant here to bring claim for misrepresentation +
seek rescission of the contract or damages.
 Section 1 of the Misrepresentation Act = claimant can rescind contract if have entered
due to misrepresentation, even in the case where the misrepresentation is subsequently
incorporated into the contract as a term, provided that he is entitled to rescind the
contract without alleging fraud.
 The general effect of this is to make provision for the survival of the right to rescind for
misrepresentation in the case where a statement of fact has been incorporated into a
contract as a term but as the same time the subsection does not purport to take away
any remedies available to the claimant for breach of contract ( Salt v Stratstone 2015)
 To this being the case - the claimant would appear to have available to them both the
remedies available for breach of contract but also possibility of rescinding the contract
for misrepresentation where he can establish an entitlement to do so.
What is a misrepresentation?
 Defined as an unambiguous false statement of fact which is addressed to the party

misled + which induces the party to enter into a contract.
 1. The misrepresentation must have been unambiguous

o An ambiguous statement generally won't give rise to an action for
misrepresentation except in case where a party makes an ambiguous
statement with intention to convey a meaning which he knows is not true
and the party to whom statement is made reasonably understands it in the
sense which is not true.
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 2. The representation must be false. A true statement cannot give rise to

misrepresentation.
 3. There must have been a statement. There must be some positive conduct on part
of the representor.
o A mere failure to disclose information will not, generally, give rise to action
for misrepresentation.
o Statement usually takes form of written or oral communication - but can also
take form of conduct.
 4. The statement must generally be one of fact.
 1. This distinguishes representation from promise.

o A promise = more than a statement of fact - it is undertaking to do/not do
something.
o A representation = simply asserts the existence of a given state of affairs
which is either true or false.
o The statement invites reliance upon it, but does not constitute an
undertaking to bring about the state of affairs.
 2. Statements of law, opinion + intention can in certain circumstances give rise to

claim for misrepresentation
o t/f no established that a mistake of law, can in an appropriate case, entitle
the mistaken party to set aside a contract entered into as result of a mistake
+ that a misrepresentation of law can found a cause of action (Pankhania).
 statement of opinion - generally, statement of opinion cannot be used for

misrepresentation case (Bisset v Wilkinson)
 Exception - when person giving opinion has a special skill but
fails to exercise it (Esso Petroleum)
 Statement of intention - cannot generally constitute a misrepresentation unless the
person making the statement mis-states his present intention (Edington v
Fitzmaurice)
 A statement must have been 'addressed to the party misled'
 This can be done in 2 ways:
 1. made directly - one party speaks/writes to another
 2. Indirectly - statement made to TP, with intention for it to be
passed on to claimant.
 e.g. one bank passing information to another bank - with intention of recipient bank
conveying information to claimant (Commercial Banking of Sydney v RH Brown -
Lloyd's rep)
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 Must the misrepresentation be material?

 1. From various cases it seems that 'material' statement means is one that would
affect the mind of a reasonable person, in deciding whether or not to enter into a
contract.
 2. second difficulty = the role played by materiality in case-law. Many issues rise
when having to decide whether or not the misrepresentation was an inducement to
entry into the contract.
 BUT - it is possible to argue that the requirement of 'materiality' (if there is such
thing) is distinct from inducement. The difficult case is when a party is induced to
enter into a contract by a misrepresentation which is objectively immaterial - but
courts would usually find that in this sort of case, misrepresentation did not induce
party to enter contract.
 Authorities suggest that courts adopt following approach:

o Where the misrepresentation is of such nature that it would have induced a
reasonable person to enter into a contact - then court will presume that it
did induce representee into contract + onus of proof then switches to being
on the party who made the statement to prove that the representee did
not rely on their statement in entering into contract (Museprime Properties
v Adhill properties)
o Where the statement would not have induced a reasonable person to enter
into contract, onus of proof rests on reciepeint of statement to prove
misrepresentation did in fact induce him to enter contract (Dadouriam
Group International v Simms)
 In any case - materiality requirement does not apply where misrepresentation was
made fraudulently. (Ross River v Cambridge City 2007)
 The misrepresentation must have induced claimant to enter into contract.

 The representation need not have been the only inducement to entry into contract
(Edington v Fitzmaurice 1885)
 It suffices that the misrepresentation was an inducement which was actively present
to the claimant's mind at the time at which he entered into the contract.
 Not sufficient for claimant to demonstrate he was 'supported or encouraged in
reaching his decision by the representation in question' (Raiffeisen v Royal Bank of
Scotland 2010)
 Claimant must go further + establish that representation played a 'real and
substantial' part in inducing him to enter into the contract.
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 TEST: Claimant must prove that 'but for such representation' he 'would not have
entered into the contract on the terms on which he did, even though there were
other matters but for which he would not have done so either' (Raiffesen)
 To decide if a claimant was induced by representation to enter into contract - court
will generally ask what the claimant would have done if no representation would
have been made to him - BUT, it is not generally required from claimant to prove he
would've acted differently having known truth.
 A misrepresentation does not induce a party to enter into a contract in the case
where the claimant was unaware of the existence of misrepresentation at the time
of entry into contract (Horsfall v Thomas), where the claimant placed his reliance
upon a TP when entering into contract (Atwood v Small 1838) + where D corrected
his misrepresentation + actually drew the claimant's attention to the correction
prior to any reliance was made on it (Peekay Intermark v Australia & New Zealand
banking 2006)
 However, the fact that the claimant could have discovered the true position by
acting in a more diligent fashion does not, prevent him from asserting that he was
induced to enter into the contract in reliance upon D's misrepresentation (Redgrave
v Hurd 1881)
 The preposition that the claimant must've discovered the truth & that it does not
suffice that he could've discovered the truth was affirmed by Peekay case.
 Where misrepresentation has been made FRAUDULENTLY, one can see justification
for not taking into account the carelessness of claimant.
 BUT - where misrepresentation has been made negligently or innocently, the
justification for not taking into account of the carelessness of the claimant is harder
to discern.
 Exemplified in cases:
 1. Bisset v Wilkinson (1927) - Statement of opinion
 2. Edington v Fitzmaurice (1885) - Statement of intention + inducement
 3. Spice Girls Ltd. v Aprilia World Service BV (2002) - Statement made by conduct.
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Smith v Land and House Property Corp (1884)
o A statement of opinion may amount to an actionable misrepresentation where

the representor was in a position to know the facts
Case Facts:
Although typically opinions cannot give rise to misrepresentation - here the facts that
influenced opinion - leads it to being actionable.
 The claimant purchased a hotel.

 The seller described one of the tenants as being 'most desirable'.
 In fact, as the seller knew, the tenant was in arrears and on the verge of bankruptcy.
Issue:
When the defendant’s description was found to have been severely incorrect, could the
contract be rescinded?
Held:
 Yes - contract can be rescinded.

 An opinion itself may not form a misrepresentation, but the facts which formed that
opinion may give rise to a misrepresentation
 an opinion must be made with reasonable grounds supporting it
 THEREFORE - This was held to be a statement of fact rather than opinion as the
seller was in a position to know the facts.

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Bisset v Wilkinson [1927 = There was no false statement here, just opinion.
 In order to amount to an actionable misrepresentation certain criteria must be satisfied:

One requirement being false statement.
REQUIREMENT: False statement
 There must be a false statement of fact or law as oppose to opinion or estimate of

future events:
Case Facts:
 The claimant purchased a piece of farm land to use as a sheep farm.

 He asked the seller how many sheep the land would hold.
 The seller had not used it as a sheep farm but estimated that it would carry 2,000 sheep.
 In reliance of this statement the claimant purchased the land.
 The estimate turned out to be wrong and the claimant brought an action for
misrepresentation.
Issue:
 Could the contract be rescinded for misrepresentation?
Held:
 The Privy Council held that the statement was only a statement of opinion (not a false
statement) and not a statement of fact and therefore not an actionable
misrepresentation.
 The defendant merchant was not an expert and so had provided no assurance.
 The claimant's action was therefore unsuccessful.
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MISREPRESENTATION + NON-DISCLOSURE
Introduction:
 General rule of common law is that a person contemplating entering into a contract with
another is under no duty to disclose information to another.
 'Ordinarily the failure to disclose a material fact which might influence the mind of a
prudent contractor does not give the right to avoid the contract'
 Parties must look out for themselves/ own interests - the onus is on them to ensure
they acquire the necessary information to avoid a bad bargain.
 Generally, the law is reluctant to allow a party to avoid a contract on the basis of his
mistake about the facts relating to the subject-matter of the contract.
 BUT - there are exceptions to this, which impose duties to disclose + where failure to do
so makes the contract voidable or ma give rise to other remedies.
 A misleading statement made during the negotiations leading to a contract - a

misrepresentation - is, however, viewed differently.
 The party making misrepresentation has induced the party to enter into the contract on
the basis of false information, and this displaces the normal rule that each party takes
responsibility for acquiring information relevant to bargain.
 The effect of a misrepresentation, subject to certain limitations, is to render the
agreement voidable at the suit of the misled party.
 A person who's been induced into entering a contract by reason of a misrepresentation
can refuse to carry out the undertaking, resist any claim for specific performance + if
necessary, have the contract set aside by means of the remedy of rescission
 In addition, the misled party will sometimes be entitled to claim tortious damages in
respect of loss sustained by reason of the misrepresentation.
 If the misrepresentation is made fraudulently, damages in the tort of deceit can be
recovered.
 If it was made without reasonable care being taken to ascertain truth, the misled party
may recover damages by virtue of statute, or at common law in the tort of negligence.
 Where the party making the misrepresentation believed, and had reasonable ground to
believe, that the facts represented were true, although the contract is still voidable at
the suit of the misled party, tortious damages may sometimes be reward in lieu of
recession.
 Moreover, the facts which give rise to a remedy for misrepresentation may also give rise
to other remedies.
 Where the misrepresentation has been incorporated as a term of the contract, the
misled party may, instead of relying on the misrepresentation to obtain a remedy,
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choose instead to rely on the breach of contract + claim damages, or sometimes

discharge of the contract, for breach.
 Sometimes a misrepresentation made by a trader which induces a consumer to enter
into a contract will also constitute a 'prohibited practice' under the Consumer Protection
from Unfair Trading Regulations 2008, which will give the consumer 'right to redress'
under the Regulations: to 'unwind' the contract, or to a discount or damages.
MISREPRESENTATION: GENERAL POINTS
 A misleading statement made in negotiations leading to contract can fall into one of
the following:
 1. mere 'puff' - by virtue of it's vagueness/ extravagance,
would not have grounding to be held liable.
 2. the preliminary statement may be intended by neither party

to have contractual effect, but may influence one party into
contract. - It is then labelled 'representation'. If it proves false,
the misled party will not be entitled to claim damages for
breach of contract (because no contractual stipulation been
broken), but will be entitled to claim the relief on basis of
misrepresentation.
 3. The preliminary statement, may actually be a term of

contract (showing overlap because you can have a statement
of misrepresentation being a term of contract) - In this case,
there'd be choice of remedy, since misled party will be
entitled to claim damages for breach of contract OR relief for
misrepresentation.
REQUIREMENTS FOR RELIEF FOR MISREPRESENTATION (MR):
 MR = false statement of existing (or past) fact or law made by 'representor', before
or at time of making contract, which is told to representee + which induces the party
to enter contract.
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There must be false representation:
 Silence - not equal MR

 Must be positive statement/conduct from which a statement can be implied, in
order to amount to MR.
 Conduct - nod/wink/ head shake/ smile / photograph = may suffice.
Partial non-disclosure (PND) + active concealment:
 PND may constitute a MR

 Suppression of material facts = can render that which is stated false, as where a
seller of land told a purchaser that the land had recently been occupied at a
particular rent (which was true) but omitted to inform him that more recently he'd
failed to find a new tenant except at a lower rent - t/f created false impression that
the land still had the higher value.
 Active concealment - there's authority for view that if a person makes positive
action to hide something, e.g. concealing defects of an object = MR.
Change in facts:
 MR - the representation must be false - false at the time representee enters contract
in reliance upon it.
 MR if representor knew of a change of facts and failed to disclose.
 Representor is bound to disclose change of circumstances.
Representation of opinion normally insufficient:
 An opinion, which is wrong, will not invalidate contract.

 e.g. A saying item is worth X amount = opinion e.g. Bisset v Wilkinson
 e.g. A saying item was sold for X amount = fact. (but if false to the knowledge of the
seller equates to fraudulent MR)
 A statement of opinion which is not in fact held = fraudulent MR
 Economides v Commerical Union Assurance Co plc - a statement that the cost of

replacing the contents of a flat was £16,000 to an insurance company, by 21-year-old
boy with no knowledge on matter = statement of opinion.
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BUT... opinion can be held as representation when:
 The representor must know the facts much better than the other party
o If, the representor in this case had no reasonable grounds for their opinion or
failed to investigate the facts they were providing - may be an actionable MR.
E.g. Smith v Land and House Property Corporation. - his opinion lied about
(facts - economic position of tenant) desirability of tenant.
Mere commendatory (recommending) 'puffs' insufficient
 Commendatory expressions (usually over-exaggerated comments made in adverts,

e.g. perfume will make you irresistible to opposite sex) are not treated in law as
representation of fact.
Expression of intention or prediction normally insufficient
 expression of intention/promise + prediction about future = not normally MR.

