MISTAKE

Topics included:
- Vitiating Elements
- Mistake
- Signed Document
- Three Factors
- Non est Factum
- Successful Plea
- Contract was void for Mistake
- Unilateral Mistakes
- Mistake made by the party
- Knowledge of the mistake
- Mistake of Fundamental Importance
- Mistaken Identity Cases
- Non-Identical Mistake
- Identical Mistake
- Res Extincta
- Mistake as to quality

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Cases Discussed:
Case #1: FOSTER v MACKINNOL
Case #2: SAUNDERS v ANGELINA
Case #3: CENTROVINCIAL ESTATE v MERCHANT INVESTORS
ASSURANCE
Case #4: CUNDY v LINDSEY
Case #5: LEWIS v AVERAY
Case #6: RAFAEL v WIDELHAUS
Case #7: COUTURIER v HASTIE
Case #8: LEAF v INTERNATIONAL GALLERIES
Case #9: BELL v LEVER BROS.
Case #10: NICHOLSON & VENN v SMITH MARRIOT
Case #11: SOLLE v BUTLER

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- Vitiating Elements:
• Having considered how contracts are formed, we will look at
a number of factors that may affect the validity of the contract.
They are called vitiating elements "vitiated" means "spoilt".

- Mistake:
• Generally the fact that one party made a mistake when
entering the contract will not affect the contract, however
some mistakes (called operative mistake) affected the contract.

- Signed Document:
• Mistake as to the nature of a signed document means that
very occasionally, if a person has signed a document believing it
to be something fundamentally different from that what it
actually is, he may have a defence to liability on the grounds
that he made a mistake.
• This kind of mistake is sometimes called "non est factum",
which means "this is not my deed". And it is extremely rare for
such a plea to succeed.

- Three Factors:
• To avoid the contract on this ground, the following must be
proved:
• The contract was made by signing a document.
• The document signed was fundamentally different from what
the person signing it thought he was signing.
• The person trying to rely on his mistake was not careless in
any way.
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- Non est Factum:
• Having to prove this means that nearly all cases of "non est
factum" will fail. Because the court will decide that it was
careless to sign a document without reading it if physically
capable of doing so.

- Successful Plea:
• Thus the plea is likely to suceed only if used by someone who
could not have read the document, for e.g. because he/she was
blind.
• In the case of FOSTER v MCKINNOL in which a feable sighted
old man who signed a document believing it to be something
completely different was able to avoid it.
• The leading case in which the contract was void for mistake is
SAUNDERS v ANGELINA BUILDING SOCIETY, in which an old lady
who had lost her reading glasses was induced to sign a
document that she believed was a deed of gift to her nephew,
in fact it was an assignment to someone else, who then
mortaged the house with the building society. When the
payments were not kept up, the building society claimed the
house and the old lady tried to avoid liability by saying that the
original assignment was void for mistake. The court held that it
was not void because she had been careless in signing the
document without reading it, but also because what she signed
was not fundamentally different from what she thought she
was signing.

- Contract was void for Mistake:

• Ocassionally when one person makes a mistake, the contract
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will be void.
• To suceed in avoiding a contract on these grounds the
following must be proved.

- Unilateral Mistakes:
• In cases of unilateral mistakes usually one of two innocent
people must bear the loss.
• Some people think that it shall be possible for the court to
share the loss between the two.

- Mistake made by the party:

• The most common example is, thinking that you are
contracting with one person when really you're contracting
with someone else.
• However the person you think you are dealing with must
actually exist; a contract will not be void merely because one
party is contracting under an alias (though it would probably be
voidable for fraud).

- Knowledge of the mistake:

• That the other party knew he was mistaken. This is usually
easy to prove because one person sets out to decieve the other
deliberately.
• However, if he genuinely does not know about the mistake
the contract will be valid.
• Likewise, in the case of CENTROVINCIAL ESTATE v MERCHANT
INVESTORS ASSURANCE, a landlord wrote to his tenant offering
a tenancy at a rent of 65,000 pounds a year. The tenant
unaware of the mistake, accepted; infact the landlord meant to
ask for 126,000 pounds a year. The Court of Appeal held that
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the mistake did not affect the contract and that the rent was
there for 65,000 pounds a year.

- Mistake of Fundamental Importance:

• If the mistake was about something of fundamental
importance so much so, that the contract would not have been
made if the true facts had been known.
• A successful unilateral mistake was established in the case of
CUNDY v LINDSEY, a crook called Blenkarn wrote to Lindsey and
ordered some handkerchiefs signing his letters so that it
appeared to have come from a reputable merchant called
Blenkiron. Blenkarn sold the handkerchiefs to Cundy. Lindsey
who had not been paid, sued to get the handkerchiefs back and
suceeded. The House of Lords found that as Lindsey had
intended to deal with Blenkiron the contract was void for
mistake and therefore ownership of the goods never passed to
Blenkiron who had therefore no title to pass onto Cundy. Linsey
remained the owner of the goods throughout.

- Mistaken Identity Cases:

• In mistake identity cases, where the parties were face to face
when they made the contract, the court usually assumes that
the contract was made with the person actually in the room
regardless of what he called himself.
• In LEWIS v AVERAY, a rogue persuaded Lewis to part with the
car in return for the cheque but pretending to be a well known
t.v. actor. The rogue then sold the car to Averay for cash; the
cheque paid to Lewis which was stolen bounced. The Court of
Appeal found that the contract between Lewis and the rogue
was not void for mistake although it was voidable for
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fraudulent misrepresentation. The right to resent the contract
had been lost, because an innocent third party had the car.

- Non-Identical Mistake:
• Sometimes the two parties may make different mistakes. If
this happens and they are at complete cross purposes so that
no objective sense can be made of what they said/did the
contract will be void.
• In the case of RAFAEL v WIDELHAUS, the parties made a
contract for cargo of cotton arriving in the ship from Bombay.
Infact they were two ships of that name and both were carrying
cotton from Bombay but arriving at different times. One party
was thinking of one, the other of another. In these
circumstances the court held that there was no contract.

- Identical Mistake:
• This occurs when both parties make some mistake and
sometimes a mistake of this kind will make a contract void.

- Res Extincta:
• The main examples are, mistake as to the existence of the
subject matter (sometimes called res extincta) and mistake as
to the possibilty of performing the contract.
• An example of the first kind is, COUTERIER v HASTIE in which
a contract was made to sell corn which unknown to the parties
had already been sold. The court found the contract void
because there was nothing to have a contract about. The corn
no longer existed at that point.
• An example of impossibilty would be a contract by which
someone agreed to buy something of which he was already the
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owner.
• However, the mere fact that the contract is difficult to
perform because the goods are difficult to obtain or the
weather is too bad.
• To perform a services contract for e.g. will not affect it.

- Mistake as to quality:
• This will usually not affect a contract.
• Thus if one party or both parties think mistakenly that
something is more valuable than it is the contract will not be
void for mistake though it may be voidable for
misrepresentation.
• In the case of LEAF v INTERNATIONAL GALLERIES the plaintiffs
bought a picture which he was told to have been painted by an
artist named J. Constable. Five years later he found that it was
not painted by him and tried to avoid the contract. The court
found that the contract was not void since the mistake which
was a common mistake as to quality did not affect it. (The
contract was voidable for innocent misrepresentation but
because of the time lapse the court found that it was too late
to rescind the contract.)
• The leading case on mistake as to quality is BELL v LEVER
BROS. the case concerned the chairman of a company was
made redundant with the substantial golden hand shake. The
company subsequently discovered that he had made certain
breaches of his contract for which he could have been
dismissed without compassion and tried to get money back on
the grounds of mistake. Bell convinced the court that he had
forgotten about the breaches of the contract and the case was
therefore one of the examples of common mistake as to
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quality; both parties thought that he was a chairman who
deserved a golden handshake but in fact he did not. The House
of Lords found for Bell who therefore kept the money.
However, they said that a mistake as to quality may make a
contract void if it is sufficiently fundamental. But they did not
explain exactly what kind of mistake will be sufficiently
fundamental.
• In NICHOLSON & VENN v SMITH MARRIOT, the court said that
a mistake as to quality could make a contract void. However,
this was only a High Court decision and it was actually decided
on other grounds. Moreover, it was criticized in the later Court
of Appeal case of SOLLE v BUTLER.