MISTAKE

 
INTRODUCTION
The underlying principle of the law of contract is still
caveat emptor (“let the buyer beware”).
The situations in which a contract will be avoided on
the ground that one or both parties have made a
mistake will be somewhat limited.
Nevertheless the cases reveal that in certain
circumstances a contract may be void at common law
on the ground of a mistake and in some cases even
where the contract is valid at law it may nevertheless
be voidable in equity on the ground of mistake.
 
INTRODUCTION
A mistake which has the effect of rendering
a contract void is described as an “operative”
mistake.
Francio JSC said in Addai v Pioneer
Tobacco Co Ltd [1989-90] GLRD 106, “a
successful plea of mistake wipe(s) out any
view of consensus and destroy(s) the
foundation of an agreement”.
 
INTRODUCTION
The law relating to mistake will be considered under
five heads:
1. Common Mistake; (11.2)
2. Mutual Mistake; (11.3)
3. Unilateral Mistake; (11.4)
4. Mistake as to Identity; (11.5)
5. Mistake Relating to Documents. (11.6)
 
COMMON MISTAKE
Here, the parties, although apparently in
agreement, have entered into the contract
on the basis of a false and fundamental
assumption.
It is called common mistake since both
parties make the same mistake.
The contract is not necessarily void at law
in these circumstances.
 
COMMON MISTAKE
The contract will be void at common law if, unknown
to the parties, the subject matter of the agreement
does not exist or has ceased to exist.
Thus, a cargo of corn, en route to London per the
‘Kezia Page', had to be sold at a port of refuge in Tunis
as it had begun to ferment. Unaware of this, the
respondents agreed a sale of the corn in London. It was
held that no contract of sale had come into being as
the subject matter effectively did not exist; Couturier
v Hastie (1856) 5 HLC 673.
 
COMMON MISTAKE
Also in Galloway v Galloway [1914] 30 TRL
531, a separation deed between a man and a
woman was declared a nullity because it was
made on a mistaken and common assumption
that they were in fact married to each other.
The supposition upon which the parties had
proceeded was that the subject matter of the
contract that is the marriage was existence.
 
COMMON MISTAKE
A common mistake therefore occurs where the
contracting parties made an identical error about the
same subject matter.
There are two species of the common mistake that result
in void transactions. These are res sua and res extinct.
An example of res sua is where, unbeknown to both
purchaser and vendor, one purports to buy something that
he already owns whilst res extinct is where, unbeknown to
both purchaser and vendor, one purports to buy
something that is already totally destroyed and therefore
non-existent.
 
MUTUAL MISTAKE
A mistake is said to be “mutual” where the parties
misunderstand each other's intentions and are at cross-
purposes.
Unlike common mistake, in this situation the parties do
not both make the same mistake.
In mutual mistake the parties misunderstood each other
and are at cross purpose.
For example ‘A’ intends to offer his Datsun car for sale to ‘B’
believes that the offer relates to a Peugeot car also owned
by the same ‘A’. The parties are therefore not at ad idem;
there is no consensus and therefore there is no contract.
 
MUTUAL MISTAKE
In Addai v Pioneer Tobacco Co Ltd [1989-90] GLRD
106, the defendant advertised in the Ghanaian Times for
tender offers for the public to buy a number of vehicles
which it wanted to sell on an “as is where is “ basis.
The plaintiff put in a tender for one of the Land Rovers
which the defendant accepted. Unknown to the
defendant, however, Leyland motors has installed a
brand new motor in the Land Rover before the plaintiff’s
bid was accepted. The Land Rover’s value was therefore
substantially enhanced.
 
MUTUAL MISTAKE
The defendant asked the plaintiff to pay for the new
engine; the plaintiff insisted on the Land Rover with its
new engine at the contract price. In light of the impasse
the plaintiff sued. The defendant pleaded mistake.
Francois JSC ruled that the plea of mistake had clearly
been made out and that there was never an intention for
the defendant to fit the vehicle with a new engine; that it
did not make commercial sense to install a new engine
on a used vehicle only to offer it to tender or accept a bid
that took no account whatsoever of the enhanced value
of the refitted engine.
 
UNILATERAL MISTAKE
Here one party is fundamentally mistaken concerning the
contract and the other party is aware of the mistake, or the
circumstances are such that he may be taken to be aware of it.
For a unilateral mistake to be operative, the mistake by one
party must be as to a fundamental term of the contract itself,
rather than an error of judgment as to the quality of the
subject-matter.
Unilateral mistakes may occur in several instances and shown
in the following cases. However unilateral mistake itself also
create legal problem only in one area, that is, the area of
mistaken identity.
 