 Since, none of these can be regarded as true or false at time of being made (except if
person may MR his own mind/power to bring an event to pass)
 T/f = there's distinction between a promise which promisor intends to perform + one
which promisor intends to break or knows cannot be performed.
o Promisor intends promise - representation is truly one of an intention that

something shall take place in future + is binding if it fulfils the requirements
of contractual promise.
o Promisor does not intend promise - There is a misrepresentation of

representor's existing intention: not only is promise made which is
ultimately broken, but when it's made, the representor's ability to perform or
state of mind is represented to be something other than what it actually is =
this MR = 'one of fact' (Bowen LJ).
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 t/f if a person makes a fraudulent misrepresentation = e.g. buying goods at a time when
he knows he has no money/ no intention to pay.
Representation of law:
 1999- HOL held that in context of claims for recovery of money paid under a mistake,
that a distinction should not be made between mistakes or law + fact.
 MR of law are now capable of remedy on the same basis as misrepresentation of fact.
Misrepresentation must be addressed to the misled party:
 representation must have been addressed by the representor (or someone on his
behalf) to the misled party with the intention that he act on it.
o Peek v Gurney - here, promoters of a company were sued by P who'd
purchased shares on the faith of false statements contained in a prospectus
issued by them. P was not a person to whom shares had been allotted on the
first formation of the company; he had merely purchased shares from such
allottees.
o HOL - held that the prospectus was only addressed to the first applicants for
shares; that it could not be supposed to extend to others than these; and that
on the allotment 'the prospectus' had done its work; it was exhausted.
o A statement made directly to the misled party is clearly addressed to that
party; but will also be held to have been so addressed where the person is
one to whom the representor intended the statement to be passed on.
o If this fact is established, it is immaterial that the misled party is merely one
of a class of persons, even of the public at large.
The representation must induce the contract

 material must form a material inducement to the party being addressed.
 But for remedies at common law/equity it only needs to be an inducement for the
party to enter into the contract, not the sole or predominant/ decisive inducement.
 So - a person who bought shares in a company on faith of fraudulent statements
contained in a prospectus, but, also in the errenous belief that he'd be entitled to
benefit of a charge on the company's assets, was able to claim that he'd been
materially misled by the statements.
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HOWEVER - When unaware of misrepresentation, no valid case.

 A person who was not actually influenced by false representation cannot be said to
have been induced to enter a contact by it.
 The representation may have been immaterial, in the sense that the representee's
judgment was never effected, or the representee did not become aware, until after
conclusion of contract, that a representation had been made.
 e.g. Horsfall v Thomas

o The claimant purchased a gun which had a concealed defect.
o His action for misrepresentation failed as he hadn't inspected the gun before
purchasing it - since he did not examine gun it's condition did not effect him
when entering contract.
o Therefore, the misrepresentation did not induce him to enter the contract
as he was unaware of it.
Remedies for fraudulent, negligent + innocent misrepresentations:
o At common law a fraudulent misrepresentation not only renders the contract

voidable and t/f allows representee to obtain rescission of contract BUT, also
gives rise to an action for damages in tort in respect of the deceit.
o If t/f misrepresentation was made fraudulently, injured party will be entitled to
choose either to affirm the contract + recover damages in respect of any loss
which will remain after rescission has been effected.
o A person who's been induced to enter contract due to negligent MR made to

him - is entitled to rescind as in the case of fraud, BUT - here the Court has
discretion under section 2.2 of MR Act 1967 to refuse rescission and award
damages instead.
o Representee may also be able to claim damages in the tort of negligence or

under S2.1 of MR act 1967.
o He has choice between affirming contract and claiming damages in negligence
OR under Section 2.1 of MR Act - for all his loss + rescinding contract + claiming
for damages for any loss that will follow rescission of contract.
o IF - court refuses rescission + awards damages under S2.2 - representee may
claim any additional losses in negligence under 2.1
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Rescission of the contract
 Remedy for misrepresentation.

 Misled party can rescind without court assistance.
 Any property transferred to the representor under the contract will revest in the
party who has rescinded the contract.
 Rescission is effectively putting the parties back in the position on their pre-
contractual position. Each party returns the benefit which they received under the
contract.
 However - not always possible to rescind/right may be lost.
Mode of Rescission
 Rescission must be communicated to other party.

 But - where seller of goods has the right to avoid the contract for the buyer's
misrepresentation, it suffices if the seller (even without buyer's knowledge) retakes
possession of the goods.
 In case of fraudulent MR - courts have accepted it is sufficient for seller to take all
possible steps to regain goods - Car and Universal Finance Co Ltd. v Caldwell.
3rd party acquire rights:
 If a third party acquires rights in the goods, eg where they have been sold on
or subject to a charge or mortgage, rescission will not generally be granted as it will
prejudice the third party.
 If however, the representee does an act to rescind the contract before a sale has
taken place the 3rd party has not acquired any rights: Car and Universal Finance Co
Ltd. v Caldwell 1965:
Case:
 A fraudster purchased the claimant’s car with a cheque which bounced
 Immediately, the claimant notified the AA that the car had been purchased
fraudulently, meaning that the claimant still had legal title to it
 The fraudster then sold the car to a dealer and disappeared
 Issue: Could Caldwell’s contract be rescinded and the car returned to her, given
that the fraudster had no right to sell it, but the dealership had purchased it with
no fraudulent intentions?
 YES
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Held:
 Although rescission is usually barred by intervening third party rights, Caldwell
had made ‘Caldwell noises’ that the car was stolen.
 This was enough to rescind the contract; the dealer should have checked with
the AA that the car was not stolen
 Had ‘Caldwell noises’ been made after the dealership had purchased the car,
rescission would have been barred
No power to award partial rescission:
 TSB Bank plc v Camfield - held the right to rescind is on the representee and
not the court.
 t/f there is no power to order partial rescission.
 TSB Bank plc v Camfield:
o Wife guaranteed her husband's business debts
by way of mortgage over their jointly owned
home.
o Husband told wife (making an innocent
misrepresentation -IR) that guarantee was
limited to £15,000 ( but it was actually
unlimited)
o But when business failed - bank claimed for
home
o Wife appealed.
o Court issue: was the guarantee provided by
wife, to bank, void (not legally binding) due to
IR made by husband or could bank claim house
and wife may money to bank.
o Held: court in favour of wife. Held that as result
of husband IR, liability to bank would be limited
at £15,000 + this would allow wife to rescind
transaction to bank.
Indemnity alongside rescission
 When a contracts been rescinded, each party is entitled to be relieved of the

obligations under the contract and to recover any benefit which was
conferred upon the other party.
 Aim of rescission = to restore the position of the parties as it was pre-
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contract, the misled party can claim indemnity against any obligations which
may be incurred or which have been incurred, as a result of contract.

 e.g. Newbigging v Adam
 Bowen LJ: "party seeking rescission of a contract must give back all that he
received. The purpose of rescission is still to restore the parties as nearly as
possible to the position in which they were before the contract was made.
Bowen LJ said: ‘when you come to consider what is the exact relief to which a
person is entitled in a case of misrepresentation it seems to me to be this, and
nothing more, that he is entitled to have the contract rescinded, and is
entitled accordingly to all the incidents and consequences of such rescission."
 e.g. Whittington v Seale-Hayne 1900
 The plaintiffs bred poultry and were induced to enter into a lease of
property belonging to the defendants by an oral representation that the
premises were in a sanitary condition.
 In fact the water supply was poisoned and the manager fell ill and the stock
died.
 The terms of the lease required the plaintiffs to pay rent to the defendants
and rates to the local authority and they were also obliged to make certain
repairs ordered by the local council.
 Farwell J rescinded the lease, and, following the judgment of Bowen LJ in
Newbigging v Adam (1886) 34 Ch D 582, held that the plaintiffs could recover
the rents, rates and repairs under the covenants in the lease but nothing
more.
 They could not recover removal expenses + consequential loss (ie, loss of
profits, value of lost stock and medical expenses) as these did not arise
from obligations imposed by the lease (the contract did not require the
farm to be used as a poultry farm).
Limitations on the right to rescind if you've lost this right, you can still claim
for damages in Tort under S2.1 of MR Act 1967.
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The 5 limitations of right to rescind:
o Affirmation
o Becoming aware of misrepresentation and affirming it either
by words or act - rescission cannot be obtained.
o e.g. Long v Lloyd - knew lorry was damaged but continued to
keep it, showing an affirmation of contract, rather than
seeking a return or rescission of contract.
o Lapse of Time
o May be treated as evidence of affirmation
o where misled party fails to exercise the right to rescind for
considerable time after discovering MR (but not always the
case).
 BUT = Where MR was fraudulent, time does not matter
until representee has discovered fraud. But other
scenarios may require representee to rescind in
'reasonable time'
 e.g. Leaf v International Galleries. - Claimant tried to
rescind contract of purchase of painting he'd bought 5
years ago, because he discovered it hadn't been
painted by official constable. Held - not able to rescind
contract. Onus was on claimant to verify his purchase
when entering contract.
o Rights of third parties

o since contract is voidable, being valid until rescinded, if 3rd
party is good faith ('bone fide') acquire right of subject-matter
in contract, these rights are valid against the misled party -
provided that up until this point the contract has not been
rescinded - if contract not rescinded by time subject-matter is
in hands of TP, TP stand in position of bona fide purchasers
for value.
o ALSO- where goods are obtained by
means of MR, a TP, who before
rescission, acquires the goods in good
faith + for value from the fraudulent
purchaser cannot be displaced by the
representee.
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o Inability to make restitution

o When party exercises right to rescind- they must be in position
to rescind, position to put parties back to original position.
e.g. no way to put parties back into position e.g. have eaten
the food of contract.
o BUT, even though the the subject-matter of the contract may
have deteriorated before the truth is discovered, this is not
sufficient to prevent a party making restitution and so to
destroy the right to rescind a contract.
o In Adam v Newbigging - rescission granted of a partnership
agreement even though company was worth less than
worthless.
o Damages in lieu of rescission

o Except in cases of fraud + where claimant is consumer who has
right to redress under Consumer Protection from Unfair
Trading Regulations 2008 - court has discretion to refuse to
allow rescission and to award damages instead of remedy -
MR Act 1967 section 2.2
Under 2.2: MR Act
o Measure of damages - the loss caused by MR as a result of the refusal to allow

rescission of the contract, not the loss caused by entering into the contract.
o e.g. in contract for sale of land - this would be the difference in value between what
the representee was misled into thinking was being bought and the value of what
was received.
o BUT - it is not a claim for damages for breach of contract, and it has been stated that
the damages under the sub-section should never exceed what the claimant would
have got, had the representation been a term.
o Where the misrepresentation is innocent - but court refuses rescission, the

representee is, not entitled to an indemnity in addition to damages under S2.2.
o An indemnity is attached to the remedy of rescission and is awarded in order to
achieve the restoration of the representee's financial position before the contract.
o Since - the representee would've been entitled to indemnity had rescission been
granted, the court should, in assessing damages under section 2.2, take account of
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any sum recoverable as an indemnity in computing the loss which has been suffered
as a result of refusal of rescission.
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Misrepresentation Act 1967, s. 2.1 - Copy of the MR Act for reference:
Damages for misrepresentation.
Where a person has entered into a contract after a misrepresentation has been made to him
by another party thereto and as a result thereof he has suffered loss, then, if the person
making the misrepresentation would be liable to damages in respect thereof had the
misrepresentation been made fraudulently, that person shall be so liable notwithstanding
that the misrepresentation was not made fraudulently, unless he proves that he had
reasonable ground to believe and did believe up to the time the contract was made the facts
represented were true.
(2)
Where a person has entered into a contract after a misrepresentation has been made to him
otherwise than fraudulently, and he would be entitled, by reason of the misrepresentation,
to rescind the contract, then, if it is claimed, in any proceedings arising out of the contract,
that the contract ought to be or has been rescinded, the court or arbitrator may declare the
contract subsisting and award damages in lieu of rescission, if of opinion that it would be
equitable to do so, having regard to the nature of the misrepresentation and the loss that
would be caused by it if the contract were upheld, as well as to the loss that rescission would
cause to the other party.
(3)
Damages may be awarded against a person under subsection (2) of this section whether or
not he is liable to damages under subsection (1) thereof, but where he is so liable any award
under the said subsection (2) shall be taken into account in assessing his liability under the
said subsection (1).
[F1(4)
This section does not entitle a person to be paid damages in respect of a misrepresentation if
the person has a right to redress under Part 4A of the Consumer Protection from Unfair
Trading Regulations 2008 ( SI 2008/1277 ) in respect of the conduct constituting the
misrepresentation.
(5)
Subsection (4) does not prevent a debtor from bringing a claim under section 75(1) of the
Consumer Credit Act 1974 against a creditor under a debtor-creditor-supplier agreement in
a case where, but for subsection (4), the debtor would have a claim against the supplier in
respect of a misrepresentation (and, where section 75 of that Act would otherwise apply, it
accordingly applies as if the debtor had a claim against the supplier).]
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Section 2.2
o A way innocent MR can be protected.

