U N I L AT E R A L M I S TA K E

As to identity — When determining whether a contract will be void for mistake, the courts draw a distinction
between contracts inter absentes (from a distance) and contracts inter praesentes (face to face). An offer can only
be accepted by the person to whom it is addressed - on objective intention, did it appear to the person in question
Supervision that the offer was addressed to him?
Boulton v Jones [1857] — C bought a shop from B, D used to deal with B and had a set off against him. D then

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bought some pipes from C and refused to pay. C took legal action and it was held that D was not entitled to pay. C
could not have accepted D’s offer because it was addressed to B.
It is required that it must be clear to B that her identity/fact that she possesses a particular attribute is so important
to A that A’s offer is only directed to her on the condition that she is that person/possesses that attribute. A mere
mistake concealment of fact does not avoid a contract - Fletcher v Krell [1873].
!
Mostly mistaken credit transactions - the seller is only selling the goods to B because he comes across as
creditworthy and therefore it is safe for A to sell him goods on credit. The contract will be void if the victim makes
the offer to the fraudster on the condition that he personally is who he says he is, there are difficulties:
Phillips v Brooks Ltd [1919] held 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 not the person they claim to be. The jewellers
A claim based in mistake is more favorable
were unable to demonstrate that they would only have sold the ring to Sir George Bullogh.
to one based in misrepresentation as the
Ingram v Little [1961] CoA held no contract had been formed — because it concerned credit, identity was of the
effect of a finding of mistake is that the
utmost importance, the rogue had written his name/address on the cheque indicating the importance attached to
contract is void as oppose to voidable.
This is important where a rogue has identity.
acquired goods and sold them on to a third Lewis v Avery [1972] - Ingram v Little heavily criticised, C thought he was selling car to famous actor. Presumption of
party. If the contract is void the rogue will face-to-face transactions not displaced, contract was not void.
never receive title to goods and will not Leading case: Shogun Finance v Hudson [2003] a rogue went into a car showroom, claiming to be Mr Patel (with
be able to pass title when selling the his license and documents) and bought a car which he then sold to X, vanishing and leaving most of the purchase
goods. However, if the contract is voidable price unpaid. HoL held that no contract had been formed since the people who checked the documents away from
the contract exists and title passes. If the the showroom itself were not technically face-to-face with the rogue. Distinction is drawn where writing is involved,
goods are sold before the innocent party one works out whom the innocent party intended to contract with by looking at the documents - in this case, all the
rescinds the contract, the purchaser documents were in Mr Patel’s name, therefore, they intended to contract with P and the contract was not valid. They
acquires good title to the goods. added obiter that there is a strong presumption that in the absence of writing, the innocent party means to contract
with whoever is in front of him. There are several difficulties with this decision:
•
Face-to-face situations should not be treated differently - the presence/absence of writing does not
3 general guidelines:! constitute a principled ground of distinction.
• If face-to-face transactions, strong • Too simplistic to say that because the written documents contained Mr Patel’s details that therefore the
presumption that he intends to contract was intended only for Mr Patel.
contract with who is in front of him.! • Main difference between majority/minority was whether the rogue had merely misrepresented that he was
• General nature of transaction - the creditworthy by being P, or whether the offer was only directed to him on condition that he was Mr
where identity is of crucial Patel. For Lord Nicholls and Lord Millet, the two situations are exactly the same; arguable however that
importance e.g. commissioning where the rogue, instead of making an ordinary misrep as to his creditworthiness, actually asserts to be
famous painter! someone else, it makes it easier to say the offer was conditional on the rogue being who he said he
• if the person who the rogue pretends was.
to be exists and is known to A, Non est factum — this is not my deed. The signature on the document is a mistake, because B did not understand
suggests offer is not addressed to its meaning, failing to read the document doesn’t lead to successful claim, but failure to understand does e.g.
rogue (Cundy v Lindsay [1878]). illiteracy Lloyds Bank v Waterhouse [1990].
 common mistake
Common mistake renders contract impossible before it was made and both parties were unaware. Cases suggests
common mistake renders contract void, but there are 2 different approaches:
- doctrine of mistake as a matter of law, certain sorts of common mistake inevitably render void. Where the
Supervision contract has not dealt with the allocation of risk, then the doctrine of mistake will render the contract void -
judicially preferred approach.
- implied terms/construction approach effect of mistake is construed by looking at the terms of the contract,
5 implying terms in the normal way and ‘voiding’ only where the contract says that that is the preferred approach.
Denies any independent doctrine of mistake - principally preferred and explains cases better.
Currently favoured test in Great Peace v Tsavliris Salvage Ltd [2002] (i) there must be a common assumption as to the
mistake existence of a state of affairs; (ii) there must be no warranty by either party that the state of affairs exists; (iii) the non-
existence of the state of affairs is not attributable to the fault of either party; (iv) the non-existence of the state of
affairs must render the contract impossible; (v) the state of affairs must be [a vital part of the contract].
If the contract can be construed to distribute risk, this should be done. Doesn’t matter if mistake of fact/law (Brennan
v Bolt Burden [2004]).

