Mistake

 There are two types of mistake- Unilateral, where one party is mistaken and bilateral, where
both parties are mistaken. In a bilateral mistake, the parties may either share a mistake
(Common mistake) or they may be mistaken on different points (Mutual Mistake).
 Mistake under common law makes a contract void, while under equity, renders a contract
voidable.
 Mistake of law was not recognized at first in law. However in Cooper v. Phibbs, mistake as to
private rights was not recognized as a mistake of fact. In Kleinwort Benson Ltd. v. Lincoln City
Council, the recovery of mistaken payment was allowed by the House of Lords where the
mistake was one of law. However, it was not until Brennan v. Bolt Burdon, that the mistake of
law was recognized by the Court of Appeal, and rendered the contract void.

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Bilateral Mistake:
1. Absence of a genuine agreement: Here the parties are mistaken as to different points. The offer
and acceptance do not correspond and thus the parties are said to be t cross purposes to each
other. No agreement can thus result as mistake negatives consent.
 Raffles v. Wichelhaus: The defendants agreed to buy from the claimants a cargo of
cotton to arrive via a ship Peerless from Bombay. Both parties were unaware that there
were two ships of the same name, one sailing in October and one in December. The
defendants meant the one in October, and when later the ship arrived, they refused to
accept delivery because they stated that the claimants were obliged to deliver the
cotton via the ship sailed in October. The claimants thus sued for the price of the cotton.
The court concluded that there was a bilateral mistake and the parties were at cross
purposes to each other.
 Scriven v. Hindley: The defendant bid at an auction for two lots, believing both to be
hemp but Lot B was not hemp, it was tow. The defendant declined to pay for Lot B and
the plaintiff sued for the price for Lot B. The defendant’s mistake of bidding for Lot B
arose due to a mistake in labeling of the goods, which was in the hands of the plaintiff.
The court held in favor of the defendant, because his mistake was caused or contributed
by the negligence of the plaintiff.

2. Common Mistake: Both parties share their mistake- they are mistaken on the same point. In
such as case the courts may nullify the consent of the parties and set it aside.
 Bell v. Lever Bros Ltd: The defendant into two agreements with the plaintiff, first being
service contracts by which they were inducted on board of directors of Niger Company
(a subsidiary of Lever) and second being compensation contract by which D, in
consideration of their retiring within the service period, promised to pay compensation.
The defendant later discovered that the plaintiffs had breached their contracts (insider
trading while working for Niger), so the defendant could have dismissed them without
 compensation. So the question here is, was the agreement between Lever (D) and Bell
(P) void by reason of a mistake of Lever and Bell? The Court decided in favor of the
plaintiffs because they did not have in their mind, breaches of duty committed by them,
such that they did not actively conceal it, and were not guilty of any fraud. The parties
had entered into the compensation agreements on the common mistake that the
service agreements were valid when they in actuality were voidable. The House of Lords
held by a 3:2 majority that the mistake was not sufficient to render the contract void
and that the severance contracts were valid.
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Non existence of the subject matter (Res Extincta): If the parties are mistaken as to the subject matter
of the contract, this mistake may be sufficiently fundamental to avoid the contract.

 Galloway v. Galloway: Both parties were under an assumption that they were married
to each other and made a separation agreement. It was later discovered that the
current marriage was invalid because against all odds, the husband’s former wife was
still alive. In this case a separation agreement was void because it was entered in the
mistaken belief that the parties were married to each other and therefore needed a
formal separation. However, it transpired that the husband's previous spouse was still
alive.
 Couturier v. Hastie: A cargo of corn shipments was shipped from the Mediterranean to
a port in England. It was later discovered that the cargo has begun to deteriorate and
that the master of the ship sold the said cargo to a third party. The seller (P) contended
that the buyer (D) was accountable to pay the price of the cargo as the buyer had
agreed to procure the cargo and all its essential risk. The House of Lords held that the
contract was void because the subject matter of the contract- the corn- did not exist at
the time the contract was made.
This case is the authority for the proposition that in a contract for the sale of goods,
where the goods have perished without the seller’s knowledge, the contract is void (S6
of the Sale of Goods Act 1979).
 McRae v. Commonwealth Disposals Commission (High Court of Australia): The
defendant invited tenders for the purchase of an oil tanker lying on Jourmand Reef; the
plaintiff applied and his tender was accepted. The defendant supplied the location
information of the tanker to the plaintiff. At considerable expense, the claimant fitted
out a salvage expedition and proceeded to the location given to him by D but he was
unable to find any tanker there. It was held that P can recover the loss he suffered. The
case was distinguished from Couturier v. Hastie on the grounds that there the parties
were mistaken about the presence of the corn, while here the defendants had actually
promised that the tanker was in existence and so had assumed the risk of its non
existence.
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Mistakes as to ownership (Res Sua):