o if you can establish it was not fraudulent - under this section you can argue for
differing remedy.
Royscot Trust v Rogerson [1991] 2QB 297
 Remedies for negligent misrepresentation
 S.2(1) Misrepresentation Act 1967 states that the same remedies are available
where the statement was made negligently as if it were made fraudulently.
 Royscott v Rogerson confirmed that the principle in fraudulent misrepresentation
relating to tortious damages applied also in negligent misrepresentation.
In the following case, under an agreement for the sale of a car, a finance company had been
induced by a negligently made misrepresentation into paying out too much money.
Case Facts:
 The defendant, a car dealer, mis-stated the particulars of a sale by hire purchase to
the finance company, the claimant.
 The finance company operated a rule whereby they would only advance money if a
20% deposit was paid by the company.
 The defendant stated the price of the car was £8,000 and the deposit paid was
£1,600 leaving the loan advanced of £6,400.
 This was the amount the customer needed to borrow, although the price and
deposit values stated were false.
 The customer later defaulted on the hire purchase agreement and sold the car on.
 The claimant brought an action against the defendant seeking damages of £3,625
representing the difference between £6,400 paid to the defendant minus the sum of
£2,774 paid by the customer before defaulting.
 The defendant argued that there was no loss since the defendant acquired title to
the car which was worth £6,400.
 The trial judge accepted neither submission.
 He held that if the figures on the hire-purchase agreement had shown a deposit of
£1200 and a cash price of £6,000, then the Finance Company would have paid
£4,800 to the Dealer and would have had no recourse against it since the deposit
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would have been correctly shown as £1200.

 Because the Finance Company were induced to pay an extra £1600, that was the
relevant loss suffered by the Finance Company.
 Both parties appealed.
Held:
 Damages could be claimed under MA 1967.

 Damages under s. 2(1) Misrepresentation Act 1967 should be assessed on the basis
of damages available in the tort of deceit not general contractual principles.
 This applies in the absence of fraud. The wording of s.2(1) was clear and not
capable of an alternative construction.
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Affirmation
Long v Lloyd [1958] 1 WLR 753

 Lose right to rescind if you continue with contract once learning of
misrepresentation.
 If the representee does an act to adopt the contract, or demonstrate a willingness to

continue with the contract after becoming aware of the misrepresentation they
will lose the right to rescind:
Case Facts:
 The claimant purchased a lorry from the defendant.

 The lorry was advertised in a newspaper which described the lorry as being in
exceptional condition.
 The claimant phoned the defendant to arrange a viewing and was told it was in
first class condition.
 He went to view it the following day and was told it was capable of doing 40 mph
and 11 miles to the gallon.
 The claimant test drove it and found that the speedometre was not working and he
had to pull a wire for the accelerator as this was not working also. The claimant still
decided to purchase the lorry.
 On the first journey the claimant noted certain faults with the lorry and contacted
the defendant who offered to pay half the repairs. The claimant accepted this.
 However, on a further journey the lorry broke down completely and the claimant
wished to rescind the contract and brought an action against the defendant for
innocent misrepresentation.
Held:
 By accepting the offer of payment for half the repairs when he became aware of
the defects, the defendant had lost his right to rescind as he had affirmed the
contract.
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MISTA
KE
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INTRODUCTION:
Summary:
o Mistake = when 1 or 2/more parties enter contract under some misunderstanding +

would not have done so if they'd known true = contract is defective.
o When A's misunderstanding was caused by words/conduct of B = A will normally
challenge validity of contract with a claim on B's misrepresentation -> because
doctrine of mistake is narrow + claimant could obtain more remedies for
misrepresentation.
o Generally accepted principle - when 2 parties are in agreement of terms = led to
increased use of objective test, here, matters are judged by the external standard of
the reasonable person - this test tends to protect the 3rd party who relies in good
faith on the apparent position.
CATEGORISING MISTAKES:
o Mistake made by 1 party - unilateral

o Mistake shared by both parties - mutual/common mistake
o There are different effects of mistakes on the formation of the contract:
 some mistakes 'negative' the parties' consent - in the sense of
preventing there being a sufficient agreement between the parties to
bring the contract into existence
 Other mistakes - do not operate to negative the consent but render
the contract void by 'nullifying' it.
o Sometimes we may separate the effects of mistakes:
 under the common law = under which an operative mistake renders
the contract void.
 under equity = why may provide remedies: contract rescission
(voidable), refusal of specific performance, even if the contract is valid
at common law & rectification of the the contract.
MISTAKES ABOUT THE TERMS OF THE CONTRACT = 'SUBJECTIVE' + 'OBJECTIVE'

AGREEMENT IN THE FORMATION OF A CONTRACT
o Regards mistake where, on first look it may seem the parties agreed on terms - but
in fact there is no sufficient agreement + t/f law does not regard a contract having
come into existence.
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o If the parties are not ad idem = no contract - Offer + Acceptance need to

correspond exactly.
o t/f is offeree enters contract thinking the terms mean something other than what
they actually do + if she accepts on mistaken presumption = no agreement since she
has not accepted the terms offered by other party.
o English law generally rejects the subjective approach, which would be the following:
o Subjective test: Were both parties actually agreed on the terms/ existence of
the contract, being that both parties intended to agree on the same terms in
their minds? If not - any mistake about the terms/existence would prevent
formation.
 A subjective test would have the merit that a party would be
bound only to contracts which she genuinely intended to enter
to.
 The issue: gives great scope for a party to avoid being bound
by the contract by simply showing they misunderstood terms
proposed by other party = this could undermine security of
contracts.
OBJECTIVE TEST (IN GENERAL)
o English law uses out objective test: Provides that a party may nevertheless be
held to have agreed with the other party if an agreement can reasonably be
inferred from objective facts.
o Generally, in offer + agreement = intentions of parties must be construed
objectively.
o BUT = objectively varies from one situation to another.
o In written contracts the court normally discover the parties' intentions from
the document alone.
 The words are interpreted as a reasonable reader of the document
would've understood them.
o The actual (subjective) intentions of the parties are in principle, irrelevant to the
question of construction of contract.
o However, they may be relevant to the question of whether the document can be
rectified.
o With regards to contract negotiations - Courts have rejected 'detached objectivity',
rather they look from the perspective of the reasonable person in the position of
the other party.
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THE 'OBJECTIVE TEST'
o General test set out in Smith v Hughes.

o If A intends to make contract on one set of terms + B intends to make
contract on another set of terms, being that the parties are not ad idem =
there's no contract.
 UNLESS - The circumstances are such as to preclude (prevent) one of
the parties from denying that he has agreed to the terms of the other.
 If whatever a man's real intention may be, he so conducts himself that
a reasonable man would believe that he was assenting to the terms
proposed by the other party, and that other party was upon that
belief enters into a contract with him, the man thus conducting
himself would be equally bound as if he had intended to agree to the
other party's terms.
o t/f the fact that the parties are not in real (subjective) agreement does not
necessarily prevent contract from being formed, if one party has led the other
party to reasonably believe that he was agreeing.
o Generally - this objective test will reject plea that the parties were not in
agreement.
o t/f in cases that mistake affect contract are the rare exceptions to this rule.
o Parties are bound by agreements to which they have expressed a clear
assent.
 If they exhibit all the outward signs of agreement the law will
hold that they've agreed.
o NEVERTHELESS - in some cases, even though at 1st sight a contract appears valid, the
law regards it as void because there was no when the parties' communications are
assessed by reference to the objective test.
o This may occur in following situations:
1. Where, despite outwards appearances, there is no coincidence
between the terms of the offer & those of the acceptance because
when each is tested objectively they conflict.
2. Where there's mistake about the promise, or terms of contract, which
is known to other party.
3. Where there's mistake in relation to written document.
4. Where there's mistake about identity of person with whom the
contract is made.
ONE: OFFER AND ACCEPTANCE NO COINCIDENT = MISTAKE AT COMMON LAW
o It may occur that due to a mistake, an offer may be innocently accepted in a

different sense from that in which is was intended by the offeror + the terms in
which the contract is expressed may suffer from such latent (covert) ambiguity that
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it is impossible to say that the conduct of the parties’ points to one solution rather
than another.
o In such a case one party may say: that she did not attach the same meaning to the
terms as the other party + it will be impossible to say that her conduct would have
induced a reasonable person to make one deduction rather than the other.
o t/f the contract will be void, because the terms of the offer and the acceptance did
not coincide.
 e.g. If 2 items have same name, and A makes offer to B referring to
one of them, which B accepts thinking A is referring to other, then
provided there's nothing in the terms of the contract to identify one
or other as its subject-matter, evidence may be given to show that the
mind of each party was in fact (and subjectively) directed to a
different object: that A offered one thing and B accepted another.
 Where a reasonable person in each of A and B's positions would also
have come to different conclusions about the parties' intentions,
there is a (subjective) misunderstanding which cannot be resolved by
application of the objective test.
o Absence of genuine agreement:

o e.g. Raffles v Wichelhaus = void contract - no consensus ad idem
Case:
o W agreed to buy from R cotton from a boat called 'Peerless' sailing from Bombay
o There were 2 ships called 'Peerless' and both were sailing from Bombay.
o But W meant the Peerless which sailed in October and R meant the Peerless which
sailed in December.
Held:
o No contract.
o There was nothing in agreement which would point to one or other of the
vessels as being the one identified in the contract
o t/f offer + acceptance did not coincide.
o Similarly, if A makes offer to B an offer which is ambiguous in its terms, or is

rendered ambiguous by the circumstances surrounding it, and B accepts the offer in
a different sense from that which is meant, then unless an objective construction
requires otherwise, B may effectively maintain that there is no binding contract.
 E.g. Scriven Bros & Co v Hindley & Co
Case:
 S instructed an auctioneer to sell lots of tow + hemp bales.
 The tow + hemp bales looked similar and were packaged similarly &
so not easily distinguishable.
 Defendants (Hindley & Co) believed they were bidding for 2 lots of
hemp, but in fact they had bid for one temp of tow.
 The bid price they made was reasonable had they actually been biding
for hemp, but for the tow, that they were actually bidding for without
realizing, was overpriced.
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 Bid was accepted by auctioneer - who did not realize buyer's mistake
(merely thought the bid to be an extravagant one for tow)
 When D discovered truth they refused to pay and so the claimant
sued for the price.
Held:
o No contract.
o No 'ad idem'
o Clear that offer and acceptance did not coincide.
o Claimant intended to sell tow
o Defendant, being misled by auction catalogue, intended to buy hemp.
o no meeting of the minds
o Mistake was fault of offeror not being clear.
o To put in into the words of Smith v Hughes: D had not so conducted itself that a
reasonable man would believe that it was assenting to C's terms.
o Accordingly, = no contract come into existence and t/f D not liable
o It's been said that these aren't truly cases of mistake rendering contract void, but
rather cases where there is no concurrence between the terms of the offer and
those of the acceptance: no agreement + t/f never a contract at all.
o But it is important to see them in the context of
the application of the objective test to override
subjective misunderstandings, since the essential
question is whether the offer + acceptance,
objectively construed, can be taken to match.
o In every case the question is whether the party seeking to establish a contract
can do so on the evidence of what the parties intended, and what D's conduct
had led C to reasonably believe
o If both parties were equally reasonable (or unreasonable) in their different
understandings of the agreed terms, then there will be an ambiguity which
cannot be resolved, and neither can establish a contract.
o BUT - if the misunderstandings was a result of the fault of one party, which was
not known to the other party, it may often be the case that the latter can
establish a contract on the basis of the terms as he understood them.
MISTAKES ABOUT THE PROMISE, OR TERMS, WHICH IS KNOWN TO THE OTHER PARTY
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Caveat emptor:
o Caveat emptor = general rule of contracts.
o One party is not bound to disclose to the other all "Let the buyer beware."
material facts or circumstances which might affect
the bargain and which are known to the party alone. A doctrine that often places on buyers the
burden to reasonably examine property
o Even if party A knows that party B is contracting before purchase and take responsibility
under a misapprehension about the facts, the general for its condition.
rule is that she has no duty to disillusion the mistaken
party.
o BUT - (that said, the law does impose certain duties for disclosure for specific
contracts)
o Active concealment = may constitute misrepresentation.
o Mere silence will not constitute a misrepresentation + there is no duty of
disclosure + each party must protect itself from its own mistake.
o Nevertheless, a mistake about the terms of the contract is different from a mistake
about the facts/circumstances surrounding formation of the contract.
o The law won't allow one party to hold the other to a contract where the party knows
that the other did not intend to agree on the same terms - e.g. Where A purports to
accept B's offer knowing that B does not intend it in the sense that A claims to be
entitled to interpret it.
o A cannot 'snap up' B's offer.
o ALSO - A mistake by one party of which the other ought reasonably to have known
will suffice.
 This follows from objective test of Smith v Hughes.
 Which shows that A can hold B to A's offer only if it was reasonable
for him to believe that B was agreeing with the terms of the offer as A
understood them and only if A in fact believed it.
 So a party can never enforce contract on terms which he did not in
fact himself intend at the time of the formation of the contract.
Smith v Hughes:
Case:
o S sued H for the price of oats sold + delivered + for damages for not accepting the
oats.
o S had offered to sell H oats
o H argued that S described the oats as 'good old oats'
o S said this was not true, the word 'old' had not been used.
o H ordered believing them to be old oats (when in fact they were new)
o Claimant brough action against seller based on misrepresentation + mistake.
Held:
o Valid contract despite mistake of quality, even though they're unsuitable for buyer.
o Cockburn CJ where there is acquiescence by the seller on the buyer's self-deception
there is no legal obligation to inform the buyer of the mistake.
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o Thus the contract is still binding between them even with such a mistake to a feature
that was not an essential term of the contract. There should have been a warranty
for particular characteristic to be guaranteed
o Misrepresentation action failed = cannot have silence as misrepresentation
o Mistake failed = mistake was not as to the fundamental terms of contract, but only
to quality.
Examples:
o 1) If sell house not knowing that there is underground mine, it is not for the
buyer to inform the seller of such a mine
o 2) if buy horse expecting it to be sound for price paid but is not, and only reason
the buyer thought it was sound was because of own false beliefs then the
contract is still valid-- the law does not require one to act to such a high moral
standard
o Per Blackburn J unless there is a warranty, a particular feature not stated in the
terms is not protected if the buyer shall make a mistake, such as the age of the
oats, where there is no active deception on behalf of the seller.
Hartog v Colin & Shields
o Terms of the contract:

