Discuss whether the law relating to mistake has achieved the appropriate balance

between the need for certainty in enforcing a bargain and protecting a party who
has entered an agreement which turns out to be fundamentally different from that
which he intended.

This essay will explore the rules and exceptions that have been developed in the law on
mistake, with the aim of determining whether the law has achieved an appropriate
balance between these competing interests. The essay will examine relevant case law to
demonstrate the application of the law in practice and evaluate the extent to which the
law has succeeded in providing a fair and just outcome for parties who have entered
into agreements under mistake.

The contract law tries to find a balance between conflicting interests such as maintaining
the stability of contracts and safeguarding a party that may have entered into a
disadvantageous agreement due to fraudulent misrepresentation. In regards to mistakes
concerning identity, the contract law aims to strike a balance between protecting the
original seller (A) who made a deal with a deceitful buyer (B) under the assumption that
B was someone else, and the rights of an innocent third party (C) who purchases goods
from the fraudster, not to be sued. Currently, the mistake as to identity law established
in Shogun Finance v Hudson tries to balance these interests by distinguishing between
written and oral contracts. Written contracts are more likely to be considered void due
to a lack of intention to form a legal agreement between A and B, allowing A to recover
from C who won't have a valid claim to the goods. However, oral contracts are less likely
to be considered void and only voidable for fraudulent misrepresentation, meaning C
who acquires good title to the goods may not be sued by A. This difference in
protection for the innocent third party based on the type of contract between A and B is
problematic and should not exist. Thus, the dissenting opinions of Lords Millett and
Nicholls in the case of Cundy v Lindsay should be followed and applied, instead of the
majority ruling.

The law regarding mistake of identity established in Shogun Finance v Hudson holds
that the level of protection for the innocent party, C, depends on the type of contract
formed between the original vendor, A, and the fraudster, B. This is due to the
contrasting approaches used by courts to determine the intent of the parties involved in
the contract. To assess the impact of a mistake of identity on the validity of a contract,
the first step, as pointed out by Lord Millett, is to establish the existence of a contract
itself. This requires examining the intention of the parties, as a contract only exists if
they intend to create one, as noted by J. Smith. In accordance with the 3:2 majority
ruling in Shogun, written contracts between A and B (inter absentes) are less likely to be
considered as having the intention to form a contract with the fraudster, B. On the other
hand, contracts formed face-to-face (inter praesentes) are deemed to presume the
existence of intent to contract.

The current legal framework regarding mistake of identity in contract law balances
conflicting interests, such as the need for contract certainty and the protection of parties
who entered into a bad bargain due to fraudulent misrepresentation. When it comes to
mistake of identity, contract law strikes a balance between protecting the rights of the
original vendor (A) and the innocent third party (C). This balance is achieved by
distinguishing between written and oral contracts, as per the decision in Shogun Finance
v Hudson. For written contracts, a lack of intention to create legal relations is likely to
render the contract void, allowing A to recover from C who will not have good title to
the goods. However, for oral contracts, the contract is only voidable for fraudulent
misrepresentation, thus providing C with more protection since they obtain good title to
the property and cannot be sued by A. This unequal protection of C based on the type
of contract is problematic, as Lord Millett and Lord Nicholls pointed out, and the
majority decision in Cundy v Lindsay, which held that C had to return goods bought
from a fraudster B because the contract with A was in writing, should be disregarded.

However, the distinction between written and oral contracts as a determining factor for
protection for C is not always followed, as seen in King’s Norton Metal v Eldridge. This
case, which Lord Millett deemed deserving of more consideration due to its departure
from the irrational distinction between written and oral contracts, found that despite A
and B having a written contract, there was still an intention to contract because A
intended to deal with the individual who wrote the letters and was merely mistaken in
believing it to be Hallam & Co instead of Wallis. Despite this exception, the rule
established in Cundy v Lindsay still stands as the prevailing law, especially in light of the
recent ruling by the House of Lords in Shogun Finance v Hudson.
The existing legal status on mistakes of identity is not adequate, and it should instead
embrace the notion proposed by Lords Millett and Nicholls that "a person is assumed to
intend to contract with the person they are actually negotiating with, regardless of the
mode of communication." This is because the current distinction between written and
oral contracts can result in unfairness, as a person's protection depends on the form of
the contract between the first two parties. The distinction is also illogical and unclear,
especially with the advent of new technologies like telephonic and video calls, and
causes inefficiency. The law should instead determine the intention of the parties
objectively, based on the view of a reasonable person taking into account all
circumstances of the case. This would align with the general principles of contract law
and be a positive step forward. Lord Millett argues that the party who was defrauded
and had the chance to uncover it, should bear the loss, not the third party who entered
the scene after the fraud was carried out.

The dominant perspective in the Shogun case lacks convincing evidence and fails to
provide any opposition to the well-argued dissenting opinions. Lord Hobhouse's
argument that applying the law differently from the established principles in Cundy v
Lindsay would bring about uncertainty is inadequate. Similarly, Lord Phillips' conclusion
that there is no requirement or possibility for a default intention in written contracts is
unsatisfactory. As a result, the prevailing view and existing law should be disregarded
and replaced by a rule that states that anyone who enters into a written agreement or
interacts with another person face-to-face should be considered to have intended to
enter into a contract with that individual, regardless of the communication method
used.

Although the implementation of this revised rule would significantly enhance the
existing law, it would also come with significant consequences. For instance, it is
probable that the decisions in Cundy v Lindsay, Shogun Finance v Hudson, and Ingram v
Little would be overturned. Although the act of overturning three precedents would be
a difficult task for the Supreme Court, the numerous problems with the current law
make such action imperative. In any case, the ruling in Ingram v Little is not aligned with
the current law. The Court of Appeal in Ingram found that C was responsible for A's loss
due to the conversion tort because the contract between A and B was deemed void due
to mistake, as A had made an offer to sell the car to P.G.M.H, who B was pretending to
be, instead of B. As a result, the fraudulent B could not accept the offer, and there was
no contract because it was void due to mistake. Such reasoning contradicts the current
law, although the distinction between written contracts and oral contracts, as
highlighted in King's Norton Metal, is not absolute.

To summarize, the current law fails to provide adequate protection to both C, the
innocent third-party buyer, and A, the original seller. This is due to the arbitrary and
unfair distinction between written and oral contracts, which also leads to inefficiencies.
Hence, the law should follow Lord Millett's dissenting opinion in Shogun and consider
the intention of all contracting parties equally, regardless of the communication method
used, taking into account all relevant circumstances. This change would align the law of
mistake regarding identity with the overall objective intention doctrine in contract law
and would be a meaningful utilization of the Supreme Court's time and resources, given
the inconsistent state of the current legal principles in this field.