LAW OF CONTRACT 2 ( Vitiating Element of a Contract)

MISTAKE

Mistake can be simply defined as an erroneous belief. It is misapprehension or

misunderstanding of main facts of a contract. Mistakes have relevance in the law of
contract in a number of different circumstances. They may prevent the mutuality of
agreement which is a necessary element for the formation of a contract. In order for
two parties to conclude a contract binding in law, each must agree with the other the
terms of the contract. It happen in some occasions that each party to a contract
mistakenly believes that he has entered into such a contract based on certain terms,
but after an objective appraisal of the facts, it reveals that no agreement has been
reached by the parties as to the terms of the contract.

See the case of Raffles v. Wichelhaus(1864) 2 H&C 906. The parties believed that
they had entered into a contract for the purchase and sale of a cargo of cotton to
arrive "ex Peerless from Bombay". That term was capable of applying equally to a
cargo of cotton on two different ships, each called "Peerless" and each having sailed
from Bombay, one in September and one in December. The court accepted that parole
evidence could be adduced to prove which shipment the parties had intended to be
the subject of the contract. Had one party intended the September shipment and the
other the December shipment, the agreement necessary for a binding contract would
have been absent. No agreement was ever reached; there was a mutual mistake in
that each party erroneously believes that the other had agreed to his terms.

Another type of mistake is that where the parties erroneously spell out their contract in
terms which do not give effect to an antecedent agreement that they have reached. In
Great Peace Shipping v Tsavliris Salvage (The Great Peace Case) [2002]
EWCA Civ 1407; [2003] QB 679 the defendants agreed that the "Cape Providence"
would deviate towards the "Great Peace" and, on reaching her, escort her so as to be
on hand to save the lives of her crew, should she be found. The contractual services
would terminate when the salvage tug came up with the casualty. The mistake relied
upon by the defendants was the assumption that "Cape Providence" was within a few
hours sailing of the "Great Peace" . They contend that this mistake was fundamental in
that it would take the "Great Peace" about 39 hours to reach a position where she
could render the services which were the object of the contractual adventure. Thus
what we are here concerned with is an allegation of a common mistaken assumption
of fact which renders the service that will be provided if the contract is performed in
accordance with its terms something different from the performance that the parties
contemplated. This is the type of mistake is called common mistake.
Underlying principle: Caveat Emptor

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.

The law relating to mistake will be considered under five heads:

1. Common Mistake;

2. Mutual Mistake;

3. Unilateral Mistake;

4. Mistake as to Identity;

5. Mistake Relating to Documents.

Classification of mistake

Commentators are not agreed as to the classification of Mistake. Treitel deals with
Mistake by contrasting Mistake nullifying consent (where parties reach agreement
which is based on a fundamental mistaken assumption) with Mistake negating consent
(Where mistake prevents the parties from reaching an agreement e.g. where they
intend to contract about different things)

Some commentators divide the mistake into two,that is, common mistake shared by
the parties, and mistake in communication. Because mistake in communication can be
on all sides (mutual mistake), or on one side only (unilateral mistake), we will adopt
the following classification:

1. 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 cases may be categorised as follows:

a) Mistake as to the existence of the subject matter (res extincta)

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, in the case of Couturier V. Hastie,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.
In Scott v Coulson (1903) 2 Ch 249 where the plaintiff contracted to sell to the
defendant a policy of life insurance on the life of a certain Mr Death. However, at the
time of the contract, Death was already dead. The court set aside the transaction.

b) Mistake as to title ( Res Sua)

Treitel regards this category as falling within the concept of legal impossibility. The
mistake will nullify the consent. The contract will be void at common law in the
situation, rare today, where one party agrees to transfer property to the other which
the latter already owns and neither party is aware of this fact. Cooper v Phibbs
(1867) LR 2HL 149, the court set aside an agreement whereby A had agreed to
lease a fishery to B, but unknown to either, the fishery was already owned by B.