o Where there is a mistaken statement of intent by 1 party and the other party knows
of it, then the mistake is operative + contract is void.
FACTS:
o D were London hide merchants
o They'd discussed orally selling the claimant goods for a price.
o When the final offer was put in writing they mistakenly wrote wrong price - the
wrong price amounted to 1/3 of the price previously discussed.
o The claimant brought an action to hold the defendants to the written offer.
HELD:
o Contract void.
o The court held that the claimant must've realized D's error.
o Where there is knowledge of an obvious mistake, there is a duty to correct that
mistake.
o D could not reasonably have supposed that the offer contained C&S's real
intention.
o Since this error concerned a term of the contract = the contract was void.
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o D could rescind contract.

o The party cannot "snap up" the benefit arising from the mistake of the offeree
where the evidence shows that a reasonable person would know that was not the
true intention of the offeree
MISTAKE IN RELATION TO A WRITTEN DOCUEMNT
o There are 2 remedies for mistakes about the terms of the contract which a peculiar
to written contracts.
o 1. Common law defense of non est factum (a plea that a written agreement
is invalid because D was mistaken about its character when signing it) which
permits one who has signed a written document, which is essentially
different from that which he intended to sign, to plea that, not withstanding
his signature, the legal position is that 'it is not his deed'
 The term properly applies to a deed but it equally applicable to
other written contracts.
o 2. There is equitable remedy of rectification of the contract, by which the Court

can order that the written contract be given effect in terms other than those of
the actual document in order to remedy the mistake of one or both parties about
the terms of contract.
o Written contract are different because the parties have taken the step of
agreeing a text containing the terms of contract, and courts t/f look for the
agreed terms in document itself.
o The interpretation of the document (although taking into account the context
of transaction), is objective.
o ' The question is what a reasonable person having all the background knowledge
which would've been available to the parties would've understood them to be
using the language in the contract to mean'
o t/f court's aren't easily persuaded that the parties' apparent contract, as set out
in document, should be held to be void or rectified.
Non est factum
o The effect of a successful plea of non est factum is that the transaction contained in
the document is not merely voidable against the person who procured its execution,
but is entirely void into whosever hands the documents may come.
o It is a narrow defense.
o A party's normally bound by the terms of a document which he has signed + those
too busy to read through it, prior to signing it cannot plead NEF.
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o Blay v Pollard & Morris
Case:
o D signed document which he knew to relate to dissolution of a partnership of
which he was a member.
o Unknown to him, document contained term (which had not been said in
previous oral agreement) which made him liable to indemnify her fellow
partner.
Held:
o Bound by signature + defense of NEF rejected.
RECTIFICATION OF WRITTEN CONTRACTS:
(A) Rectification contrasted with interpretation

o Rectification + interpretation = different purposes
o Interpretation = discovers the meaning which the law will give to the document as
written
o rectification = changes the document
o A party who admits the written document doesn't appear by language to reflect his
intentions may claim 1st that it should be interpreted so to give effect to those
intentions + 2nd if such interpretation isn't possible, the document should be rectified to
reflect his intentions.
o t/f sometimes = a mistake in the document may effectively be remedied by
interpretation without the need to have recourse to rectification.
(B) Rectification for common mistake

o Where a contracts been reduced to writing or a deed executed, and the writing/deed
fails to express the concurrent intentions of the parties at the time of execution, the
Court may rectify the document in accordance with their intentions.
o e.g. Craddock Brothers v Hunt

o Vendor orally agreed to sell purchaser a property.
o By mistake the written contract included the adjoining yard (which the parties had
excluded from the sale but the subsequent conveyance conveyed this land to the
purchaser.
o Held: Conveyance should be rectified to bring it into line with the parties' oral
agreement.
o Swainland Builders Ltd v Freehold Properties Ltd:

o Peter Gibson LJ set out requirements for rectification of common mistake
o The party seeking rectification must show:
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1. Parties had common continuing intention, whether or not amounting

to an agreement, in respect of a particular matter in the instrument to
be rectified.
2. there was outward expression of accord.
3. the intention continued at the time of execution of instrument sought
to be rectified
4. by mistake the instrument did not reflect the common intention.
1. COMMON INTENTION
o The document which is sought to rectify must fail to express the common intentions and
outward accord of parties.
o An absence of intention does not suffice: Accord cannot be shown where there's
confusion as to what's been agreed or where a matter's omitted from a document due
to forgetfulness.
o A concluded contract need not be shown.
o But, there must be evidence of the parties 'common intention'
o It has been debated whether the intention should be subjective looking at subjective
intentions of party) or objective ( what the reasonable observer would've though the
intentions of the party to be)
o Rectification on the basis of common mistake should be limited at least to the case
where the document fails to reflect the parties' agreement as it would be determined on
an analysis of their communications leading up the the execution of the document.
o However, there's only a 'common mistake' where both parties in fact make the same
mistake + t/f the remedy should allow only the actual shared intentions of the parties as
to the terms of the contract to override the written document.
o If the parties didn't share the same understanding as to the terms of the contract, the
claim for rectification may be based on a unilateral mistake.
2. CONTINUING INTENTION
o The intention of the parties as expressed in the prior accord must've continued
unchanged up to the time of the execution of the written instrument.
o If there's no clear evidence to this effect; the document (in its different terms)
would indicate that the parties had changed their intentions by the time of the
execution of the written document.
3. FAIL TO REPRESENT COMMON INTENTION
o The party seeking to have a document rectified must adduce convincing evidence
that its terms do not accurately record the common intention of the parties at the
time.
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o However, rectification is not an appropriate where the mistake relates to the

transaction itself rather than to the document which purports to record it.
o t/f there must be a literal disparity between the terms of the agreement & the
document.
o Proof of an inner misapprehension is insufficient.
 Frederick E Rose (London) Ltd v William H Pim Jnr & Co Ltd:3
o Rose received goods horsebeans labelled as 'feveroles' from it's middle
eastern associates
o rose did not know what they were so asked Pim.
o Pim replied they were simply horsebeans + so Rose orally contracted to buy
from Pim a quantity of horsebeans to meet this order.
o A subsequent written agreement embodied the same terms.
o However - feveroles were a very different type of bean
o Rose claimed to have the written agreement rectified to read 'feveroles',
intending to claim damages on the agreement if so rectified.
Held:
o Rectification refused
o Both the oral + written contracts were for horsebeans.
o There was no literal disparity between them
o The only mistake was the mind of the parties at the time.
Denning LJ:
Rectification is concerned w/ contracts + documents, not with intentions.
In order to get rectification it's necessary to show the parties were in complete agreement
on the terms of their contract - but by error wrote them down wrongly & in this regard, in
order to ascertain the terms of their contract, you do not look to the inner minds of the
parties- into their intentions- any more than you do in the formation of any other contract.
----- But: it's been held that, where the parties have expressly agreed what is the particular
meaning of words in written contract, the contract can be rectified to make it clear that the
words bear the meaning agreed.
C. RECTIFICATION FOR UNILATERAL MISTAKE
o The remedy of rectification was originally granted only in cases of common mistake,
to correct erroneous expression of the common intention of both parties.
o It' s been extended to unilateral mistakes - where document fails to reflect the
intention of only one of the parties at the time of execution.
o BUT - if the mistake is unilateral = it's more difficult to establish that the document
should be rectified because rectification is a 'drastic' remedy which deprives the non-
mistaken party of the benefit of the document which he intended and which were
apparently agreed by the party who claims he made a mistake.
o The knowledge/conduct of the party who was not mistake must be such as to make
it inequitable for that party to object to rectification.
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o The course will not order rectification for unilateral mistake unless 3 things are
satisfied:
 1. other party must have actual knowledge of the mistaken
party's intentions and of the mistake. (someone who's willfully
shut their eyes to knowledge that a reasonable person
would've noticed)
 2. The party not under mistake must've failed to draw the
mistaken party's attention to the mistake.
 3. The mistake must be such that the party not under a
mistake would derive a benefit / or the mistaken party would
suffer a detriment if the inaccuracy in the document were to
remain uncorrected.
o It's clear that if a party executes a document in ignorance that the other party is
under a mistake, the remedy for rectification will be denied.
LIMITS ON THE REMEDY OF RECTIFICATION:
o The award of remedy for rectification is within the discretion of the Court.
o As an equitable remedy - it's barred not only by the mistaken party waiving his claim to
the remedy, but also by the equitable doctrine of laches - where other party would be
prejudiced by the delay in bringing the claim.
o Rectification may also not be ordered if it would prejudice of an innocent TP.
EQUITABLE REMEDIES FOR MISTAKES ABOUT THE TERMS
o Courts of equity developed their own remedies in favour of a party who'd made a
mistake.
o We've already see that equity can rectify a written document in order to give effect to
the true agreement of the parties.
o 2 other remedies are also relevant: specific performance (which may be refused where
there's been a mistake) + rescission.
REFUSAL OF SPECIFIC PERFORMANCE
o In cases of contracts for the sale/transfer of land, the common law remedy is
damages but equity would normally compel the transfer of the lands by means of an
order of specific performance.
o Specific performance = discretionary remedy + court will not order it where it would
cause undue hardship in the circumstances of the case.
o Mistake of a type which is insufficient to render the contract void at law may be a
ground for resisting specific performance -where it would be harsh to enforce
performance of a contract against one who has entered into it under a mistake.
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o Specific performance may be refused not only where the mistake is about the facts
relating to the land but also where mistake relates to the terms of the contract itself,
such as the term which identifies the property that the purchaser has agreed to buy.
Leaving the party to a suit for damages (these case more difficult since there's no blame on
the claimant.
o Malins v Freeman:
 A purchaser bid for + bought 1 lot of land at an auction in the belief
that he was buying a wholly different lot
 Court refused to order specific performance of the contract.
 Held: D's mistake was due to his own carelessness and to no fault of
the claimant
 BUT - the Court was prepared to exercise its discretion in his favour,
leaving the claimant to claim damages at law.
Comparatively...
o Tamplin v James
o D bid for + bought an inn & outbuildings in the mistaken belief that the lot included 2
attached pieces of garden.
o There was little excuse for the misapprehension as the plans of the property to be sold
were exhibited at the sale.
o Held: Court made an order for specific performance of the agreement.
RESCISSION:
o Sometimes said that - where a contracts binding at law, a party who made a
mistake about the terms may be able to obtain rescission in equity.
o OR in the case of unilateral mistakes in written contracts, equity might give D the
option of accepting rectification or having contract rescinded.
o BUT - such statements must now be viewed with caution, + there appears not to
be any general equitable discretion to grants rescission for mistake about the
terms of a contract which is valid at law.
o 1 view - is there must be fraud or misrepresentation on the part of the other
party before rescission is available.
o other view - (this formed basis of decision in Solle v Butcher) - it is sufficient if the
Court is 'of the opinion that it is unconscientious for (the other party) to avail
himself of the legal advantage which he has obtained by the contract.)
o BUT this approach of Denning LJ in Solle v Butcher was rejected in The Great
Peace (TGP).
o In TGP - court held there is no equitable jurisdiction to rescind a contract for a
common mistake of fact where the mistake is not sufficient to render the
contract void at common law.
o This is on the basis that the 'premise of equity's intrusion into the effects of the
common law is that the common law rule in question is seen in the particular
case to work injustice + for some reason the common law cannot cure itself.
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o A similar argument should apply to a mistake about the terms.