UNILATERAL MISTAKE
In the first case it was a mistake as to a term of the contract,
whereas in the second it was a mistake as to the quality of the
subject matter.
In Hartog v Colin and Shields (1939) 3 All ER 566, the
defendants offered hare skins to the plaintiff at a certain
price ‘per pound' but had intended to offer them at the same
price ‘per piece'.
The value of a piece was one third that of a pound. It was
held that the circumstances were such that the plaintiffs
must have realised the defendants' error, which, as it
concerned a term of the contract, rendered the contract void.
 
UNILATERAL MISTAKE
Also in Smith v Hughes (1871) LR 6 QB 597, D was
shown a sample of oats by the plaintiff. The defendant
bought them in the belief that they were “old” oats; he
did not want “new” oats.
They were new oats. The court was of the view that the
mistake was merely as to the quality of the subject-matter
and could not render the contract void, even if the
plaintiff seller knew of the mistake.
But if the buyer mistakenly believed that the seller had
warranted that the oats were old and the seller was aware
of this mistake, the mistake would be operative.
 
UNILATERAL MISTAKE
Where one party is mistaken as to the identity of the other
party, in certain circumstances the contract may be void at
common law.
Almost all the decided cases of operative mistake in this area
are in fact instances of unilateral mistake, as the non-mistaken
party is aware of the mistake because he has engineered it
through his own fraud.
Even where the contract is not void, it may be voidable for
fraudulent misrepresentation and if the goods which are the
subject matter have passed to an innocent third party before
the contract is avoided, that third party may acquire a good
title.
 
UNILATERAL MISTAKE
Supposed that ‘A’ pretending to be ‘X’ makes an offer to ‘B’
which ‘B’ accepts in the belief that ‘A’ is in fact ‘X’. In a
subsequent dispute ‘B’ now alleges that he would have
withheld this acceptance had he not mistaken ‘A’.
If this allegation is proved and if ‘B’s’ intention was known
to ‘A’ at the time of acceptance it is simple because there
was no correspondence between offer and acceptance.
But it may not be all that simple because outward
appearances cannot be neglected and despite the mistake
a contract has been concluded between the parties. The
burden lies upon the party who pleads the mistake.
 
UNILATERAL MISTAKE
To be able to discharge this burden you need to prove the
following:
1. That he intended to deal with a person other than the
person with whom he has apparently made the contract;
2. That the latter was aware of his intentions;
3. He will also have to prove that at the time of negotiating
the agreement he regarded the identity of the other
contracting party as a matter of crucial importance;
4. That he took reasonable step to verify the identity of the
party.
 
UNILATERAL MISTAKE
UNILATERAL MISTAKE
To satisfy the second requirement the mistaken party must
prove that the other party was aware of the mistake. In
Hardman v Booth, ‘X’, one of the plaintiffs, called at the place
of business of Gandell & Co. This firm consisted of Thomas
Gandell only, though the business was managed by a clerk
called Edward Gandell.
‘X’ being fraudulently persuaded by Edward that the latter was
a member of the firm sold and deliver goods to the place of
business of Gandell & Co. but invoiced them to ‘Edward
Gandell and Co’. Edward, who carried on a separate business
with one Todd, pledged the goods with the defendant for
advances bona fide made to Gandell & Todd.
 
UNILATERAL MISTAKE
The plaintiffs now sued the defendant for
conversion. The court held that no contract of
sale came into existence since ‘X’s offer was
made to Thomas only and Edward though he
knew of this fact purported to accept it for
himself.
Edward has thus acquired no title to the goods
capable of transfer to the innocent defendant
and the defendant was therefore liable.
 
UNILATERAL MISTAKE
Thirdly, that at the time of negotiating the agreement he
regarded the identity of the other contractual party as a
matter of crucial importance.
In Cundy v Lindsay, a fraudulent person named Blenkarn
writing from ’37 Wood Street’, Cheapside London, offered
to buy goods from the plaintiff and he signed his letter in
such a way that his name appears to be ‘Blenkiron & Co’.
The latter were respectable firms carrying on business at
123 Wood St. Blenkarn occupy a room which he called 37
Wood St but in fact its entrance was from an adjourning
street.
 
UNILATERAL MISTAKE
The plaintiffs, who were aware of the high reputation
of Blenkiron & Co., though they neither knew nor
troubled to ascertain the number of the street where
they did business, purported to accept the offer and
dispatch the goods to “Messers Blenkiron & Co., 37
Wood St, Cheapside”.
These were received by the rogue Blenkarn, and he in
turn sold them to the defendants, who took them in all
good faith. The plaintiff now sued the defendants for
conversion.
 
UNILATERAL MISTAKE
The case is difficult, for the facts admitted of two
different inferences:
1. It might be inferred that the plaintiffs intended to
sell to Blenkiron & Co. but that Blenkarn
fraudulently assume the position of the buyer.
2.It might also be inferred that the plaintiff even
though deceived by the fraud of Blenkarn, intended
to sell to the person who traded at 37 Wood St.
 