c) Mistake as to quality

Leaf v International Galleries [1950] 2 KB 86 -HELD: if A sells to B a painting

which both parties mistakenly believe to be the work of the famous John Constable
(and therefore very valuable), but which in fact is not his work (and therefore worth
far less), the contract is valid at law, assuming the absence of actionable
misrepresentation or the other matters outlined above. The mistake concerns the
quality of the subject-matter. Bell v Lever Bros Ltd [1932] AC 161. Bell and
Snelling agreed to serve for a period of four years as Chairman and Vice-Chairman of a
Lever Bros subsidiary company. Lever Bros wished to terminate the contract early and
agreed with Bell and Snelling to pay £50,000 compensation split between them. Lever
Bros then discovered breaches by Bell and Snelling of their service contracts which
would have allowed Lever Bros to terminate the contracts without payment of
compensation. There was no fraudulent concealment on the part of Bell and Snelling
and the House of Lords had to consider whether the compensation agreements were
void for mistake. According to Treitel“The mistake related only to a quality of the
service contracts and was not fundamental”. It was held thatin the absence of a
breach of a contractual term or misrepresentation the victim of a mistake as to quality
will generally have no remedy for a mistake.
 2. 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

Operative mistake

A mistake which has the effect of rendering a contract void is described as an

“operative” mistake. The contract will be valid in spite of the mistake if the person “so
conducts himself that a reasonable man would believe he was assenting to the terms
proposed by the other party, and that other party, upon that belief enters into a
contract with him.”

Illustrations of operative mistake

See Raffles v Wichelhaus (1864) 2 H & C 906

D agreed to buy cotton from the plaintiffs ex the ship “Peerless” from Bombay. Two
ships of that name were due to leave Bombay; it seems D had in mind the ship leaving
in October and P had in mind the ship leaving in December. The court held that the
transaction was too ambiguous to be enforced as a contract. The test applied by the
court in this type of case is to ask what a reasonable third party would take the
agreement to mean.Would he take the agreement to mean what party A, understood it
to mean or what party B understood it to mean. It is only when the transaction is
totally ambiguous under this objective test that the contract is void for mutual mistake.

Wood v Scarth (1855) 2 K & J 33

D offered in writing to let a pub to the plaintiff at £63 per annum. After a conversation
with the defendant's clerk, the plaintiff accepted by letter, believing that the £63 was
the only payment under the contract. The defendant had intended that a £500
premium would also be payable and he believed that his clerk had explained this to the
plaintiff. It was held that the contract as understood by the plaintiff would be enforced
and the court awarded him damages. In Scriven v Hindley (1913) 3 KB 564

At an auction, lots of hemp and also of tow (an inferior commodity) were up for sale.
The defendants bid for two lots believing that both were for hemp whereas one was
for hemp and tow.The bid was accepted. However, the catalogue and samples were
misleadingly described and marked, and these factors, together with other
circumstances, meant that a reasonable person could not say whether the contract
was for hemp or tow. The contract was held to be void.
 3. UNILATERAL MISTAKE

Definition: 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.

Operative mistake

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.

The distinction is illustrated by the following pair of cases:

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.

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.

4. MISTAKE AS TO IDENTITY

Definition: 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.

The burden is on the person alleging mistake to establish that there was indeed a
mistake as to identity. For the contract to be void as a result of mistake as to identity
the complaining party must satisfy certain requirements:

a. The identity of the other party with whom the mistaken party intended to enter
contract with must be of crucial importance
b. The mistaken party must have in mind an identifiable person with whom he
intends to contract
c. The other party must be aware of the mistake
d. The innocent party must have taken steps to verify the identity of the co-
ordinator.

1. The identity of the other party with whom the mistaken party intended to
enter contract with must be of crucial importance:

Cundy v Lindsay (1878) 3 App Cas 459

The plaintiffs received an order for linen from a rogue, Blenkarn, who gave his address
as 37, Wood Street, Cheapside. In the correspondence, he imitated the signature of a
reputable firm, Blenkiron and Co, known to the plaintiffs, who traded at 123, Wood
Street, Cheapside. The plaintiffs were thus fraudulently induced to send goods to
Blenkarn's address, where he took possession of them and disposed of them to the
defendants, innocent purchasers. It was held that the contract between the plaintiffs
and Blenkarn was void for mistake as the plaintiffs intended to deal only with Blenkiron
and Co.