o The objective test applied by the common law already prevents a party who
made a mistake about the terms of the contract from being bound where the
other party knew, or ought to have known - No further role needed in equity.
MISTAKE ABOUT THE IDENTITY OF THE PERSON WITH WHOM THE CONTRACT IS MADE
o These mistakes can only occur when A contracts with B, believing B to be C.

o = where a party has in contemplation a definite and identifiable person with whom he
intends to contract.
o At time when contract made, one party must regard identity of other party as really
important.
o t/f someone who accepts bid at auction, cannot allege they cared about identity of other
party.
o Issue usually is which of 2 innocent people defrauded by a TP is to bear the loss.

o e.g. If A is induced to enter into contract of sale of goods by a fraudulent
misrepresentation by B about his identity; but by time A has discovered truth
about B identity, B has sold goods to C.
Outcome:
o The fraudulent MR would render contract between A and B as voidable, but
rescission no longer possible once the goods have gone into hands of C.
o C can keep the goods and leave it to A to get his remedy in damages against B ( if
he can find him + if B is solvent)
BUT...
o If A can show that there was mistake of identity which rendered his contract void, then B
acquired no title to the goods and so could not transfer title to C.
o C must t/f return the goods or pay damages in the tort of conversion to A.
o Shogun Finance Ltd v Hudson = contract may be void for mistake of identity (thus not
protecting the innocent third-party purchaser)
A) AN OFFER CAN BE ACCEPTED ONLY BY THE PERSON TO WHOM IT IS ADDRESSED
o A can only say he is in a contract with B, if he knows B is aware of this.

o A person cannot constitute himself a contracting party with one whom he knows or
ought to know has no intention of contracting with him: an offer can be accepted
only by the person to whom it's addressed.
 e.g. Boulton v Jones - Pollock CB said: It is the rule of law, that if a
person intends to contract with A, B cannot substitute himself in.
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o But we need to remember that offer + acceptance needs to be looked at in objective

sense.
o the test is not just 'did A intend to contract with B?' but also 'how would a
reasonable person in the position of the offeree have interpreted offer?'
o SO - if A makes an offer to B in mistake for C, and B, reasonably believing that the
offer is intended for him, accepts = A is bound, even though he can prove that he
had made a mistake. e.g. Upton-on-Severn RDC v Powell (extreme version):
o D called for Upton fire brigade, in mistake it was Pershore fire brigade in whose are
he was + call was accepted in good faith by Upton brigade.
o Held: D was contractually bound to pay for their services despite mistake + despite
fact neither party thought they were entering a contract.
o No contract formed if person accepting offer believes on reasonable grounds that

he's accepting an offer from someone other than the person who it has been made,
and this fact is known to offeror.
o e.g. Cundy v Lindsay:
o A rogue, Blenkarn, hired a room at 37 Wood street, Cheapside.

o This was in the same street that a highly reputable firm called Blenkiron & Son
traded.
o The rogue ordered a quantity of handkerchiefs from claimant disguising the
signature to appear as Blenkiron.
o The goods were dispatched to Blenkiron & co 37, Wood street but payment failed.
o Blenkarn sold a quantity the handkerchiefs on to the defendant who purchased
them in good faith and sold them on in the course of their trade.
o The claimants brought an action based in the tort of conversion to recover the value
of the handkerchiefs.
o The success of the action depended upon the contract between the Blenkarn and
the claimant being void for mistake.
o If the contract was void, title in the goods would not pass to the rogue so he would
have no title to pass onto the defendants.
o Ownership of the goods would remain with the claimant.
Held:
o The contract was void for unilateral mistake as the claimant was able to
demonstrate an identifiable existing business with whom they intended to
contract with.
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o SO with regards to this case:

 If the contract between the A + B was voidable for fraudulent
misrepresentation = C entitled to retain goods, since they'd been
taken in good faith + for value.
 If the contract between A + B was void for mistake = B had acquired
no title to the goods from A & so could not pass title to C.
THE NEED FOR AN IDENTIFIABLE THIRD PERSON
 If A's mistake is not about the identity of other party = then he cannot prevent
contract formation on basis that he 'would have not have entered contract if he had
not been labouring under some mistake regarding personality of other party'
 t/f sometimes said - mistakes as to attributes = insufficient.
Example given of mistake as to 'attributes':
 solvency of person
 social position
 does he have a driving licence?
 'error of identity' consists in misapprehending (the attributes of) 2 or more persons.

 'error of attributes' consists of misapprehending (the attributed of) a single person.
E.g. King's Norton Metal Co Ltd v Edridge, Merrett & Co Ltd.
 A rogue ordered goods from the claimant using a printed letter head a claiming to be a
company called Hallum & co with offices in Belfast Lile and Ghent.
 In fact no such company existed.
 The claimant sent out the goods on credit.
 The rogue sold the goods on to the defendants who purchased them in good faith.
 The rogue then disappeared without paying for the goods.
 The claimants brought an action for conversion of the goods based on their unilateral
mistake as to identity.
 Claimants argued:
o the contract with Hallam & Co was void + the goods were
t/f still their his property
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Held:
 The contract = not void for mistake as they could not identify an existing company
called Hallum & co with whom they intended to contract.
 The mistake was only as to the attributes of the company.
 The contract was voidable for misrepresentation but that would not stop title passing
to the rogue
 the defendants therefore acquired good title to the goods.
 Court of Appeal held:

 claimant had intended to contract with writer of letter.
 even though claimant would not have entered contract if he knew
was 'sort of person' rogue person was - a contract was made
which was not void on grounds of mistake but only voidable on
grounds of fraud.
 If it could've been shown there was a separate entity called Hallam & Co and another
entity called Wallis = then the case may have come within the decision of Cundy.
 But here, in courts eyes, there was a contract by the plaintiff with the person who wrote
the letters + by which the property passed to him.
 t/f to establish mistake as to identity, the party contracting must prove not merely that
she did not intend to contract w/ the person with whom the apparent contract was
concluded, BUT there was a 3rd identifiable person who whom there was an intention to
contract.
DIFFERENCE BETWEEN CUNDY AND NORTON:
 The plaintiffs in Cundy knew of the entity with which they intended to deal,
Blenkiron & Co, and that entity was different from different from the identity of
the author of the letters
 Whearas...
 In Norton the the plaintiffs intended to deal with the author of the letters but
were under the mistaken impression that the author was a company called
Hallam & Co when in fact it was Wallis.
 (1) Where A contracts w/ B in the belief that B is not B and B knows of this error, it might
be thought that the situation is no different from that where (2) A contracts with B in
mistake for C, and B realises mistake. - BUT THERE IS A CONSIDERABLE DIFFERENCE!
 In situation 2: contract void because B cannot accept an offer which he knows is not
intended for himself but for C.
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 In situation 1: There's no 3rd person to whom the offer is really addressed, it is

addressed to B, even though A mistakenly believes that he is not B. T/f B is not
prevented from accepting an offer addressed to himself + the contract will be valid and
binding.
 But in some circumstances, the offer made by A may expressly/impliedly contain a

stipulation that excludes B.
 These are terms upon which A is prepared to contract & as we know, it's not possible for
an offeree to accept an offer which he knows is made to him in different terms from
those in which he purports to accept.
 B cannot therefore accept such an offer.
 e.g. An offer may be made to certain group of people

 e.g. members of a club/college (of whom B is not a member of)
 B may know (based on previous interactions with A) that he is a person A
does not want to sell to.
 e.g. A drama critic who's refused a ticket to a show cannot conclude a
contract by going to box office in disguise or by getting a friend to buy
ticket for him.
 In King's Norton, the mistaken claimant failed to satisfy the court that this implication
should be made.
 BUT... it was different in Sowler V Potter where it was held that the identity of the
tenant was a vital element in a tenancy contract + t/f any mistake with regard to her
identity rendered the contract void ab initio (from the beginning)
o But this is NOT a good positive test of mistake in English law.
o the proper test should have been to inquire whether a stipulation could be
implied into the offer that the offer excluded the particular person as a tenant +
whether this stipulations was known to the offeree.
o the answer = NO such stipulation could be implied + the contract should have not
been held void.
o The decision for Sowler has had massive disapproval + basically overruled.
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WRITTEN CONTRACTS
 Regarding written contracts, the identity of the parties is established by the names
written on contract.
 In Shogun, the majority of the HOL based their decision on the fact that the contract was
in writing & therefore, the only person who could've been a party to hire-purchase
agreements with Shogun Finance, was Mr Patel (whose driving license had been used,
without his knowing) for credit check.
 Because it was not actually Mr Patel who signed contract = void.
TRANSACTIONS CONCLUDED IN THE PARTIES' PRESENCE (FACE TO FACE)
 Where the parties do not conclude their contract in writing, nor through
communications at a distance from one another, but deal face to face, there is a
presumption that each intended to deal with the other not with someone else.
 IN simple terms: Where the parties contract in a face to face transaction

the law raises a presumption that the parties intend to deal with the
person in front of them
 e.g. Phillips v Brooks 1919:
Case
o A rogue purchased some items from the claimant's jewelers shop claiming to be
Sir George Bullogh.
o He paid by cheque and persuaded the jewellers to allow him to take a ring
immediately as he claimed it was his wife’s birthday the following day.
o He gave the address of Sir George Bullogh and the jewellers checked the name
matched the address in a directory.
o The rogue then pawned the ring at the defendant pawn brokers in the name of
Mr. Firth and received £350.
o The defendant's had no knowledge of the fraud.
o He then disappeared without a trace.
 The claimant brought an action based on unilateral mistake as to identity.

o sued for return of ring or the value
o he alleged he'd never parted with the property in it.
HELD
o The contract was not void for mistake.
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o Where the parties transact face to face the law presumes they intend to deal
with the person in front of them not the person they claim to be.
o Plaintiff was found to have had intention to deal with person in front of him - the
contract being voidable, rogue was able to confer on the on the defendants good
title to the ring so they could defend themselves against claimant.
o Horridge J: even though claimant believed the rogue to be Sir George, he in fact
contracted to sell + deliver to the person who came into the shop.
o Claimants intention was to 'sell to the person present and identified by sight and
hearing'
o The jewellers were unable to demonstrate that they would only have sold the
ring to Sir George Bullogh.
o Contract therefore not void on grounds of mistake but only voidable on ground
of fraud + defendants had acquired good title to ring.
Ingram v Little 1961
Case:
 Two sisters Hilda and Elsie Ingram sold their car to a rogue calling himself Mr.
Hutchinson.
 They agreed a price for cash, but when the rogue offered a cheque Elsie said the
deal was off.
 She wanted cash or no sale.
 The rogue then gave them his full name and address and Hilda went to the post
office, which was two minutes down the road, to check the details out.
 When she returned she informed Elsie that the details checked out and the
sisters agreed to let Mr. Hutchinson take the car in return for a worthless cheque
 the rogue sold the car was on to Mr. Little, who took it in good faith.
 The sisters brought an action to recover the car.
Held:
 The contract was void for mistake + vehicle still the sisters property.
 The Court of Appeal held that the sisters only intended to deal with Mr.
Hutchinson at the address given because they were not willing to offer a sale
for payment by cheque from anyone else.
 Although in face-to-face contract there's a presumption that the contracts not

void for mistake of identity, the specific circumstances in this scenario, in
particular, the investigation of telephone diretory - indicated that it was with
Hutchinson that the claimants intended to deal + not with the rogue who was
physically present before them.
 t/f here the presumption was rebutted.
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 This case has received widespread criticism and has not been followed since.
 - Essentially same as Phillips - where case was held as voidable.
 THEREFORE, ANOTHER CASE CONTRADICTED INGRAM...
LEWIS V AVERY 1971
 The claimant sold his mini cooper to a rogue claiming to be the actor Richard Greene
(who played Robin Hood in a series at the time).
 The rogue showed the claimant a Pinewood studio pass which had Richard Greene's
name and an address on it.
 The claimant then let him take the car with the log book in exchange for a cheque for
£430 which was later dishonoured.
 The rogue sold the car on to Mr Avery for £200 claiming to be the claimant.
 The claimant sought return of the car on the grounds that the contract was void for
mistake.
Held:
 The contract was not void for mistake.
o The court held that A intended to contract with the

