SEMINAR 10 – MISTAKE II

Anna Mechlinska
Peter went into a car showroom wanting to buy a second hand BMW M3 Sports Convertible for £18,000

He had a long discussion with the showroom manager, Ian, who explained all of the fine detail in relation
to the car and then took Peter for a test drive. Peter had introduced himself as ‘Lord Jonah Whittington-
Smythe QC – an eminent Court of Appeal Judge’. Ian became very excited at the prospect of such a
customer.

Peter was very impressed and decided to buy the car. He paid for the car by cheque. The name on the
cheque book and the bankcard also supplied was ‘Lord Jonah Whittington-Smythe QC’. He handed over
the cheque and drove away. Later that afternoon, Peter sold the car on to Lilian who paid Peter £21,000 in
cash.

Peter took the money and got on the first flight to Mauritius.

A few days later, the bank wrote to Ian and informed him that the cheque had been stopped by the REAL
Lord Whittington-Smythe after he had discovered that his wallet and cheque book had been stolen.

a) Advise Ian as to whether the contract between him and Peter is void for Mistake, and if so, advise Ian
as to whether he will be able to recover the car from Lilian.

b) Would it have made a difference if Peter had bought the car using a finance arrangement with a finance
company?
Problem Question

Issue
Rule
Application
Conclusion
ISSUES

1. Is the contract between Ian and Peter void for

mistake?

2. Will Ian be able to recover the car from

Lilian?
 If you think the contract is vitiated by mistake,
what category of mistake would it be?
 Ian can try to establish unilateral mistake as to the
identity of the other contracting party.
 Consequence?
 Contract void. Title to the car could not have
passed to Peter and Peter could not have
passed it to Lilian. Therefore, Lilian liable to
Ian in conversion, Ian would get the car back.
 If you think Ian has an action for mistake, does he have another
cause of action besides the one for mistake?

Ian can try to establish fraudulent misrepresentation.

 Consequence?
 Contract voidable. Ian can choose to rescind (i.e. set aside) the contract with Peter. Rescission
restores parties to the position they were in before they entered the contract. Therefore, Peter
would have to return the car to Ian.
 Two problems:
i. A bar to rescission: third party involvement - when a third party acquires a proprietary
interest into the object of the contract, in good faith, for value and without notice of the
misrepresentation. Lilian (i.e. innocent third party) bought the car before Ian discovered
misrepresentation; therefore, rescission barred and Ian will not be able to get the car back
ii. Peter is gone – not feasible to sue him.
Conclusion

Ian would be better off if he manages to establish

unilateral mistake as to the identity of the other
contracting party.
 RULE
 To be operative, mistake must have related to
the identity of the person with whom you were
contracting, not his/her attributes.
 What matters?
 Whether the contracting parties were in each
other’s presence when the contract was made
RULE
 Contract face-to-face
 Presumption that claimant intended to contract
with the person in front of him. Very difficult to
rebut.
 Mistake as to attribute.
 See Phillips v Brooks & Lewis v Averay
 But also see Ingram v Little
 Rule
 Contract not face-to-face

 If claimant intended to contract with a person other

than the one who made the offer.
 Mistake as to identity.
 Contract void.
 See Cundy v Lindsay, Shogun Finance v Hudson
 Application

Apply the rule to the facts of the

case problem.
 Application
 Contract face-to-face
 Therefore, Ian is deemed to have intended to
contract with the person who is physically in front
of him (i.e. Peter), even if he assumed the identity
of someone else (i.e. Lord Jonah Whittington-
Smythe QC).
 Mistake is not as to the identity of the other party
(i.e. Peter) but as to his creditworthiness.
 Conclusion
 Ian’s mistake does not amount to operative
mistake.
 Therefore, contract is NOT void. Property has
passed on to Peter under it.
 Thus, Lilian acquired good title.
 Ian will then NOT be able to get the car back.
Issue

Will the contract be void for mistake and will the

seller be able to recover the car from Lilian if Peter
bought the car using a finance arrangement with a
finance company?
When applying the rule, please consider:

 With whom does Peter have a contract? – Ian (car dealer) or finance company?

 Who then will be the claimant? – Ian or finance company?

 Who will be the defendant? – Peter or Lilian?

 Is this a face-to-face or not face-to-face contract?

 Was Ian an agent of the finance company? That is, did he represent them in the negotiations, was he acting on their
behalf, could he bind them?

 Was the identity of the buyer of fundamental importance to the claimant? Did they intend to deal with the person whose
name was on the documents (i.e. Lord Jonah Whittington-Smythe QC) or did they intend to deal with Peter but
mistakenly thought Peter was Lord Whittington-Smythe?

 Which case would help you answer all these questions?

 Conclusion

 The finance company’s mistake amounts to operative

mistake since it did not deal with Peter face-to-face.

 Therefore, contract is void. Property has not passed on

to Peter and from Peter to Lilian.

 Lilian
did not acquire good title and therefore, finance
company can get the car back.