InPhillips v Brooks [1919] 2 KB 243

Identity was held not to be crucial. Here, a rogue called North entered the plaintiff's
shop and having selected some jewellery, wrote a cheque and announced himself as
Sir George Bullough of St James' Square, a man of means of whom the plaintiff had
heard. The plaintiff, having checked this addressed in a directory, allowed North to
take away a ring. He then pledged the ring with the defendants, who had no notice of
the fraud. In an action by the plaintiffs to recover the ring from the defendants, it was
held that the contract between the plaintiffs and North was not void for mistake,
because the plaintiffs had intended to contract with the person in the shop, whoever it
was. The only mistake was as to the customer's credit-worthiness, not his identity. The
contract was, however, voidable for fraud but because the defendants had acquired
the ring in good faith before the contract was sought to be set aside, they acquired
good title.
Despite Phillips v Brooks , the decision in Ingram v Little [1961] 1 QB 31.
Identity was held to be crucial in The plaintiffs, elderly ladies, advertised their car for
sale. A rogue, calling himself P. G.M. Hutchinson of an address in Caterham, offered to
buy it. The plaintiffs would only accept a cheque when they had checked, from a
directory, that there was such a person at that address. The cheque was worthless and
the rogue disposed of the car to the defendant, who took in good faith. It was held
that the contract between the plaintiffs and the rogue was void for mistake. The
decision in this case is very difficult to distinguish from Phillips v Brooks .

The decision in Phillips v Brooks was followed by Court of Appeal in Lewis v

Averay [1972] 1 QB 198 where the plaintiff, a post-graduate student advertised a
car for sale and was visited by a rogue posing as the actor Richard Greene, who
offered to buy it. The rogue signed a cheque but the plaintiff only allowed him to take
the car away after being shown a forged studio admission pass. The cheque was
worthless and the rogue sold the car to the defendant, an innocent purchaser. The
Court of Appeal held that the contract, though voidable for fraudulent
misrepresentation, was not void in common law. The court took the view that, where
the parties are face to face, there is a presumption that a person intends to deal with
the person before him, as identified by sight and hearing. There was insufficient
evidence in this case that the plaintiff intended to deal only with the well-known actor.

Cundy v Linday has come to be regarded as establishing a principle that a mistake as

to identity will be fundamental, and render the contract void, where the parties
communicate in writing; although there may be a valid contract, regardless of a
mistake as to identity, where parties deal face to face. This principle has been
confirmed by a bare majority of the House of Lords in Shogun Finance v Hudson
[2003] UKHL 62, [2004] 1 AC 919.

Shogun Finance v Hudson [2003] UKHL 62, [2004] 1 AC 919

A rogue obtained a car on hire purchase. He pretended to be a Mr Patel – a case of
‘identity theft.' The car dealer contacted the hire purchase company, Shogun Finance,
with Mr. Patel's details. Shogun Finance checked Mr Patel's credit, and agreed to
extend finance. This involved the finance company buying the car then renting to the
ultimate customer. They thought they were renting it to Mr Patel. They were in reality
renting it to a rogue. The rogue sold it Mr Hudson. If the contract with the rogue
posing as Mr Patel was valid (if voidable for misrepresentation) Mr Hudson got good
title to the car (under Hire Purchase Act 1964 s.27). If the contract was void, Mr
Hudson got no title, and the car still belonged to the finance company. The majority
followed Cundy v Lindsay and decided that a mistake as to identity where the parties
are not face to face means the contract is void. Therefore the rogue never had good
title to pass to Mr Hudson, and the finance company still owned the car.
A mistake as to identity should be distinguished from a mistake as to the
capacity in which a party deals

Hardman v Booth (1863) 1 H & C 803,

P intending to sell cloth to Thomas Gandell Co, negotiated with one Edward Gandell at
the firm's offices. Edward, an employee and not a member of the firm, intended to
take possession of the goods for his own use. Having obtained possession, he sold
them to the defendant, an innocent third party. It was held that the contract between
P and Edward was void. P had believed that Edward was a representative of the firm
and never intended to deal with him personally.

2. It is sometimes stated that an additional requirement for the contract

to be void is that the mistaken party must have taken reasonable steps to
verify the identity of the other party. It may be that this is more in the nature of
an evidential burden to establish that the identity of the other party is crucial.

3. The mistaken party must have in mind an identifiable person with

whom he intends to contract :

Norton Metal Co v EdridgeMerrett Co Ltd

This requirement was not satisfied: P received a letter purporting to be from “Hallam
and Co” with an impressive letterhead. In fact Hallam was a fictitious firm consisting
entirely of a rogue named Wallis. The plaintiffs dispatched goods on credit to the
bogus company. The court took the view that the plaintiffs had intended to contract
with the writer of the letter, whoever it may be, and the contract was not void for
mistake. The only mistake was as to the credit-worthiness of the other party and not
as to his identity. This decision should be compared with Cundy v Lindsay, and
Shogun Finance (above), where the rogue posed as a real person who was
creditworthy.