person actually present before him.
o Contract therefore merely voidable for fraud
o Therefore, A acquired the property in the car against L.
 The case of Ingram v Little was criticised by all of the judges although not formally
overruled.
 The presumption that the parties intend to deal with the person in front of them
was not displaced and remains a 'strong presumption'
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THE CURRENT STATE OF LAW; CRITIQUE:
 The decision of the majority of the HOL in Shogun Finance Ltd. v Hudson rested on fact
that the contract was in writing + identity of parties to contract were to be determined
by an objective interpretation of the document itself.
Although various views on this issue it's been largely accepted that contracts which are not
in writing but formed through offer and acceptance between parties e.g. exchange of letters
- the intentions of of each party as to the person with whom he is willing to contract is
determined by an objective test of the communications + the party who knows e.g. that he
is not the intended recipient of the offer cannot claim to have entered into a contract by
accepting it.
Shogun Finance Ltd v Hudson [2004] AC 919
Case:
o A rogue purchased a car on HP terms from a car dealer.
o He had produced a false driving license in the name of Durlabh Patel.
o The car dealer faxed the driving license to the claimant finance company and
phoned through the details on the application form.
o The claimant then did a credit search on Durlabh Patel and then told the dealer to
let the rogue have the car.
o The Rogue paid 10% deposit and drove off with the car.
o He then sold it on to the defendant and reneged on the finance agreement.
o The claimant brought an action against the defendant claiming to be the owner of
the car as the contract was void for mistake.
Held:
o 3:2 The contract was void for mistake.
 If agreement was only voidable for fraud = D entitled to car
 If agreement void for mistake about fraudster's identity = fraudster not
considered as a 'debtor' (required under s.27 of Hire-Purchase Act 1964 for hire-
purchase agreement) under 'hire-purchase agreement' + defendant = not
protected.
 HOL held the hire-purchase agreement = void, because, it could have only been
made between the company + Mr Patel - not possible since Mr P had no clue of
deal.
 t/f D did not obtain title to car + finance company were entitled to it.
o The contract concluded between the finance company and the rogue was made
inter absentes.
o The identity of the person was crucial to the contract as that it was Durlabh Patel
that the credit check was carried out on and the claimant would not have allowed
the car to go without the credit check.
o The two dissenting judges were highly critical of the result.
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o Lord Millet and Lord Nicholls were of the opinion that there should be no distinction
between contracts made inter absentes and contracts inter praesentes and that
Cundy v Linsey should be overruled.
Inter absentes:
 Where the parties are not physically present when the contract is made, eg. where
the contract is made through dealings through the post, telephone or over the
internet, the courts will only make a finding of mistake if the claimant can
demonstrate an identifiable person or business with whom they intended to deal
with.
 A mistake as to their attributes will not suffice
 Example cases
 Cundy v Lindsay
 King's Norton Metal v Edridge
 Shogun Finance v Hudson
MISTAKES OF FACT OR LAW ABOUT THE SUBJECT-MATTER OF THE CONTRACT OR THE

SURROUNDING CIRCUMSTANCES
 Regarding situation where parties have agreed on the terms of the contract, and
neither makes an operative mistake about the other's identify
 BUT = one or both parties have contracted in the mistaken belief that some fact
which lies at the root of the contract is true, either fact about subject-matter of
contract, which was relevant to the claimant's decision to enter contract.
 It is rare to satisfy the requirements for this sort of mistake - but, if satisfied, the
mistake renders the contract void.
 This form of mistake invalidates contract by nullifying consent.
 Until recently for this sort of mistake to be operating + to invalidate contract it had
to be one of fact and NOT law.
 BUT = HOL 1999 held, in the context for recovery of money paid under a mistake, a
distinction should no longer be made between mistakes of law + mistake of fact.
 This reasoning now applied to mistakes in contract.
o Mistake of fact =
 misapprehensions or misunderstandings at the time of
contract formation of an apparent contract
 where operative, renders the whole contract void ab initio.
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UNILATERAL MISTAKES OF FACT OR LAW
o A unilateral mistake of fact or law does not render contract void.

o As shown in Smith v Hughes = drew distinction between a unilateral mistake where the
terms of contract, which may prevent there being a contract unless the objective test
can override the absence of subjective agreement
o AND a unilateral mistake about the facts relating to the subject-matter of
the contract, which is irrelevant even if the party knows about the mistake.
o The mistaken party will have a remedy if the other party gave a warranty in
the contract about the subject-matter, or if the mistake was induced by the
other party's misrepresentations.
COMMON MISTAKES OF FACT OR LAW:
o Where both parties make the same mistake of fact or law relating to the
subject-matter or the facts surrounding the formation of contract = contract
may be void.
o BUT - the courts have developed a very narrow test for these mistakes -
emphasizing that the parties are normally expected to provide in the
contract for the allocation of the risk of unknown facts + that a party should
be entitled to rely on the doctrine of mistake only in exceptional cases.
COMMON MISTAKE AT COMMON LAW:
o Leading case - Bell v Lever Brothers Ltd

o Mistake as to a quality of the Subject-Matter
o HOL decision 1931.
o Facts of case are simply but the opinions are difficult to interpret regarding scope of
doctrine of common mistake.
o CASE:
 L entered into 2 agreements with B and S.
 1st agreement = service contracts by which B + S were appointed to
Board of Niger Company - a subsidiary of L - for 5 years with salaries
of £8,000 + £6,000 respectively.
 2nd agreement = compensation contracts by which L, in consideration
of their retiring within the service period, later promised to pay B
£30,000 + S £20,000.
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o Unknown to L - while working under their contracts, B + S, secretly

entered on their own account into transactions in cocoa - this
conduct, if L had known, would've given it rights to dismiss them +
without compensation.
o L had entered into compensation contracts + paid the promised sums
(without the knowledge of their breaches)
o When L discovered truth = sought rescission of the compensation
contracts + recovery of money on grounds that it had been paid
under a mistake of fact.
o Jury found = B and S not guilty of fraud + that at the time they entered
compensation contracts they did not intend to breach the duty.
o t/f case must be considered for common mistake.
o common mistake = where the parties had both contracted under the
same mistaken presumption.
o L would never have entered into contract if it had known the true
state of affairs & it therefore alleged that the contract was a nullity
from the beginning.
o Wright J + Court of Appeal upheld this.
o BUT = HOL held that contract was valid + binding.
o The House of Lords held that this was only a mistake as to quality
and did not render the contract essentially different from that which
it was believed to be. The action (of Lever bros bringing an action
based on mistake saying that they entered the agreement thinking
they were under a legal obligation to pay compensation) therefore
failed.
HOL Held contract to be valid because:
o The mistake was not of "such a fundamental character as to constitute an underlying

assumption without which the parties would not have made the contract they in fact
made"
o It was a mistake as to the quality.
o Moreover, the case held that common mistake does not lead to a void contract
unless the mistake is fundamental to the identity of the contract.
o Effectively, the mistake must nullify or negative consent of the parties in order for
the agreement to be void.
o In order for the contract to be void by common mistake the mistake must involve the
actual subject-matter of the agreement and must be of such a "fundamental
character as to constitute an underlying assumption without which the parties would
not have entered into the agreements".
o From the facts the Court found that the mistake was not sufficiently close to the
actual subject-matter of the agreement.
o The parties got exactly what they had bargained for.
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THE RELATIONSHIP BETWEEN COMMON LAW MISTAKE AND EQUITY:
Associated Japanese Bank (International) Ltd v Crédit du Nord SA:
Case
o Claimants, Associated Japanese Bank, bought 3 engineering machines from D (a
rogue).
o They bought this machinery & as part of the contract, they leased it back to him,
with a guarantee from D, Credit Du Nord SA.
o D guaranteed the fraudulent party's obligations under the sale + lease-back.
o Rogue failed to keep up with payments.
o He was adjudged bankrupt
o AJB (claimant) sued on the guarantee (sued for D's money).
o However, the parties discovered that the machines did not exist!
Issue:
o Whether the contract between claimant + defendant could be set aside or made
void, due to the engineering machines not actually existing.
Held:
o Court held contract = void by common mistake.

o Machines were fundamental to contract and the mistake to their existence
was shared by both parties = t/f the subject matter of the contract was very
different from what they'd believed to enter into.
o Court stated: for common mistake to render contract void, the subject
matter must be 'essentially and radically' different from what the parties
believed to exist.
 the guarantee provided the substitution of the subject of the contract,

& that is, the machines, could be made only with the guarantor's
consent, it was subject to an express condition precedent that the
lease related to existing machines.
 Alternatively, it was stated that the contextual background + the fact
that both parties were informed that the machines existed meant that
such a condition could be implied.
o However, you can no longer base the doctrine of common mistake on implied terms.
o Great Peace Court of Appeal:
o "Theory of implied terms is as unrealistic when considering common mistake
as when considering frustration.
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o Where a fundamental assumption upon which an agreement is founded

proves to be mistaken, it is not realistic to ask whether the parties impliedly
agreed that in those circumstances the contract would not be binding."
o 3rd - it's been suggested that the application of the doctrine of common mistake
depends upon the true construction of the contract made between the parties.
o As a general rule, one or other of them will be considered to have assumed risk of
the ordinary uncertainties which exist when an agreement is concluded.
o Normally, because of the principle of caveat emptor (the principle that the buyer
alone is responsible for checking the quality and suitability of goods before a
purchase is made.) The buyer is held to have taken the risk that property sold might
prove defective or might be in some way different from that which the parties
believed.
o Alternatively - this risk will have been assumed by the seller if there was an
express/implied warranty as to the quality or description in the contract.
o A common misunderstanding t/f not normally nullify contract.
o The construction of the contract is certainly critical to any claim of mistake.

o It is only where the terms of the contract, construed in light of the nature of the
contract + circumstances believed to exist at the time is was made, show that it was
never intended to apply to the situation which in reality existed at the time, and the
risk of the relevant mistake has not been allocated to one of the parties, that the
contract can be held void.
But...
o It is not sufficient to say that the doctrine of common mistake rests on construction
of the contract.
o If contract expressly or by implication allocates the risk of unknown fact to one or
other of the parties, then = no mistake: contract provides for the situation.
o But a test is needed for those cases where the unknown fact is not dealt with
expressly or impliedly in the contract itself, to determine whether the mistake is
sufficient to render the contract void.
o Court in The Great Peace: said the doctrine of mistake " fills a gap in the contract
where it transpires that it's impossible of performance without the fault of either
party and parties have not expressly dealt with their obligations in that eventuality."
The Great Peace
Case:
o D urgently required a vessel to save another ship in distress.
o D was told by reputable shipping organization that claimant's vessel The Great
Peace, was in the vicinity
o So D contacted C's manager to ask to hire vessel.
o Contract entered into, for minimum of 5-day hire, both parties believed TGP was 35
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miles away from distressed ship.

o The info about TGP = wrong - it was actually 410 miles away.
o After finding out truth, D waited 2 hours in order to find another vessel closer + then
cancelled the contract and argued that it was not required to pay for 5 day hire
because contract was void for common mistake about the location of TGP.
Held:
o Contract valid + D liable to pay charges

o Court said following elements needed for common mistake to avoid a contract:
1. must be a common assumption as to existence of a state of affairs
2. must be no warranty by either party that the state of affairs exists
3. the non-existence of the state of affairs must not be attributable to
the fault of either party.
4. the non-existence of the state of affairs must render performance of
the contract impossible.
5. the state of affairs may be the existence, or a vital attribute, of the
consideration to be provided or circumstances which must subsist if
performance of the contractual adventures is to be possible
The contract in TGP was not void because performance of the contract - was not
impossible.
TGP could till be used by D to salvage the distressed ship (even though it would've
taken longer).
Res Extincta: MISTAKE AS TO SUBJECT MATTER OF CONTRACT.
Case
o refers to a mistake as to the existence of the subject matter of the contract.
o Courtier v Hastie - common mistake case
 Facts: contract was for sale of a cargo of Indian corn.
 BOTH parties believed the corn existed at the time of contract.
 But - during the voyage, cargo overheated = unfit to be carried over.
 SO - captain of ship sold cargo (this was customary practice)
 C (buyer) said: since cargo of corn did not exist = not bound to pay
 D (seller) said: C had contracted for both the title of the goods and the
'adventure' of the goods and t/f took upon himself the risk.
Held
 Contract void.
 Buyer not liable to pay since contract contemplated a sale of existing
goods.
 The subject matter of the contract did not exist at time contract
made.
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o This proposition is now held in section 6 of Sale of Goods Act 1979.