 Cooper v. Phibbs: Believing that his uncle owned the fishery, the nephew leased it from
his uncle and after his uncle’s death, he entered into an agreement to lease it from the
uncle’s daughters. However, it later become known that the uncle had given the
 nephew a life tenancy in his will. So the court decided that the lease was held to be
voidable for mistake as the nephew was already the true owner of the fishery.
 Bligh v Martin: The paper owner of the disputed land had grazed cattle on it in winter,
and denied that the defendant claiming adverse possession had been in continuous
occupation. It was held that even though the adverse possessor had received rent from
the real owner, who had been then unaware of his ownership and became the tenant of
the land, the adverse possessor could still successfully claim the land.

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Mistake as to the possibility of performance: Both parties believe that the contract is capable of being
performed, when in actuality it is not. There are three categories of such cases:

 Physical Impossibility: Both parties think that they are contracting about something which is
physically possible. The contract will be void if what is contracted for turns out to have been a
physical impossibility.
 Sheikh Brothers Ltd. v. Ochsner: The appellants allowed the license of the respondents
to enter their land and cut the sesil growing on their land. The respondents in turn
agreed to deliver 50 tons of cut sisal to the appellants per month. Both parties were
unaware that the land was incapable of producing 50 tons of sisal per month, and the
contract was thus void as it was a physical impossibility.
 Cases of Legal impossibility:
 Cooper v. Phibbs: The contract as void as the nephew was already the owner of the
fishery and the contract was legally incapable of performance.
 Cases of Commercial impossibility:
 Griffith v. Brymer: The parties entered into a contract for the hire of a room for the
purpose of viewing the coronation procession of Edward VII, which was then cancelled
due to his illness. The parties had concluded their contract at 11 am but unknown to
both, the decision to operate Edward VII was taken at 10 am. The contract was void as
the cancellation of the procession had undermined the commercial object of the
contract.

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Mistake as to quality of the subject matter: A mistake as to quality of the subject matter of the contract
may be sufficiently fundamental to avoid a contract. But the courts are extremely reluctant to conclude
that such a mistake renders a contract void, thus making the area an extremely difficult one to
understand.

 Bell v. Lever Bros Ltd: The jury concluded that the mistake was a bilateral mistake as to
the quality of the subject matter. The subject matter of the termination contract was the
employment contract and the particular quality was the terminability of the
employment contract at Lever Brothers’ option. The House of Lords however held that
the mistake was not sufficient enough to render the contract void.
 Leaf v. International Galleries: The plaintiff purchased a painting from the defendant.
Both parties believed that the painting was by the artist Constable. 5 years later the
plaintiff discovered the painting was not a Constable and brought an action for both
 misrepresentation and mistake. The claim for mistake failed as the mistake related to
the quality and did not render the subject matter something essentially different from
that which it was believed to be. He believed he was buying a painting and he got a
painting.

 Solle v. Butcher: The defendant agreed to lease a flat to S for 7 years at an annual rate
of £250. The parties entered into the agreement under the mistaken assumption that
the flat was free from rent control. The plaintiff discovered that the flat was subject to
rent control (mistake as to quality) and that rent payable under legislation was only
£140. He sought to recover the overpaid rent. The landlord counter claimed for
rescission of the lease on the grounds of mistake. It was held that the contract was not
void at common law, but in equity it was declared that the lease should be set aside and
that the plaintiff could either leave the flat or pay the max rent under the Rent Acts.

 Associated Japanese Bank (International) Ltd v Credit du Nord SA: The defendant bank
guaranteed Bennett's obligations to pay the rental on the machines. It turned out that
there were no machines because Bennett had been fraudulent. The plaintiff bank sued
the defendant bank on the guarantee. Steyn J concluded that the doctrine of mistake at
common law had a narrow ambit- one into which few cases fell. He concluded that the
existence of the machines was fundamental because they formed the prime security for
the contract of guarantee. He declared the contract to be void on the basis of mistake at
common law.

 Great Peace Shipping Ltd. v. Tsavliris Salvage Ltd.: Tsavliris were advised that a vessel
named "Cape Providence" was in trouble. They used the Ocean Routes service to try and
find a salvage tug nearby, and were told that there was one about 35 miles away called
the "Great Peace". Tsavliris contacted its owners, and agreement was made to hire the
tug for a minimum of five days. It then became apparent that the Great Peace was not
35 miles from the Cape Providence, but 410 miles. Tsavliris then found a closer tug and
terminated the contract with Great Peace Ltd. Great Peace Ltd. then sued. Tsavliris
argued it was a common mistake and that the contract was void. The Court of Appeal
held that the mistake was not sufficiently fundamental to set aside the contract. While
the vessels were 410 miles apart and it would have taken them some 22 hours to meet,
this was not such a time delay as to render performance essentially different from those
which the parties had envisaged when the contract was concluded.