4. The other party must be aware of the mistake :In the cases discussed above,
identity was fraudulently misrepresented and therefore this requirement was satisfied.
Boulton v Jones (1857) 2 H&N 564.
P was employed by Brocklehurst, a pipe hose manufacturer, with whom the
defendants had had previous dealings. The plaintiff took over Brocklehurst's business
and on the same day the defendants ordered hose form Brocklehurst. The plaintiff
supplied the goods but the defendants refused to pay on the ground that they
intended to contract, not with the plaintiff, but with Brocklehurst as they wished to
enforce a set-off against him. It was held that there was no contract, although the
precise state of knowledge of the plaintiff was not made clear. If the plaintiff was
unaware of the fact that the offer was not intended for him them, arguably, the
contract was valid.

MISTAKE IN EQUITY

1. Common mistake: Equity

Where a contract is void at common law on the ground of common mistake (e.g.
existence of the subject matter, title and quality) the court, exercising its equitable
jurisdiction, may refuse specific performance of the contract. Alternatively, the court
may rescind any contractual document between the parties, and in order to do justice
between them, impose terms.

In Cooper v Phibbs , while setting aside the lease, the House of Lords imposed a
requirement that the “lessor” should have a lien on the fishery for such money as he
had spent on improvements during the time he wrongly thought it belonged to him.

Where there is a mistake as top quality although the agreement is probably valid at
law, it is not voidable in equity.The case of Solle v Butcher [1950] 1 KB 671 broke
new ground in that the Court of Appeal enunciated a new doctrine of common mistake
in equity under which the courts have a discretionary jurisdiction to grant such relief as
in the circumstances seems just. It will come as no surprise to learn that Lord Denning
was involved in this decision.

Other examples of this equitable jurisdiction include Grist v Bailey [1967] Ch 532
and Magee v Pennine Insurance [1969] 2 QB 507 (again Lord Denning).
However, in Great Peace Shipping v Tsavliris Salvage (The Great Peace Case)
[2002] EWCA Civ 1407; [2003] QB 679the Court of Appeal declared that where
the contract is valid at common law, there is no jurisdiction to set it aside in Equity.

2. Mutual mistake in equity

If the contract is void at law on the ground of a mutual mistake, equity “follows the
law” and specific performance will be refused, and any contractual document the
parties have entered into, e.g. a lease, will be rescinded. However, even where the
contract is valid at law, specific performance will be refused if to grant it would cause
hardship. Thus the remedy of specific performance was refused in a sequel to Wood v
Scarth (1858) 1 F & F 293.

3. Unilateral mistake in equity

As with mutual mistake, equity follows the law and will rescind a contractual document
affected by operative unilateral mistake or refuse specific performance. In Webster v
Cecil (1861) 54 ER 812 D, having refused to sell his property to P for £2,000, wrote
offering to sell it to him for £1,250. This offer was immediately accepted.The
defendant had intended to write £2,250. It was held that the mistake was operative
and specific performance was refused. Webster was presumed to have known of the
mistake. It was unfair of him to seek to enforce the contract against cecil.

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. L'Estrange v Graucob [1934] 2 KB 394.
Where he has been induced to sign a contractual document by fraud or
misrepresentation, the transaction will be voidable.

In the absence of these factors, the plea of non est factum (not my deed)
may be available

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.

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.

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:

(i) the signer's mistake as to the nature of the document must be fundamental or
radical, and

(ii) the signer must not have been careless in signing the document.

With regard to (i) the courts originally took the view that the plea was not available
where the signer's mistake was merely as to the contents of the document rather than
as to its character or class; Howatson v Webb [1908] 1 Ch 1. This test was not a
realistic one and was substituted by the House of Lords in Saunders v Anglia
Building Society [1971] AC 1004. The test is now that there must be a
fundamental or radical difference between the document actually signed and what the
signer believed it to be.
With regard to (ii), the Court of Appeal had ruled in Carlisle and Cumberland
Banking Co v Bragg [ 1911] 1 KB 489 that negligence on the part of the signer
only defeated the plea if the document was a negotiable instrument. The distinction
was illogical and Bragg's case was overruled by Saunders; the position is now that
the plea cannot be raised by a signer who has been careless.

Saunders v Anglia Building Society [1971] AC 1004. An elderly widow wished to

transfer the title of her house to her nephew by way of gift. Her nephew and a man
named Lee prepared a document assigning the property to Lee and asked her to sign.
She signed it unread as she had lost her spectacles and trusted her nephew. Lee
mortgaged the property to the Building Society and disposed of the moneys raised for
his own use. He defaulted on the repayments and the Building Society sought
possession of the house. Saunders (the widow's executrix) sought a declaration that
the assignment to Lee was void by reason of non est factum.

In the view of both the Court of Appeal and the House of Lords, the plea could not be
raised because, (i) the transaction the widow had entered was not fundamentally
different from what she intended at the time she entered it; and (ii) she had been
careless in signing the document; she could at least have made sure that the transfer
was to the person intended by her. The effect of Saunders v Anglia Building
Society is, if anything, to restrict the circumstances in which the plea of non est
factum can be successfully raised.

Rectification

Where the parties are agreed on the terms of the contract but by mistake record them
incorrectly in a subsequent written document, the remedy of rectification may be
available. The court can rectify the error and order specific performance of the
contract as rectified.

The remedy is an exception to the parol evidence rule as oral evidence is admissible to
show that the written document is in error.

In order to obtain rectification the following must be established:

(i) There must be a concluded antecedent agreement upon which the written
document was based. The agreement need not necessarily be a finally binding
contract, Joscelyne v Nissen [1970] 2 QB 86.

(ii) The written document must fail to record what the parties had agreed. In
Frederick E Rose (London) Ltd v William H Pim Co Ltd [1953] 2 QB 450 the
parties had contracted for the sale of a type of horsebean and the written contract
referred to “horsebeans”. The goods delivered were not of the type the parties had in
mind. Rectification was refused since the written contract correctly recorded what the
parties had agreed.

(iii) The written document must fail to express the common intention of the parties.
However, if one party mistakenly believes the document gives effect to that intention
and the other party is aware of this mistake but nevertheless is guilty of sharp practice
in allowing the contract to be executed, rectification may be ordered, A Roberts Co v
Leicestershire CC [1961] Ch 555.

(iv) It must be equitable to grant the remedy; in particular, it will be refused where
third parties have acquired rights on the faith of the written contract.

Rectification is an equitable doctrine. A court can correct obvious slips of the pen
under ordinary rules of evidence, without the need to grant rectification.

A note on mistake. When approaching questions on mistake it is advisable to

remember that the law of mistake is often a last resort, i.e. there may have been an
actionable misrepresentation or a warranty which will provide the plaintiff with a
remedy.

SELF ASSESSMENT QUESTION

Demonstration Question – Mistake

P and Q are rival art dealers who live in the same town. In August, 2004, while P was
on holiday in Spain, he acquired what he honestly believed was a valuable painting by
Goya. On returning home he offered the painting for sale. Q, after having viewed the
painting and also believing it to be a Goya, sent his agent, W, to buy the painting,
instructing him to pose as Sir Charles Trevelyan. P sold the painting to W for £250,000,
pleased at last that he was attracting wealthy clientele.

Q subsequently resold the painting for £300,000 to S who also believed it was a Goya.

Last month all the parties discovered that they were mistaken and that the painting is
in fact a missing part of Guernica by Picasso and that the art world has been searching
for this painting for years. It is worth £2,000,000.

1. What is a “common mistake”?

2. What is the difference between the approach of common law and equity to common
mistake as to quality?
Advise P.

Answer

Issues

(a) Mistake as to identity and,

(b) Mistake as to quality at common law and in equity.

Law and application

The contract: P v W/Q

W an agent for an undisclosed principal.

1. Misrepresentation

P induced to sell by fraudulent misrepresentation.

No remedy of rescission for Fr. Misrep because the goods have been sold on to an
innocent third party

(s.23 SOGA 1979, the right of rescission being barred)

Remedy in damages available against W

(Remedies in Agency will not be canvassed)

2. Mistake as to identity

Is the contract void at common law? If so, then no title will vest in W, Q or S.

Contrast Cundy v Lindsay (affirmed by Shogun Finance) with Lewis v Avery

A Lewis v Avery situation – person thus present to sight and hearing; therefore not
void, but only voidable for fraud. Cundy v Lindsay distinguished (not inter praesentes)

Compare Ingram v Little and reconcile.

3. Mistake as to quality

The perception on the part of (all) parties was that the painting was a Goya when in
fact it is a Picasso raises mistake as to quality.
Bell v Lever Bros [1932] AC 161

Lords Atkin and Thankerton

Atkin specifically raised this case as an illustration of when mistake as to quality would
not be operative. (See: Treitel criticism)

See also:

Kennedy v Panama etc Royal Mail Co (1867)

Smith v Hughes (1871) LR 6 QB 597

Peco Arts Inc v Hazlitt Gallery Ltd [1983]

Associated Japanese Bank v Credit du Nord [1988] 3 All ER 902 per Steyn J.

Any remedy in Equity?

Equity does not allow rescission for mistake where the contact is valid at common law.

See :

Great Peace Shipping v Tsavliris Salvage (The Great Peace ) [2002] EWCA Civ 1407;
[2003] QB 679

Could Q recsind against S and, thereby allow the possibility of P rescinding against Q?

Questions on Mistake

1. How does the court decide whether a mutual mistake is operative?

2. What must be established before a unilateral mistake will be operative?

3. If a person wishes to avoid a contract on the ground of a unilateral mistake as to

identity, what must he prove?

4. “I do not accept the theory that a mistake as to identity renders a contract void. I
think the true principle is ... that the contract is voidable.” (Lord Denning MR in Lewis v
Averay [1972] 1 QB 198

To what extent, if at all, does this statement reflect the current legal position relating
to mistaken identity in the Law of Contract?
5. “After Gallie v Lee the plea of non est factum is now not available to persons of
sound mind and full capacity”.

How far do you agree with this view?

8. Under what circumstances is rectification available?

Tutorial – Mistake (1)

1. Oscar, a frequent visitor to Diana's house, had always admired her dining table. On
one occasion he expressed interest in buying it and Diana said, “it is an Elizabethan
relic and actually belonged to Queen Elizabeth the First herself.” One week later Diana
sold the table to Oscar for £20,000.

Some two years later, Oscar wished to sell the table and sent it to Northeby's, the
auction house, for valuation. They reported that the table was no more than 100 years
old and worthabout £500.

Advise Oscar.

How far, if at all, would your answer differ, if the table had been genuine as Diana
stated but just before Diana and Oscar agreed the sale and unknown to either of
them, it was stolen and replaced by a copy?

2. On Saturday, Peter put an advertisement in the local newspaper, offering his Ford
Sierra for sale for £2,500 and giving his telephone number. That evening Peter
received a telephone call from bill, who, impersonating the well-known television and
stage personality Ronnie Parker, agreed to buy the car. In his assumed voice, Bill said
that he would send his chauffeur round to collect and pay for the vehicle. On Sunday
morning Bill called at Peter's house, saying he had been sent by Ronnie Parker. Peter
handed over the car in exchange for a cheque for £2,500 signed by ‘R Parker'.

Bill then asked Peter to sign a piece of paper, which read: ‘Received of R Parker, a
cheque for £2,500'. Peter read this and signed. Just before leaving, Bill handed Peter
another piece of paper, saying it was just a copy of the receipt for Parker's records.
Peter signed the document without reading it. It was in fact a guarantee to Tom, a
tradesman, of Bill's debts up to £3,500.

On Monday, Bill sold the car to Doris for £500 and by showing the guarantee, induced
Tom to let him have goods on credit to the value of £500.
Advise Peter who wishes to recover the vehicle from Doris and refuses to honour the
guarantee.

Tutorial – Mistake (2)

1. Gartmore agrees to buy a house from Murray which both parties believe to be
rented by Fleming who enjoys protection under the Rent Acts at a low price to reflect
Fleming's protected residency.

Murray has now learnt that Fleming was killed in a car crash just before the contract
was signed.

Advise Murray.

Would it make any difference if Gartmore had sold the property on at a considerable
profit when, on taking possession, he realised that Murray had been killed?

2. Horace, pretending to be the well known City financier Rupert Murdoch, persuades
Throgmorton who wished to add to his personal pension, to part with his AC Cobra
against an uncleared cheque from him.

Throgmorton later that day realised that he had been defrauded by Horace when told
that the cheque was worthless by his banker and unable to find Horace reported the
fraud to the Police.

Later in the day Horace sold the car on to Barclay. Barclay paid for the car in cash.
Horace has now disappeared. Barclay is in possession of the car.

Advise Throgmorton as to whether he may recover the car from Barclay.