o Where there's a contract for sale of goods, and unknown to seller the goods have
perished at time of contract being made = contract void.
o This principle may also apply where parties contract on basis of mistaken assumption.
o Scott v Coulson = C contracted to sell D life insurance on the life of a TP.
 TP was already dead at time of contract ( subject-matter doesn't exist)
 T/f contract = set aside.
o e.g. McRae v Commonwealth Disposals Commission:
 Contract could not be void for mistake - but could claim damages for a
breach on contract instead.
 Case: shipwreck was sold, turns out ship did not exist.
 Claimant (McRae) claimed for damages for the loss sustained by going
on expedition to find shipwreck that didn't exist.
Held:
 Could not void for mistake because the liability for non-existence had
been accounted for in the contract = t/f damages awarded.
 Commonwealth had said there definitely was a shipwreck - they'd
guaranteed the existence of the tanker = the contract indicated that
the seller assumed responsibility for non-existence
McRae (buyers) = sought to claim damages based on contract not being fulfilled
Commonwealth (sellers) = tried to argue they needn't pay expenses because no contract,
because since the subject-matter didn't exist = contract was void ab initio.
o BUT - The mere fact that the subject-matter does not exist does not render contract vid.
o Since one party may have undertaken in the contract the risk of existence.
o One party can actually warrant the existence of the subject-matter (and t/f carries risk
of non-existence) = contract valid.
o Mistake does not affect contract.
MISTAKE AS TO THE EXISTENCE OF THE SUBJECT-MATTER OF CONTRACT:
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o Subject-matter of a contract is sometimes called res extincta

o meaning at time of contract + unknown to parties it has ceased to exist, or if it's never
been in existence, the the contract = void for common mistake.
o In contract for sale of specific goods, the non-existence of goods will lead to no contract.
o Section 6 of Sales of Goods Act 1979 - where contract for specific goods, but goods have
unknowingly perished at time of contract = void.
o Perished = for business terms also covers goods which are so damaged they are different
to the description they were sold.
o Leading case: Courtier v Hastie.
MISTAKE AS TO TITLE TO PROPERTY
o Res Sua = the shared mistake as to the ownership of the subject matter of the contract
o Where person agrees to purchase property which, unknown to himself + seller, is
already owned by buyer = contract may be void.
o Explained by L Atkin in Bell v Lever Bros: 'mistake as to title in cases where, unknown to
the parties, the buyer is already the owner of that which the seller purports to sell to him'
o e.g. If A agreed to take from B a lease of land which, contrary to belief of both parties at
time of contract, A is already tenant for life = contract void at common law.
o Shown in Cooper v Phibbs = void at common law.
o Court held: "If parties contract under mutual mistake as to their relative rights, the result
is that the agreement is liable to be set aside having proceeded upon a common
mistake"
MISTAKE AS TO THE QUALITY OR THE SUBSTANCE OF THE THING CONTRACTED FOR
o Mistake as to quality of the subject matter is not sufficiently fundamental to be an

operative mistake at common law.
o Leaf v International galleries:
 Gallery sold painting - both believed it was Constable.
 5 years later purchaser discovered it was not real.
 Held: contract valid.
 Mistake does not void contract.
 In absence of actionable misrepresentation or assumption of risk the contract
is valid!
o Bell v Lever, with regards to mistake as to quality: this will not effect assent unless
it's mistake of both parties + as to the existence of some quality which makes the
thing without quality essentially different from what it was believed to be.
o Bell v Lever: Contract valid = since mistake was not "of such a fundamental character
as to constitute an underlying assumption without which the parties would not have
made the contract they in fact made"
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 In problem question think: is the mistake so fundamental that a party would not
have entered into contract if they were in possession of accurate information.
 Although it's been suggested that mistake as to quality (or attributes) won't avoid
contract, a mistake as to substance ( or essence) will. ( But there's no clear rule for
substance)
 Kennedy v Panama, New Zealand, and Australian Royal Mail Co Ltd.
Case
 K induced to take shares into capital by Defendant company by
a statement saying the capital was going to be used for
contract with NZ govt.
 C believed contract was real (in fact fake)
 NZ govt. refused to ratify it because it was fake.
 The shares bought fell in value massively.
 K claimed to return the shares + recover back purchase price
Held
 Claim refused = Mistake as to quality.

 Shares were far from being of no value + were no different in substance from those
which the company had contracted to deliver.
 This cases distinguished between substance and quality
 Substance = can void
 Quality = can't void (usually)
E.g. 2:
 Oscar Chess Ltd v Williams

 G buys car from H which both believe to be 1948 model.
 It's actually 1939 model + worth less.
 There's no mistake at common law.
 Contract not void = mistake as to quality.
GENERAL RULE: (Established by Bell v Lever) = where mistake is as to 'an essential and
integral element in the subject-matter of the bargain so that it renders the subject matter
'essentially and radically different from the subject-matter which the parties believed to
exist' = contract void.
t/f the following have been classed as void:
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1. a breeding cow which was mistakenly believed to be a sterile cow and sold by the
pound for beef.
2. contract for land, labelled building land, but in reality due to absence of sewage
facilities it would be impossible to obtain building permit.
4. A FALSE AND FUNDAMENTAL ASSUMPTION; IMPOSSIBILITY OF PERFORMANCE OF THE

CONTRACT
 where parties contract under false + fundamental assumption (going to root of

contract) + and at the time, both parties’ minds believed in this = contract may be
void.
 If performance of contract is, as both parties understood it, impossible = can be void
Contract have been void for:

 Contract for life insurance, but both parties made mistake that the assured was still
alive (but in fact they were dead) = void. (Scott v Coulson)
 A separation deed entered into by a couple, on errenous assumption their marriage

was valid. (Galloway v Galloway):
 Mr + Mrs. G believed they were lawfully married and they entered a deed of
separation.
 Deed was void on the ground their 'marriage' (the basis of the whole deed) never
existed.
 Mrs. G t/f could not sue for payment under it, because in law it never existed.
Commercial impossibility:
Contract can be void: e.g. Griffith v Brymer:

 A contract for hire of rooms to watch a coronation procession made in ignorance
procession already happened.
 = contract void.
Legal impossibility: (Common mistake regarding ownership of property)
 Contract can be void: Cooper v Phibbs

 Uncle mistakenly told nephew that he (the uncle) was entitled to a fishery.
 After uncle death, nephew entered contract with uncle daughter to rent the fishery.
 However, fishery actually belonged to nephew himself!
 Held: void at common law
 The agreement was made on a misassumption of facts which went to the whole root
of the matter.
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 t/f client = entitled to recover room hire money.
Physical impossibility:
 Sheikh Brothers Ltd v Ochsne

 A contractual license to cut and manufacture all sisal grown on a particular estate, in
return for payment + delivery of monthly quantity of sisal
 But the estate was not capable of producing the sisal.
 Contract void.
COMMON MISTAKE IN EQUITY
 effect of mistake at common law = void contract ab initio

 BUT - there's circumstances where equity can give relief where common law cannot.
 e.g. at common law a written contract may be valid but equity may grant
rectification of the written document
EQUITABLE RELIEF - RESCISSION
 The question is whether equity will allow rescission of a contract on the basis of
common mistake where mistake is not sufficient to render contract void under
principles set out in Bell v Lever Bros.
 In Solle v Butcher - Denning LJ set out equitable doctrine for common mistake.
 But this doctrine was rejected law by Great Peace.
THE EQUITABLE DOCTRINE SET OUT IN SOLLE V BUTCHER:
 The equitable doctrine in this case expanded the jurisdiction court have in their
discretion to set aside a contract.
 Denning LJ: said courts "had power to set aside the contract whenever it was of
opinion that it was unconscientious for the other party to avail himself of the legal
advantage which he'd obtained"
 The common misapprehension needs to be fundamental.
Solle v Butcher 1950
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Concerning statements of law:
o traditionally a false statement of law cannot amount to misrepresentation because

there is a presumption that everyone knows the law + therefore it cannot be falsely
stated.
o However - since the distinction between fact + law is not always clear cut, it can be
difficult to distinguish between a statement of law + a statement of fact.
CASE FACTS:
o Before WW2, a house was converted into flats.
o After war - D leased the building with intention to repair bomb damage + undertake
other improvements.
o Claimant + defendant discussed the rents to be charged after the work had been
completed.
o D stated that the flat had become new and separate dwelling by change of identity,
and was therefore not subject to Rent Restrictions Act.
Held:
o Held to be a statement of fact and therefore actionable.
o Rescission is available where it's unconscionable to allow 1 party to take advantage

of the mistake.
B) REJECTION OF EQUITABLE DOCTRINE BY GREAT PEACE
 GP rejected Denning LJ's approach.

 It said Denning contradicted the common law principle, for which Bell v L is the
leading authority.
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CONSIDERATIO
N
CONSIDERATION GIVEN IN RETURN FOR A PROMISE:
O THE CONSIDERATION MUST BE GIVEN IN RETURN FOR THE PROMISE - IT'S USUALLY GIVEN AT THE
REQUEST OF THE PROMISOR.
O T/F PROMISEE MUST PROVE EITHER:
 AN EXCHANGE OF PROMISES (EG. PROMISE TO SUPPLY GOODS IN RETURN FOR A
PROMISE TO PAY FOR THEM)
 OR = SOME ACT OR FORBEARANCE ON THE PART OF THE PROMISEE IN RETURN FOR
THE PROMISE MADE.
 A BENEFIT CONURRED OR A DETRIMENT SUFFERED OTHERWISE THAN IN RETURN
FOR THE PROMISE = CANNOT CONSTITUTE CONSIDERATION.
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o e.g. There is no consideration where merely because there is detrimental action by

the promisee in reliance on the promise, but not in return for it.
o t/f in Combe v Combe = where a husband, upon divorce, promised his wife a
permanent allowance of £100 p/a
o Held: refused to hold that a consequent forbearance on the part of the wife to apply
for maintenance amounted to consideration.
o The husband had not requested for her to forbear + her action couldn't be said to
have been in return for his promise to pay.
CONSIDERATION + CONDITION: CONSIDERATION NEEDS TO BE ADEQUATE
o Consideration needs to be distinguished from fulfilling a condition.

o If A says to B " I will give you £500 if you break your leg" = no contract.
o But simply a gratuitous promise subject to a condition.
 Where the condition consists of the performance of an act by the
promisee and it has been stipulated that it is regarded by both parties
as the price to be paid for promise = valid contract.

o Chappell & Co Ltd v Nestle Co Ltd.
o D (Nestle) contracted to buy these songs with C (Chappell), who held the
copyright for songs.
o D offered to sell the records at a discounted price to anyone presenting 3
wrappers for their chocolate bars.
o The wrappers, themself, were worthless + thrown away by Nestle.
o C sought an injunction restraining manufacture + sale of the records because
they breached copyright.
Issues:
o Copyright Act 1956 = allowed for the manufacture of records for retail sale
provided that a royalty of 6.25% was paid to copyright holder.
o The question was whether the sale was 'retail sale'
o D argued that the wrappers were part of consideration.
o The issue was whether the wrappers were consideration for the sale of
records or whether they were merely a qualification for buying the records.
Held:
o HOL held the wrappers did for part of the consideration for the sale of
records despite the fact they had no economic value).
o The wrappers formed consideration as the object of the sale was to increase
sales + t/f provided value.
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NECESSITY FOR CONSIDERATION:
o Consideration is necessary for the formation of every simply contract ( unless

it's a deed)
o It shows an intention to be bound.
EXECUTED AND EXECUTORY CONSIDERATION:
o Consideration may be:

o executory = a promise given for a promise
o executed: an act or forbearance given for a promise
o Executory consideration: A promise to do, forbear, or suffer, given in return

for a like promise.
o e.g. Mutual promises = a promise to do work in return for a promise of
payment = executory consideration.
o The fact that the promise given may be dependent on a condition does not
effect validity of consideration.
o e.g. A promise to do work for B, which B promises to pay for if a TP approves
= the promise of B is good consideration for the promise of A.
o Executed consideration: When one party has done an act (which either
constitutes offer or acceptance), done all that party is bound to do under the
contract.
o This leaves an outstanding liability on one side only.
o e.g. an act which constitutes an offer e.g. A offers to do work/provide goods
in circumstances that show an obvious expectation that payment be made;
the contract arises when the work/goods are accepted by the person whom
they offered to + that person by accepting them becomes bound to pay a
reasonable price.
o e.g. A sends B wine. B keeps some wine but sends some back, the customer is
bound to pay for those kept.
o But when the consideration is an act constituting as acceptance e.g. an

advert of a reward for services = becomes a binding promise when the
service is rendered.
o Here it is the acceptor who has performed when the contracts entered into.
o e.g. If A makes general offer of reward for information + B supplies the
information = A's offer turns into a binding promise by the act of B + B
simultaneously concluded the contract showing consideration by the
performance.
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PAST CONSIDERATION:
o Executed consideration must be distinguished from past consideration (which

is a mere sentiment of gratitude for benefits received)
o Past consideration = the promise is subsequent to the act + independent of it
= t/f not part of same transaction.
o t/f if A saves B from drowning & B later promises A a reward = A's action
cannot be relied on as consideration for B's promise for it is past in point of
time.
o Past consideration = no consideration at all.
o It confers no benefit on the promisor + involves no detriment on the
promisee in return for the promise.
o established by Roscorla v Thomas.
EXCEPTIONS TO PAST CONSIDERATION:
Facts:
o BUT a past consideration will, support a subsequent promise if the
consideration was given at the request of the promisor.
o Lampleigh v Braithwaite:
o D killed a man + was due to be hung for murder.
o D asked C to do everything to obtain a pardon from King
o C went to great efforts + got pardon.
o D then promised to pay C £100 = but never did.
Held:
o Even though promise for payment came after performance and equated to
past consideration = the consideration was preceded by a request from D =
consideration is valid.
o D had to pay £100.
Principle:
o court held that if A does something for B at their request and afterward B
promises to pay A for their trouble, then that promise is good consideration.
The later promise was considered to be part of the same single transaction
and was, therefore, enforceable.
Pao On v Lau Yiu Long:

o Legal Principle established:
o An act done before the giving of a promise to make a payment/confer some
benefit can sometimes be consideration for the promisee.
o The act must've been done at the promisor's request = the parties must've
understood that the act was to be remunerated either by payment or
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conferment of benefit + payment must've been legally enforceable had it

been promised in advance.
Case Facts
o D had requested C to promise not to sell certain shares for a year + later
promised to indemnify the claimant if the shares fell below a certain price.
o D argued that the consideration for the indemnity was past.
Held
o All the conditions mentioned above were there.
o So the past consideration was valid here.
CONSIDERATION MUST MOVE FROM PROMISEE
FIRST
o E.G. If A promises to pay B £1000, B cannot enforce promise because there's no
consideration for A's promise.
o Although B is a promisee, the consideration must 'move from the promisee'.
SECONDLY
o Consideration must move from the claimant.
o The person seeking to enforce the contract must have provided the consideration for
the promise.
o e.g. If A Promises B to pay £1000 in return for B doing work for A, C cannot enforce
the contract because the consideration has moved from B and not C.
o This parallels the doctrine of privity of contract = only a party to a contact can
enforce it.
o Tweddle v Atkinson:
Case Facts:
o Couple getting married.