UNILATERAL MISTAKE
At first the Court of Appeal held on the 2nf view that
the plaintiff wanted to deal with anybody from 37
Wood St. In the House of Lords, the first view was
preferred. Having held on to the 1st position it was
clear therefore that the defendant were liable because
there was no contract of sale between the plaintiff and
Blenkarn. It meant that Blenkarn possess no title
which he could pass on.
 
MISTAKE RELATING TO DOCUMENTS: Non est factum
As a general rule, a person is bound by his signature to a
document, whether or not he has read or understood the
document.
In the case of L'Estrange v Graucob [1934] 2 KB 394, the
English Court of Appeal confirmed the general rule that
any person who signs a document is taken to have agreed
to its terms whether or not he has actually read it.
However, where a person has been induced to sign a
contractual document by fraud or misrepresentation, the
transaction will be voidable.
 
MISTAKE RELATING TO DOCUMENTS: Non est factum
The plea is an ancient one and was originally used to protect
illiterate persons.
It eventually became available to literate persons who had
signed a document believing it to be something totally
different from what it actually was.
In Foster v Mackinnon (1869) LRCP 704, D, a senile man
with poor eyesight, was induced to sign a document which
he was told was a guarantee.
In fact, it was a bill of exchange upon which the plaintiff
ultimately became entitled. It was held that D, who had not
been negligent, was not liable on the bill; the plea of non est
factum succeeded.
 
MISTAKE RELATING TO DOCUMENTS: Non est factum
In order to invalidate a contract unwittingly entered in this
way, the signer must therefore show non est factum - “it is not
my deed" - which in turn requires that the document should
have been radically different in nature from the one the signer
believed he was signing, and that his mistake was not due to
his own carelessness.
A successful plea makes a document void. The plea was
originally used to protect illiterate persons who were tricked
into putting their mark on documents. It eventually became
available to literate persons who had signed a document
believing it to be something totally different from what it
actually was.
 
MISTAKE RELATING TO DOCUMENTS: Non est factum
Sometimes a person is induced by the false statements
of another to sign a written document containing a
contract that is fraudulently different in character from
that which he contemplated. The following is a typical
example of that situation.
In Lewis v Clay, Lord William Naville produces to Clay
some documents entirely covered with blotting paper
except for four blank spaces that have been cut in it. He
says that the hidden documents concern a private family
matter and that his own signature requires a witness.
 
MISTAKE RELATING TO DOCUMENTS: Non est factum
There upon Clay signs his name in the blank spaces.
The truth is that the documents are promissory notes to
the value of £11,113 signed by Clay in favour of Lewis. On
the faith of these notes Lewis advances money to Lord
William Neville.
Here it is clear that the person who signed the
document appear to have made a contract or a
disposition of property though his intention was to
append his signature to a transaction of an entirely
different character. The category of document actually
signed is not what he thought it was.
 
MISTAKE RELATING TO DOCUMENTS: Non est factum
Under such a situation the mistaken party will escape
liability if he satisfies the court that he signed a
document that is radically different from that which he
intended to sign and from that his mistake was not
due to his carelessness.
This was what led to the principle known as: scriptum
predictum non est factum suum (non est factum) –
that is, it is not my deed.
 
MISTAKE RELATING TO DOCUMENTS: Non est factum
In the course of its development, this plea of non est factum
was made available to defendant who could not read, whether
owing to illiteracy or blindness, so as to enable him escape
liability upon proof that the written terms of the deed did not
correspond with its effect as explained to him before he put his
seal to it.
In Thoroughgood’s case, William Chicken being in arrears with
his rent tendered to his landlord, Thoroughgood, a deed by
which he was relieved from ‘all demands whatsoever’ which
Thoroughgood had against him.
Thus the dispensation on its face comprises not only arrears of
rent, but also the right to recover the land.
 
MISTAKE RELATING TO DOCUMENTS: Non est factum
Thoroughgood was an illiterate, but a bystander, affecting to be
helpful, seized the deed and said: ‘The effect of it is this, that
you do release to William Chicken all the arrears of rent that
he doth owe you and no otherwise, and thus you shall have
your land back.’
After replying, ‘If it be no otherwise, I am content,’
Thoroughgood sealed the deed. Chicken subsequently sold
the land to an innocent purchaser. Thoroughgood sued and
recovered the land.
The court held that he was a layman and without learning and
that he had been deceived by a distorted recital of the content
of the deed.
 
MISTAKE RELATING TO DOCUMENTS: Non est factum
An unrestrained right to raise the plea would lead to abuse
and uncertainty and so the courts have placed two restrictions
on the right to raise the plea:
the signer's mistake as to the nature of the document must be
fundamental or radical, and
the signer must not have been careless in signing the document.
In Ghana a signature or thumbprint under Cap 262, illiterates’
Protection Ordinance (1951), is not binding on an illiterate
unless it is shown that the document was read over and
interpreted to the illiterate in the language that he
understands and that he understood the contents of the
document before appending his signature or thumbprint.
End of
Lecture!