1. The Objective View of Intention and Agreement Flashcards
The defendant, a trainer of racehorses, agreed to buy a quantity of oats, thinking them to be “old” oats. He had seen a sample of the oats. In fact they were new, not old. For that reason he refused to pay for them, and was sued by the plaintiff. At trial, the judge directed the jury to give a verdict in the defendant’s favour if they found that the oats had been described as “old”, or alternatively if they found that the plaintiff seller had been aware that the defendant believed himself to be contracting to buy old oats. The jury found for the defendant, but were not asked to state on which basis. The Court of Appeal ordered a re-trial on the ground that the trial judge’s direction had been unclear.
Legal principles:
- One party may be mistaken about the subject matter of the contract, but the contract remains valid, even if one party is aware that the other is making a mistake.
- This does not apply when deception is present (= active steps to promote or sustain the mistaken belief).
- The same result followed where the mistake relates to the terms of the contract, even where no deception is present.
Q. If the seller knew the oats were new, but also knew the buyer thought them to be old, how could they be said to be in agreement?
Smith v Hughes
The plaintiffs were asked by their Egyptian house to acquire “Moroccan horsebeans described here as feveroles”. They asked the defendants’ representative what “feveroles” were, and were told that they were simply horsebeans. A chain of related supply contracts was then agreed in which the commodity to be supplied was described as “horsebeans”. The eventual buyer found that they were not “feveroles”, and sought damages. The plaintiffs in the present action were applying for rectification of their contract with the defendants on the basis that it mistakenly referred to “horsebeans” and should have specified “feveroles”. They failed. The agreement was simply one for the supply of horsebeans.
Legal principles:
- Objective appearance prevails over a subjective concern.
Q. The parties wanted to deal in feveroles, so how can they be bound to a contract for horsebeans?
Rose v Pim
The sellers offered Argentine hare skins at a given price per pound. This was a mistake; they had in mind the price per piece, and had therefore quoted at roughly one third of the going rate. The buyer ordered 30,000 hare skins, and sued the sellers when they refused to deliver. The court held that the buyer must have been aware of the sellers’ mistake, and therefore must have been aware that the sellers’ offer did not represent their true intention. Thus there was no agreement between the parties upon which an action could be maintained.
Legal principles:
- This is a ‘snapping up’ case: It occurs where one party purports to accept an offer which he knows it was not the other’s true intention to make.
- Invalidating mistake in this case: concerns one of the most fundamental terms of the deal (the price) –> subjective knowledge of an error defeats the objective appearance of agrement
- Allowable mistake in Smith v Hughes: one of mere motive; the buyer is making a wrong, unintended, unwise deal, maybe even to the certain knowledge of the seller, but he is under no mistake as to the terms of the deal itself –> objective appearance trumps subjective concerns
Q. Can this outcome be reconciled with Smith v Hughes?
Hartog v Colin & Shields
The defendants mistakenly altered the price of commercial laser printers on their website from $3854 to $66. Overnight some 4000 printers were ordered before the defendants were informed of their mistake. The defendants contacted all the purchasers immediately, and informed them of the mistake and stated that they would not be supplying the printer at $66.
Held that the plaintiffs were not entitled to succeed with their claim. The plaintiffs were fully conscious that an unfortunate and egregious mistake had indeed been made by the defendants. The plaintiffs were not entitled to enforce their purported contractual right.
Legal principles:
- The contract fails because the mistake relates to a term of the contract so that the parties are never in agreement.
Chwee Kin Kong v Digilandmall.com Pte
During negotiations over an existing lease, the landlords’ solicitors wrote to the lessees proposing that the “current market rental value” of the property should be contractually agreed to be £65,000. After the lessees had agreed, the landlords stated that they had made a mistake, and had meant to propose the sum of £126,000. The lessees objected that £65,000 was the contractually agreed figure. The landlords brought an action against them, seeking a declaration that there was no agreement. As part of this action, they sought summary judgment. The Court of Appeal held that summary judgment could not be obtained on these facts. Therefore, at this interlocutory stage, the lessees won.
Legal principles:
- This is not a typical snapping up case since it wasn’t beyond doubt that the lessees knew that a mistake was being made.
Q. Why was this not a simple case like Hartog, justifying summary judgment?
Centrovincial Estates