o Farther or bride entered contract with father of groom that they would each pay the
couple a sum of money.
o Father of bride died without having paid.
o Father of son also died and so was unable to sue on agreement.
o The groom made claim against executor of will.
Held:
o claim failed.
o Groom was not party to agreement + consideration did not move from him.
FATIMAH NAZIR 86

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o t/f not entitled to enforce contract.

o But = Contacts (Rights of Third Parties) Act 1999, also constitutes exceptions to the
need for consideration to move from claimant.
THIRDLY
o Also the saying 'consideration must move from promisee' means in some cases = a
promisee cannot enforce a promise made to it where the consideration has been
provided by someone else.
o e.g. If A promises to pay B that in return for C doing work for A, A will pay B £1000 =
B cannot enforce promise, because although B is promisee, C has provided the
consideration + the consideration needs to move from the promisee.
o B has suffered no detriment
o Although A has received benefit = it was conferred by C + not B.
CONSIDERATION NEED NOT BE ADEQUATE - just sufficient

o Consideration need not be adequate but it must be of some value in the eyes of the
law.
o If a person gets what he has contracted for, they will not inquire whether it was
equivalent to the promise which was given in return.
o 'The adequacy of the consideration is for the parties to decide and not the courts'
o The most trifling detriment or benefit will suffice.
o e.g. Chappell & Co Ltd v Nestle Co Ltd
CONSIDERATION MUST BE REAL
o Though consideration need not be adequate it must be real.

o 'something of value in the eyes of the law moving from C'
o Motive is not consideration.
o e.g. Thomas v Thomas
o Held: the wife's desire to carry out the wishes of her deceased husband who'd left
her a house in return did not amount to consideration.
IMPOSSIBILITY:
o Impossibility - either physical or legal which exists at time of formation of contract

and is obvious = makes consideration unreal.
UNCERTAINTY:
o A promise which purports to be a consideration may be too vague + insubstantial to

be enforced.
FATIMAH NAZIR 87

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o t/f a promise which in terms leaves performance exclusively in discretion of the

promisor = not enforceable.
o consideration = illusory.
o White v Bluett
o In proceeding's by his father's executors on a promissory note, a son alleged that the
father had promised to discharge him from the liability in consideration of his
promise to cease complaining about not having enjoyed as many advantages as his
brothers.
Held:
o The son's promise was no more than a promise 'not to bore his father' + was too
vague to form a consideration for the father's promise to waive his rights.
PERFORMANCE OF, OR PROMISE TO PERFORM AN EXISTING DUTY
o Where promisee is under an existing duty to do something + then promises to do

that thing = not good consideration.
o Because if you are doing something you were already planning to do so, how can
you be suffering a detriment!
EXISTING PUBLIC DUTY:
o Where the promisee is already under an existing public duty/promise to perform

= duty will not amount to consideration.
o There'll be no detriment to the promisee or benefit to the promisor over + above
their existing rights and liabilities.
o Collins v Godfrey:
Case Facts:
o Claimant recieved subpoena to appear at a civil trial as a witness on behalf of D.

o D promised to pay C a some of money for his trouble.
o But, a person who receives a subpoena is bound to attend + give evidence.
Held:
o no consideration for the promise = claimant already under public duty.
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o BUT - where the undertaking is to do more than which the promisee is legally
bound, this may be consideration = even though it's an act of the same kind as the
the subject of the obligation.
o Glasbrook Brothers Ltd v Glamorgan County Council
Case Facts:
o A police authority sued for money promised to it by a company for whose mine
the authority had provided a stronger guard during a strike than was in its opinion
necessary.
Held:
o Police claimant was entitled to maintain an action on the promise.
PRACTICAL BENEFIT
o It's possible that the recognition of a 'practical' benefit = can constitute

consideration. (this could alter the view on the rule for existing duty)
EXISTING DUTY OWED TO A THIRD PARTY:
o Consideration which consists in the performance of/promise to perform, an

existing contract with a TP = may be real consideration.
o Here the promisee obtains the benefit of a direct obligation which can be
enforced.
o e.g. Shadwell v Shadwell
Case Facts
o C was engaged to marry Ellen N.

o His uncle wrote to him saying he was pleased about marriage + would give him
money to start up in life giving him money either until the rest of his life (the
uncle) or as till the nephew owned 600 guineas.
o C married Ellen.
o C never earned up to 600 G.
o Uncle died + annuity not paid.
o C sued uncle’s executors seeking money from uncle's estate
Held:
o Claim allowed - Uncle's promise was supported by consideration.

o Performing a pre-existing duty can constitute consideration as long as it is for a TP
+ not for the promisor.
New Zealand Shipping Co Ltd v AM Satterthwaite & Co:
FATIMAH NAZIR 89

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Legal Principle:
o The actual performance of an existing duty to a TP can be sufficient
consideration, even though the performance is no additional detriment to the
promisee.
EXISTING DUTY OWED TO PROMISOR
o Where promisee undertakes to fulfil conditions of existing contract = no

consideration.
o Stilk Myrick:
Case Facts
o During a voyage from London to Baltic - 2 seamen deserted + captain being
unable to replace them, promised the rest of the crew that if they worked the
vessel home = the wages of 2 deserters would be divided amongst them.
Held:
o There was no consideration on part of the marines, they'd already contracted to

do all they could (under original contract) including to do all they could under all
emergencies.
o agreements cannot be altered unless without fresh consideration, e.g. new
agreement offering to pay more - that would’ve been fresh consideration.
EXISTING DUTY BUT THERE IS A PRACTICAL BENEFIT
o Where the promise is only to perform the existing contractual obligation but may
be beneficial to the promisor = could be good consideration.
o Williams v Roffey Bros & Nicholls
Case:
o Williams (the subcontractor) was contracted to do carpentry work for Roffey Bros
(the main contractor responsible for building a block of flats)
o Williams ran into financial difficulty + Roffey promised to pay more money for
work.
o Completion allowed Roffey Bros to avoid penalty clause for late completion of
flats.
o Later Roffey refused to pay extra promised.
Held:
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o Even though they were performing an existing duty.

o Claim allowed for extra money.
o As long as there's no economic duress or fraud, consideration can be provided for
the promise to pay more for an existing duty if the promisor obtains a practical
benefit for paying more.
o Here, avoiding a penalty clause was a practical benefit for the promisor for the
promisor (Roffey).
DISCHARGE OF A DEBT:
o Principle that performance of an existing duty owed to the promisor = unreal

consideration has been applied to both the creation of a new obligation but also
the discharge of an existing duty.
o e.g. If A owes B a debt of £200 and B agrees to accept £100 in full satisfaction of
the debt = B is not bound by agreement + can subsequently sue for whole
amount.
o Payment of a smaller amount = not good discharge of a debt.
o Since - this payment is no more than the promise is already bound to = no
consideration.
GENERAL RULE: PART PAYMENT OF A DEBT - NOT VALID CONSIDERATION
 Pinnel's Case = rule that the payment of a smaller sum in satisfaction of a larger is
not good discharge of a debt.
Case Facts:
 C was owed £8 from D

 D paid £5
 C sued for outstanding payment.
Held:
 Claimant was entitled to the full amount even if they agreed to accept less.
 Part payment of a debt is not valid consideration for a promisee to forbear the
balance.
Foakes v Beer:
Case Facts:
 Dr Foakes was indebted to Mrs Beer on a judgment for sum of £2900.
FATIMAH NAZIR 91

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 Mrs B agreed that if Foakes paid her £500 in cash + the remained balance in
instalments she would 'not take any proceedings whatever' on the judgment.
 Foakes paid the money exactly as required.
 But Mrs B then claimed additional £360 as interest.
 Foakes pleaded that his duty to pay interest had been discharged by the promisee
not to sue.
Held:
 Foakes was liable to pay interest.

 The agreement they'd reached = equated to part payment of a debt + under rule
in Pinnel's case = not good consideration.
 t/f he had to pay interest.
IRRELEVANCE OF PRACTICAL BENEFIT when it comes to debt:
 Although a practical benefit may be found as consideration where there is an

extra money for existing duties, as per Williams v Roffey
 but = such a benefit cannot be found in the case payment of a debt.
 Re Selectmove Ltd:
 To extend Roffey to part payment of debt would go completely against Foakes v
Beer - which expressly said that a practical benefit was not good consideration in
law.
FATIMAH NAZIR 92

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lOMoARcPSD|7576172

CONTRACT LAW REVISION NOTES:

Inferences from conduct:

o Willingness to enter into a legally binding contract + in its terms expressly or

Offers and Invitations to Treat:

o Offer = An invitation communicated by one party to another to enter into a legally

o Statement of Fact = Cannot constitute as offer, merely supplying information,

Displays of goods for sale:

o Displays of shelves in self-service shops: Invitations to treat.

e.g. Pharmaceutical Society v Boots Cash Chemists

o Self-service shelf display of medicine was an advertisement for

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o Announcement inviting tenders = not normally offer.

o Advertisement of auction = not offer, but rather an Invitation - Harris v Nickerson

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o An offer is effective only when it is communicated to the offeree.

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o e.g. Tinn v Hoffman + Co:

OFFER BY RENDERING SERVICES MUST BE COMMUNICATED

o rendering services can constitute as an offer

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o For contract to be formed - offeree must accept offer.

OFFER AND ACCEPTANCE MUST CORRESPOND:

COUNTER OFFER + REJECTION:

o Counter offer = amounts to rejection of offer = brings offer to end.

o A purported (falsely appearing to do something) acceptance of an offer may

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o Occurs in modern commercial practise

o Tekdata Interconnection Ltd v Amphenol - Court here confirmed L Denning's more

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EQUIVOCAL OR QUALIFIED ACCEPTANCE:

MENTAL ASSENT = INSUFFICIENT

o Acceptance - in general means communicated acceptance, which must be something

o Acceptance may be inferred from conduct without it being expressly communicated.

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COMMUNICATION TO THE OFFEROR

COMMUNICATION OTHER THAN BY OFFEREE

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EXCEPTION TO GENERAL RULE THAT COMMUNICATION MUST BE COMMUNICATED TO

o e.g. Carlill v Carbolic Smoke:

Distinction drawn between instantaneous methods e.g.

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OFFEROR MUST BEAR RISK OF ACCEPTANCE LETTER BEING DELAYED/LOST:

o Fire and Carriage Accident Insurance Co Ltd v Grant

o Holwell Securities v Hughes [1974

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Postal rule still applies if:

2. If acceptance letter is never received by offeror (Household Fire Insurance Co v Grant)

RATIONALE OF POSTAL RULE

STIPULATED METHODS OF ACCEPTANCE:

o Generally - acceptance can be in any form, as long as it's communicated to the

o If the offeree uses an equally expeditious method of acceptance to that stipulated =

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Even if offeror has waived communication by indicating that acceptance by silence

Claimant (in England) sent telex message to D ( in Holland) offering to purchase

Since acceptance must be communicated = silence can never constitute as

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 Held: Nephew never signified acceptance of offer before auction

 However, situation may be different where previous dealings between

ACCEPTOR MUST HAVE KNOWLEDGE OF OFFER

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one who did know that it had been offered.

PRESCRIBED MODE OF ACCEPTANCE: