Mistake

Remedies:
 Often no.
o The objective theory of contract – a contract is based on party’s objective
intentions, other party base on this intention to form contract
 can’t read your mind of what you subjectively believe, (aka the belief
that causes the mistake), then I should not be detrimentally affected
due to your subjective belief  too harsh on the other party
o Certainty of contract
 Ensure commercial certainty in transaction.
 Some situations where mistaken parties enjoy remedy
o Fairness
 Sometimes if it’s fairer to provide remedy/set aside contract
o Need of integrity of actual agreement
 Ad idem: parties in agreement because they agree exactly on a
particular term, which is the basis of their contract
 The mistake which makes the basis break  no consensus  set
aside contract

Reasons for mistake

 Misrepresentation
o Party entered the contract because of the misrepresentation  mistake 
rescind on the basis that contract is voidable
 Common mistake
o Both parties are mistaken, share the same mistake
 Example, both parties sell a good, but the good is destroyed, while
both parties believed the good is under good quality.
 Mutual mistake
o Both parties are mistaken, but mistaken as to different thing
 Cross purpose: one party means one thing while the other party
means the other
 Example: sale of a horse via name. 2 horses with the same name. The
seller sells this horse w this name, while the other party refers to the
different horse.
 Unilateral mistake
o One party is mistaken while the other refers to the correct meaning of the
contract
 Cross purpose:**there’s a correct meaning that can be objectively
determined from the contract, that the court decides’

Potential consequences of mistake

 Operative mistake: mistake where a remedy is granted
1. No contract formed (void ab initio: no contract from the beginning)
2. Contract voidable (innocent party has right to rescind the contract subject to
restrictions)
 3. Restitution for unjust enrichment (equity denies specific performance, remedy of
specific performance, compelling a party to perform the contract)
a. Where a party has paid something, the party may recover the cost on the
basis of restitution for unjust enrichment
4. Refusal to grant specific performance
a. Protection to the mistaken party: even if the contract is valid, and the other
party requests order of specific performance, court of equity may deny such
order to protect the mistaken party
5. Rectification of contract: to correct the mistake in contract

Mutual Mistake
 Under mutual mistake operative:
1. No contract formed
a. Offer and acceptance do not coincide (no consensus ad idem)
2. May be possible where parties have literal correspondence between offer and
acceptance in contract, but still have mutual mistake
 Raffles v Whichelhause
Facts Rules
- P and D entered agreement to - Cross purposes: one party thinks
purchase cotton to arrive by ship December, the other thinks October,
Peerless from Bombay despite literal agreement corresponds
- Two ships named Peerless, one sailing to either of the interpretations
in October while the other in - Could this provide P to claim seller for
December the price?  yes
- Goods shipped in December
- Buyer refused to take delivery: the
agreement was to purchase cotton to
arrive earlier in October, which was
not done
- Potentially, a contract can be void on the basis of mutual mistake
- There are two reasonable interpretations  consistent with objective theory
(latent ambiguity in words used, either interpretation is reasonable, cannot
objectively say which interpretation is correct)

 Scriven v Hindley
Facts: Rules:
- P sells hemp and tow by auction - No contract formed for purchase of
- Goods are not properly described of tow
its nature - Parties not ad idem as to the subject
- D inspected the first sample and matter of sale  Auctioneer intended
believed the second sample (tow) is to sell tow for the second lot, D
hemp too intended to bid for hemp
- D made bids for both lots at auction,
tow was knocked down to D, but D
refused to pay
- True ambiguity: nature of goods never described in the catalogue  no
reasonable interpretation of the correct subject of goods  no contract
 - What the seller intended to sell may not be what the actual agreement is about 
unless it’s expressly included in the contract of what is to be sold

 Mutual mistakes are operative only if the objective facts are equivocal, that both
interpretations may be correct
 If one interpretation can be objectively determined to be correct, then it is only
unilateral mistake
 Goldsborough Mort v Quinn
Facts: Rules:
- P sells land £1.10s per acre - Purchaser (D)’s interpretation was
“calculated on a freehold basis” correct
- P: price = £1.10s*number of acres
- D: deduction of conversion from
leasehold to freehold
- Unilateral mistake when ones’ interpretation can be determined as correct

Unilateral mistakes
 Mistake as to terms
o One simply misunderstanding the contract doesn’t necessarily provide
remedy
o Caveat emptor – let the buyer beware
 Example: the purchaser believes the goods should be in perfect
quality while the quality isn’t specified in the contract. Contract
stands valid even if the goods isn’t of “perfect quality”
 Unilateral mistake operative – no contract (/contract void) – Smith, Hartog
 Smith v Hughes
Facts: Rules:
- P sold oats to D with samples given - Seller knew purchaser intended to
- D agreed to buy purchase old oats  not decisive as
- D discovered oats were new oats but to whether purchaser can have
not old oats remedy
- Parties ad idem: offeror sells “sample
oats” and offer and acceptance
corresponds to the sample
- Contract validly made  ad idem
- Customer mistaken to the quality of the goods will not affect the validity of
contract under common law
- *correspondence of offer and acceptance is important
- *if there is misrepresentation, or if there’s duty on the part of the seller to correct
the mistake
- Unilateral mistake operative if there’s a mistaken belief as to a term of the
contract and the other party knew that mistake, or has induced mistake

 Snapping up case – Hartog v Collin & Shields

- Sale of hare skins at price per pound, - No contract as parties not ad iedm
which should be intended as price per - Compare trade custom  mistake 
piece buyer would have known that it’s a
 - Buyer snapping up offer as price per mistake
pound would be a bargain – 3 pieces =
1 pound

Whether mistake unilateral or mutual

- Objectively whether we can determine what the contract was

In conflict with the objective theory?

Analysis 1
A in mistake, B the innocent party
- Objective theory – B would not have known A is in mistake (subjective thoughts)
so B should not suffer due to A’s mistake
- Unilateral mistake – B should be aware/have known that A is in mistake 
operative mistake

Analysis 2
- Objectively possible to ascertain the real agreement  no objective agreement
and correspondence to the literal agreement
Hartog as an example
- Objectively possible to ascertain the real agreement was price per piece
- No reasonable person could form view that there was agreement on the literal
terms
- Objectively not reasonable for purchaser to believe there was consensus ad idem
for sale at price per pound
- True intentions can be objectively ascertained and do not correspond to the literal
agreement

Alternative remedy for operative unilateral mistake

- Apparent contract (literal meaning of the contract) void (because of mistake of mistaken
party)
- Actual contract enforceable on terms as intended by mistaken party (and known to the
other party) to reflect true intentions (Ulster Bank v Lambe)
o Example as in Hartog  form a contract from price per pound (mistake) to price
per piece (real intention)

- Rectification 修正
o Rectification of written instrument/contract to give effect to true intentions of
parties – the written contract regarded as containing mistake (to be rectified)

Where unilateral mistakes not operative

- Mistaken party not know/induced by unmistaken party

- Court may deny specific performance if it is unjust to impose burden on mistaken party
due to hardship (to perform, too much burden for the party to perform the specific
performance as remedy)

Burrow v Scammel

Tamplin v James

Mistaken party still liable for damages for breach of contract if party does not perform –
contract stands, non performance is breach (Webster v Cecil)

Unilateral mistake as to identity

- Usual scenario – mistake induced by misrepresentation of rogue (fraudster)
- A intended to contract with B, but believed that B to be C due to B’s misrepresentation
- Contract voidable for misrepresentation

Analysis – whether the identity is a term of the contract/does A’s intend that C to accept the
contract to be a term of the contract
- If the specific identity not a term of the contract  contract not void

Question – is contract void for unilateral mistake?

- Mistake to identity is definitely unilateral as one party misunderstood the identity of the
other bei 被認錯的人當然不會認錯自己啊！！
o Issue critical where contract involves sale of goods to rogue who then sells to
innocent third party
o Nemo Dat rule (Nemo dat quod non habet) – no one can give what they do not
have

Whether contract is void from the outset

- Affects clients where there is an innocent third party involved, the contract is for the
sale of goods from A to B, B has to transfer the goods to D
- The original owner of goods not paid, owner A may have to go to D to get the goods
back
Principles to the question
- Where offer made personally to specific individual, no other person can accept the offer
so as to bind the offeror Boulton v Jones
o A intend to bind w C, B has no rights to accept the offer
o If the offer is made without specifically to be only accepted by somebody
(doesn’t matter who accept), B’s acceptance doesn’t matter

Parties dealing face-to-face

- Strong presumption that parties intend to deal with the person in front of them (Philips
v Brooks)
- P sold pearls and ring to Rogue and R - Contract between P and R voidable, but
pretended to be someone else via not void, too late to rescind
cheque - P intended to deal with person in shop,
 - P allowed R to take rings but cheque but mistaken as to R’s identity 
dishonoured misrepresentation
- R gave the ring to defendant - P claim against D failed
pawnbroker
Authority: where parties contract face2face, court presume party intend to contract with
each other, regardless of whether each party is telling truth of the identity