mistakes which render performance impossible

Destruction of subject matter — Couturier v Hastie [1856] quantity of corn sold whilst aboard a ship, unbeknownst to
Misconstruction of Couturier led to s,6
A or B, the corn had deteriorated so much that the captain had lawfully disposed of it. Seller tried to argue that buyer
Sale of Goods Act 1979 which now
bore risk of deterioration - HoL disagreed and held that the buyer was not bound to pay, on interpretation of the
states that ‘where there is a contract
contract, the buyer had not purchased the risk, but the cargo that was ‘supposed to exist’ with Lord Cranworth
for the specific sale of goods, and the
arguing it was all to dowith ‘construction of the contract’. Advantages of construction approach seen in McRae v
goods without the knowledge of the
Commonwealth Disposals Commission [1951] no tanker in existence when M launched an expensive voyage - both
seller have perished at the time when
parties mistaken at the existence of the tanker. High Court proceeded on the basis that Couturier created no doctrine
the contract is made, the contract is
of mistake and therefore on a construction approach, the contract contained a promise from CDC that the tanker was
void’.
in existence and they were therefore liable. They even said that in the alternative and Couturier did create a doctrine
of mistake, it would not apply as the mistake was due to CDC’s fault.
Common mistakes as to quality — real doubt as to whether mistake regarding quality would render contract automatically void. Harrison & Jones Ltd v Bunten
court held there was no misrep or warranty and that the goods answering the contractual description had been delivered. Generally, if the seller gives no
representations/warranties as to quality, this is evidence that the parties intended the contract to be valid even if the assumption was false.. On the other hand, if
the contract was entirely dependent on the mistaken assumption and it turned out to be false, there would be no valid contract.
“Essentially different” — Bell v Lever Bros [1932] where Lord Atkin said the quality does not matter unless the mistake is ‘essential’ aka seller made specific
promises/warranties and it turns out to be something essentially different, otherwise, it is still a valid contract. Treitel tried to rationalise this test by confining the
essential quality mistakes to those in which the subject matter had been identified. Little authority to support Lord Atkin’s proposition, the closest being
Associated Japanese Bank v Crédit du Nord which was Lord Steyn’s “essentially and radically different” test. Closest reexamination was Great Peace [2002] in
which CoA put forward the test that common mistake would only be serious enough to render the contract void if “it transpires that one or both of the parties
have agreed to do something which is impossible to perform”. There are 2 problems with this test:
I. unclear how they dismissed HoL authority in Bell v Lever Bros and replaced it with their own test, although in Kyle Bay v Underwriters [2007] the CoA said that
the court in Great Peace may assumed the ‘impossibility” test meant the same thing as the Bell test.
II. furthermore, the CoA did not appear to take their own, new, test literally. The question in this case was whether the 2 vessels were so far apart that as to
render the performance of the contract impossible. CoA found it was not, since GP could have arrived within 5 days. However, even if the distance has made
it impossible for GP to arrive, the contract was only for the charter of a ship, Cs had made no guarantee as to the position of GP and were under no obligation
to ensure it reached CP.
Therefore, generally mistake as to quality is not enough to render contract void.
 R E L E V A N C E O F F A U LT
Person will be barred from relying on common mistake where he is ‘at fault’, 3 tests as to meaning of fault have
been suggested:
I. Held in McRae that a party cannot rely on mutual mistake where the mistake consists of a belief which is

Supervision
Supervision 5
entertained by him without any reasonable ground, and deliberately induced by him in the mind of the other
party.
II. In Associated Japanese Bank Steyn J held that a party cannot rely on common mistake where the mistake is
mista 5k e a belief held by him without any reasonable ground - suggests second limb of McRae test is unnecessary.
III. Third, and most recently, the CoA in Great Peace held simply that a path cannot rely on common mistake if
“the non-existence of the state of affairs is attributable to the fault of either party”.
mistake O’Sullivan and Hilliard submit the McRae test is to be preferred.

does it matter which approach we use?

O’Sullivan and Hilliard submit that it does:
• no need for an independent doctrine of mistake, which is quite uncertain, when orthodox principles of
construction and and implication of terms can deal with the issue,
• if the construction approach deals well with the situations where parties have failed to allocate risk, why do
RECTIFICATION: we need independent doctrine?
Rewriting of a document where one or • the construction approach seems to better explain the cases than the application of the doctrine of mistake.
both parties are mistaken as to its • construction approach better accommodates the role of fault which obviously has a place in implied terms,
terms. Conditions summarised by LJ but not so much in the doctrine which focuses on seriousness of mistake.
Mustill in The Olympic Pride [1980]: • use of the doctrine creates awkward categorisation of mistakes e.g. mistake as to existence of subject matter
(i) mistake in recording of agreed terms etc…
- remedy is unavailable where the
mistake is due to the transaction not R E S C I S S I O N AT E Q U I T Y ?
the document,
(ii) a mistake common to both parties, Possible to get rescission in equity if the contract is not void at common law - leading case is Solle v Butcher
being the belief that the document [1949] where Lord Denning held that although the contract was not void, it was voidable at equity. He took the
accurately records the transaction, view that the correct question was whether the contract should be rescinded in equity “if the parties were under
(iii) prior transaction can be concluded/ a common misapprehension either as to the facts or as to their relative and respective rights provided the
continuing. If continuing, intention misapprehension was fundamental and not due to the fault of one of the parties. Applied occasionally since e.g.
must be objectively manifested, Grist v Bailey [1967] Goff J held that under the “essentially different” test in Bell, the contract was valid.
remedy is available where document However, he ordered rescission under Solle v Butcher because the mistake was “fundamental”.
does not match what common
intention of parties was. Held in PROBLEMS WITH SOLLE V BUTCHER:
Joscelyne v Nissen [1970] that there I. If this equitable jurisdiction does exist - it seems odd that it was not mentioned by the HoL in Bell,
must be some outward expression of II. Lord Atkin gave a no. of examples in Bell where a contract should not be unravelled on the ground of
common intention - must be inferred mistake including a painting bought believed to be by an old master but which is actually a copy - therefore
from objective actions. how do you distinguish from the relief given in Solle?
Held in Chartbrook v Persimmon III. the meaning of ‘fundamental’ is shrouded in confusion, since if all it means is a ‘mistake without which the
Homes [2009] that pre-contractual transaction would not have gone ahead’ or ‘a mistake which marks a significant difference in value’, it would
negotiations should not make a disrupt far too many transactions and undermine the common law entirely.
difference - approach should be
objective. HoL ultimately rejected rescission for mutual mistake in equity in Great Peace, since it could not be
reconciled with Bell and was wrong on policy grounds.