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Unilateral Mistake:

Generally courts are reluctant to declare the contracts void where only one party is mistaken. The courts
will now only find the contract void in two situations:

1. Mistaken assumptions or promises: The non mistaken party must be aware of the other
party’s mistake.

 Smith v. Hughes: The defendant wanted old oats to feed his horses so he took sample oats (new
oats) from the plaintiff and bought it. The plaintiff was aware that D wanted old oats; however
he sold new oats to D. So was there an issue or a promise that the seller was meant to sell old
oats? D’s claim failed. Blackburn J said in this case "... 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 upon that belief enters into the 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...’
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2. Mistake as to identity:
If the contract between the vendor and the rogue is void, this means that there had not been any
transfer of title of goods to the rogue and the third party would have to return the goods to the vendor.
However, if the contract is voidable, the third party can keep the goods.

 Cundy v. Lindsay (1873): A rogue, Blenkarn, ordered a quantity of handkerchiefs from the
claimant disguising the signature to appear as Blenkiron. The goods were dispatched by P to
Blenkarn but payment failed. Blenkarn sold a quantity of the handkerchiefs on to D who
purchased them in good faith and sold them on in the course of their trade. P brought an action
based in the tort of conversion to recover the value of the handkerchiefs. The success of the
action depended upon the contract between the Blenkarn and P being void for mistake. If the
contract was void, title in the goods would not pass to the rogue so he would have no title to
pass onto D. Ownership of the goods would remain with P. It was held that the contract was
void for unilateral mistake as P was able to demonstrate an identifiable existing business with
whom they intended to contract with.

 King’s Norton Metal Co v. Edridge, Merrett & Co.: A rogue ordered goods from the claimant
using a printed letter head, claiming to be a company called Hallum and Co. with offices in
Belfast Lile and Ghent (a company which did not exist in reality). The plaintiff sent out the goods
on credit. The rogue sold the goods on to D who purchased them in good faith. The rogue then
disappeared without paying for the goods. P brought an action for conversion of the goods
based on their unilateral mistake as to identity. The court held that the contract was not void for
mistake as they could not identify an existing company called Hallum and Co. with whom they
intended to contract.
  Phillips v. Brooks Ltd.: A rogue purchased some items from the claimant's jewelers shop
claiming to be Sir George Bullogh. He paid by cheque and persuaded the jewelers to allow him
to take a ring immediately as he claimed it was his wife’s birthday the following day. The rogue
then pawned the ring at D’s pawn shop and disappeared. P sued the defendants, who were the
pawnbrokers, for the return of a ring or, alternatively, its value, and damages for its detention. P
brought the action based on unilateral mistake as to identity. It was held that the contract was
not void for mistake. Where the parties transact face to face, the law presumes they intend to
deal with the person in front of them and not the person they claim to be. The jewelers were
unable to demonstrate that they would only have sold the ring to Sir George Bullogh.
 Lewis v. Avery: P sold his mini cooper to a rogue claiming to be the actor Richard Greene (who
played Robin Hood in a series at the time). P, believing the words of the rogue, let him take the
car with the log book in exchange for a cheque for £430 which was later dishonored. The rogue
sold the car on to Mr. Avery for £200 claiming to be P. P alleged that since there was a mistake
as to identity, the contract between him and the rogue never existed. Thus, the title never
passed, and the car still belongs to him. He claimed damages from D since he had his car. It was
held that the contract was not void for mistake.
 Ingram v. Little: A person presenting himself with a different but existing name (Rogue) bought
a car from P. The rogue paid with a check so before accepting the cheque, P checked the name
in the phone book and confirmed the rogue’s given name and address. However the cheque was
dishonored and in the meantime, the rogue sold the car to D, who bought the car as a bone fide
buyer. It was held that the contract was void for mistake. The Court of Appeal held that P only
intended to deal with Mr. Hutchinson (rogue) at the address given because they were not willing
to offer a sale for payment by cheque from anyone else. This case has received widespread
criticism and has not been followed since.
 Shogun Finance v. Hudson: The rogue told Shogun Finance Ltd. that his name was Mr. Patel and
produced Mr. Patel's driving license. The finance company did a credit check on Mr. Patel,
finding no problems, and the rogue drove away. It was held there was no contract (rescission) of
hire purchase between Shogun Finance and the rogue, so that the car was not Mr. Hudson's
NOTE: Shogun Finance, however, was not a case of a face-to-face transaction and the
presumption that there was intention to deal with the person did not arise. The contract was
written.
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Mistake in Equity:
There are three forms of equitable relief:

1. Rectification: This is a remedy aimed at correcting a mistake not made during the formation of
the agreement, but the recording of the agreement.

 Roberts v. Leicestershire CC: It was held that rectification could be used where the plaintiff
could show that a term beneficial to himself which both parties had intended to be included in the
document had been omitted and the other party was aware of the omission at the time the
document was being executed.
 Thomas Bates and Sons v Wyndham's (Lingerie): The original lease between Bates, who were
the landlords, and Wyndham's, who were the tenants, contained a provision for fixing the rent
by arbitration in default of agreement between the parties. A new lease which was prepared by
the landlords omitted to include the arbitration provision. The tenants who were aware of the
 omission signed the new lease without drawing the omission to the attention of the landlord.
On discovering the omission the landlords brought an action for rectification of the lease so as
to include the arbitration provision. The Court held that "by what appears to be a species of
equitable estoppel, if one party to a transaction knows that the instrument contains a mistake in
his favor but does nothing to correct it, he (and those claiming under him) will be precluded
from resisting rectification on the ground that the mistake is unilateral and not common’.
 Commission for the New Towns v Cooper: Rectification was ordered because the defendant
had sought to mislead the plaintiff into making the relevant mistake, the plaintiff had in fact
made it, and this was sufficiently unconscionable conduct on the part of the defendant to render
it liable to rectification.
 Riverlate Properties v Paul: The plaintiff lessor, through its agent, had mistakenly omitted to
insert a clause to place the defendant lessee under an obligation to bear a part of the cost of the
exterior and structural repairs of the demised premises. The lessor sought rectification, or,
alternatively rescission in equity on the ground that the lessor had made a mistake which the
lessee or her agent knew. The Court held that as the error was purely that of the lessor and/or
its solicitors and the lessee and/or her solicitors had no knowledge of such error and were not
guilty of anything approaching sharp practice, there were no grounds to intervene.
 F.E. Rose (London) Ltd v William Pim Jnr & Co.: The plaintiffs received from the Middle East an
order for 'Moroccan horse beans' described as 'feveroles'. Negotiating, the defendants, being
asked what those beans were, said they were just 'horse beans'. Later, the plaintiffs discovered
that they were in fact different from what they wanted. So they sought to have the contract
rectified so as to read 'feveroles' for 'horse beans'. Verbal agreement and document were in
accord (though the plaintiff had wanted 'feveroles', they agreed on 'horsebeans' after they
asked the defendants). The mistake was unilateral.
 George Wimpey UK Ltd v VI Components Ltd: The mistake had occurred in the use of
complicated formulae for deferred payment of the purchase money to VIC. It was only after the
sale that Wimpey realized that a key element of the formulae had been excluded from the
agreement. The exclusion was detrimental to Wimpey, which sought to have the agreement
rectified on the basis of the mistake. The High Court held that a unilateral mistake had occurred.
VIC was aware of the omission in the final draft and had acted unconscionably in failing to bring
it to Wimpey's attention. But the Court of Appeal held that the lack of supporting
documentation had not proved that a mistake had occurred when executing the contract,
coupled with the inequality of bargaining power, meant that Wimpey was effectively barred
from rectifying the contract, despite its detrimental impact.

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2. Specific Performance:

This flows from the nature of equitable relief, whose principal characteristic is that it is discretionary:
that is, flexible and responsive to the justice of the individual case; thus, in an appropriate case, the
remedy of specific performance.

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 3. Rescission:

The contract is voidable by the courts and not by one of the parties. This relief will not be available
where the party has made a unilateral mistake as to the commercial consequences of the contract he
had entered into rather than the terms of the agreement or the subject matter of the agreement.

 Clarion v National Provident Institution: Equitable doctrine of mistake cannot be used in order
to rescue a party from a bad bargain.
 Solle v Butcher: Equity offered greater flexibility in remedial relief. The contract is, in a sense,
'voidable' for mistake rather than void. This means that a court applying an equitable doctrine of
mistake is not faced with the all-or-nothing situation that a court applying a legal doctrine of
mistake is - the matter can be rearranged to try to suit the bargain the parties thought they
were reaching in the first place.
 Kyle Bay Ltd (t/a Astons Nightclub) v Underwriters: The assured had taken out a business
interruption policy. After a fire the issue arose between loss adjusters acting for insurers and the
assured as to whether the policy was declaration-linked or not. After a compromise agreement
was reached, the assured discovered that the policy was declaration-linked and therefore not
subject to average. P claimed to set aside the compromise on the basis of negligent
misrepresentation and / or common mistake. The Court of Appeal upheld the judge's finding
that whilst the common mistake was significant it did not render the agreement "essentially or
radically" different.

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