= I have a question, has R the title? If R has no title (due to failure of payment), D should
not have the title anyway

Ingram v Little
- Sale of car - Presumption rebutted
- R test drove car and wished to pay by - But-for test: P would not have sold the
cheque, but P declined car if R did not pretend to be someone
- R pretended to be somebody else else
- P checked phone directory at post office
 agreed to accept the cheque
- R sold car to D, P sue D

Lewis v Averay
- P sold car to R, who misrepresented - Contract formed between P and R
that he was the actor Richard Greene - Contract voidable, not void
- P accepted the cheque after R produced - Lord Denning and Phillimore LJ: nothing
special admission pass to Pinewood to rebut presumption – seller intend to
Studios with the name “Richard A deal w the Rogue
Green” and a photo of R - Megaw LJ: P failed to prove that
- R sold car to D identity of a person of a vital
importance, as opposed to general
concern of creditworthiness
- Whether the identity is a crucial term

Can cases be reconciled?

- Each case depends on own facts and circumstances
- Basic issue: whether identity was intended to be a term of a contract
o Not easy to prove (face-to-face cases)
o Strong presumption that it is not (in face2face)
o Can be rebutted only in exceptional circumstances (can apply but-for test in
Ingram v Little)

Parties dealing at a distance in writing

- Same broad principles, but presumption different
- Dealing w the person stated in the contract
Cundy v Linsay
- Rogue ordered goods from Defendant - No contract between Rogue and
by letter, using another identity Lindsay
 - D dispatched goods without checking - Lindsay intended to contract with the
address, Rogue sold goods to P identity as stated in the written contract

Shogun Finance v Hudson

- Rogue in hire-purchase contract using - In hire purchase, Finance Company
stolen identity to purchase a car and owns the car
sold to defendant - Nemo dat – R did not own car and could
- Shogun Finance approved credit check not confer title to H
and transaction to R - Hire Purchase Act 1964 – if R a debtor
under hire purchase agreement, then R
excepted from Nemo dat  no
exception
o Hire purchase agreement
referred to Durlabh (stolen
identity)
o Identity of customer
fundamental for finance
company under consumer credit
contract
o No contract between finance
company and rogue

- General principle
o Presumption that parties intend to contract with persons named in written
agreement
o written agreement with named party tends to indicate that identity intended
to be a term of the contract – condition precedent to formation of contract
o presumption rebuttable

Kings Norton Metal v Edridge

- Rogue sends letter to P seeking - Contract formed between P and R
quotation for purchase of metal using a - P intended to contract with writer of
fake identity letters
- Fake identity non-existent - Cundy v Lindsay distinguished because
- R made order and collected goods, sold fake identity in current case is non-
to D existent
- No intention on part of P to contract
specifically and only with fake identity

Nature of mistake
- Fraudulent – pretend to be an existent identity and non-existent identity
Common mistakes
- Contract void under common law where mistake = performance of contract impossible,
or essentially be fundamentally different to what is contemplated by the parties
o Bell v Lever Bros Ltd
o Great Peace Shipping v Tsavliris Salvage
o Tony Investments v Fung Sun Kwan

Analysis
1. Whether subject of matter exist at the time of contract
a. Contract prima facie void – Bell v Lever Bros; Great Peace Shipping
i. Consent of parties to contract useless and nullified
ii. SOGO s8 – where a contract of sale of goods, the goods have perished
at the time where contract is made  contract is void 樣嘢唔存在
b. Contract not void where party expressly or impliedly undertakes
responsibility for existence of subject matter
i. Great Peace Shipping
ii. McRae v Commonwealth Disposals Commission
2. Mistake as to quality of subject matter
a. Whether contract void for common mistake –
i. whether absence of the quality as to subject matter renders the
subject matter essentially different from the thing that parties
believed it to be (Bell v Lever Bros)
ii. Whether mistake renders contractual venture impossible (Great
Peace Shipping; Tony Investments v Fung)  preferred by HK courts
iii.

McRae v Commonwealth Disposals Commission

- Public tender for purchase of oil tanker - Contract not void – commission
said to be wrecked impliedly warranted existence of tanker
- No tanker in locality

Bell v Lever Bros

- Agreement for early termination of two - Compensation contract not void
employees in return of compensation - Subject matter of contract – early
- Employer company had right to termination – not fundamentally
terminate without paying compensation different
for employee’s breaches of duties –
both not aware = common mistake

Great Peace Shipping

- D ordered P’s ship to help a third - Contract not void for common mistake
party’s sinking ship - What the parties agreed and whether it
- Mistake – wrong distance between P can still be performed
and third party’s ship (thought 30 miles - Two ships could still meet in 22 hours 0
away turns to be 400 miles) contractual venture not impossible
- D cancelled contract w P and P sued for despite mistake
 compensation
- English CA ruled Solle v Butcher not
consistent with Bell v Lever Bros

Tony Investments v Fung (Hong Kong Case)

- Sale of land agreement in 2004, - Contract not void
included a former slipway - Contract not impossible to perform –
- Vendor did not have title due to vendor had right to seek re-grant from
reclamation initiated and extinguishing government to nominal premium
of title under statute - Implied warranty that vendor has good
- Common mistake – ownership, both title (McRae)
thought vendor have

So rare to render contract void

In equity – contract voidable (Solle v Butcher)
Hong Kong Position not settled – Lo Shing Kin v Sy Chin Mong Stephen
Rectification
- Equitable remedy to correct mistake in written instruments  remedy to the mistaken
party
- Rectification where unilateral mistakes as to terms and other party aware of mistake
o Kowloon Development Finance v Pendex Industries
- Rectification possible because of lack of good faith by unmistaken party

Hong Kong Authorities – objective intentions applied to analysis

Kowloon Development Finance v Pendex
- Consent orders allowing further time - Objective intentions – look at objective
for repayment of arrears owed by evidence  common intention of the
borrower to moneylender party that the parties was not to
- Vague as to whether outstanding debt discharge future liabilities
released aside from the specified - CFA – rectification ordered either on
payments basis of common mistake or unilateral
- Prior negotiations – clear that debt not mistake in the alternative
intended to be released

Non est factum

- Signed contract may be void under doctrine of non est factum (it is not my deed)

Application
- Applies where person did not sign document
- Person signed where – (Saunders v Anglia Building Society)
o Signer was under disability that prevents them from being able to read or
understand document (e.g., blindness, illiteracy, cannot understand the
language)
o Fundamental or radical difference between document signed and what signer
believed they were signing
o Signer was not careless
- Failure by person of full capacity to read document before signing document, not
sufficient to establish non est factum, even if they have not read the document
- Mistake as to legal effect of document also insufficient to establish non est factum (like
what) – Saunders v Anglia Building Society;
o Kincheng Banking v Kao Yu Kuei (Hong Kong) – guarantor (could not read
Chinese) aware document signed involved some obligation re-borrower’s liability
but not fully aware of precise legal effect  doctrine not established
 Guarantor was aware that he was undertaking some obligations
 Doctrine not established if the party’s lack of understanding only to legal
effect of the document

Saunders v Anglia Building Society

- Mrs Gaile signed document assigning - Non est factum not established
leasehold to Lee believing it was gift to - Requirement for radical difference not
nephew (business partner with Lee), established
with nephew’s witness o Different identity not critical in
 - G’s glasses broken and G asked Lee to the circumstances
explain the documents (disability) - G also careless
- G was aware that nephew was going to o Just a quick question about
use the property to raise loans for whom the contract is for is not
business sufficient to be not careless

Radical different example – signing extension of period of option under belief that he was
signing a receipt
Petulin v Cullen

Not radical difference where signing guarantee of existing and future indebtedness,
believing guarantee only to cover future indebtedness – O’Brien v Australia and New
Zealand Bank

Non est factum and unilateral mistake (the relationship between the two doctrines)
- Where unmistaken party seeks to enforce contract
o No need to establish absence of carelessness by mistaken party to render
contract void (Petulin v Cullen)
o Apply principles of operative unilateral mistake as to terms where mistake
known by the other party
- Where innocent third party involved, acted in good faith in reliance on signed document
without notice of mistake
o Cannot apply principles of unilateral mistake, but non est factum principles
o Mistaken party not entitled to assert absence of consensus ad idem against third
party
 Unilateral mistake principles – contract void – not applied
 Only basis for setting aside the contract is non est factum
o Person not allowed to take advantage of own wrong against third party (where
there was carelessness) Saunders v Anglia per Lord Hodson