13. Mistake Flashcards
Introduction to mistake
Mutual mistake
- Where mistake has left the parties at cross purposes, it negatives agreement. One thought he offered peas; the other thought he accepted beans. Unless there is an objective means of ascertaining what the subject matter of the contract was meant to be, the contract is void.
Unilateral mistake
- Where one party mistakenly deals with an interloper rather than his intended contractual partner, agreement is again negatived. It was X who was offered peas, but Y purported to accept that offer, masquerading as X. The contract may be void or it may be merely voidable, depending on some rather fine distinctions.
Common mistake
- Where the parties have dealt on the basis of a fundamental misapprehension as to the subject matter of their contract, consent is nullified. They thought they were dealing in peas, but in fact the peas turned out to be beans. The contract is void, because the parties had no intention to contract as in fact they did.
The main difficulties with mistake
The main problems are to be found in unilateral and common mistake.
- In unilateral mistake, the one party’s misapprehension will often be found to be not a matter of the other’s identity as such, but rather of some attribute which the other represented himself to have (eg. the honest intention to pay). In that case, the contract will not be void; it will be voidable for fraudulent misrepresentation. This area has proved to be highly problematic.
- In common mistake, there has been much discussion of how fundamental the parties’ shared misapprehension must be in order to justify avoidance of the contract. An equitable easing of the situation by Lord Denning lasted 50 years, but has fairly recently been declared bad law.
Mutual mistake
Mutual mistake properly denotes the situation in which the parties misunderstand each other, so that they are at cross-purposes. It is sometimes said that two mistakes are therefore being made, one by each party.
The real questions where the parties are at cross-purposes are
- a) whether this misunderstanding amounts to a flaw in their contract, or is nothing more than private misapprehension;
- b) whether it matters that one party may be more to blame for the misunderstanding than the other; and
- c) whether the matrix of fact allows a court to identify the more probable understanding, and therefore to overcome the ambiguity.
If the ambiguity does attach to the terms of the agreement and cannot be overcome, then the contract is void. This can be put in terms of a mismatch of offer and acceptance or, if it fits the facts better, in terms of vagueness rendering the contract unenforceable.
(Mutual mistake) The parties’ contract provided that the one would deliver and the other would accept 125 bales of Surat cotton “to arrive ex Peerless from Bombay”. The defendants refused to accept the consignment, and the plaintiff brought an action for damages. The question for the court was whether it was permissible, in terms of evidence and substance, for the defendants to plead at trial that they understood the contract as referring to the ship Peerless sailing from Bombay in October, whereas the plaintiffs had landed cargo only from a second ship, also called Peerless, which had sailed from Bombay in December.
Counsel for the defendants submitted that the case was one of latent ambiguity, so that there was no consensus ad idem and therefore no contract. The court gave judgment for the defendants, without stating reasons for the decision. Nevertheless, in the course of argument Pollock CB intervened to say that the question whether the parties were or were not referring to the same Peerless was a matter of evidence for the jury (and therefore a matter on which a finding of fact should be made at trial). That could be regarded as the case’s ratio.
Note:
- The case has been used by those who wish the law to require true (subjective) agreement between the parties, and has been criticised by supporters of the orthodox (objective) understanding of agreement.
Q. Did it matter from which ship the cotton was landed? Did it matter in which month it was landed?
Raffles v Wichelhaus
(Mutual mistake) In this case, the parties agreed a sale of 125 bales of cotton, to be delivered from Bombay on a particular ship, the Peerless. Unfortunately, there were two ships with this name, leaving Bombay at different times. One party thought the agreement referred to the ship leaving in October, but the other thought it referred to the ship leaving in December. The claimant brought an action for the price.
It was held that the fact that the meaning of the agreement was ambiguous was capable of giving a defence. While little reasoning was given by the court, its approach appears to have been as follows. It was not possible to work out what the apparent intent of the defendant was, so the objective principle did not apply and the court had to look at the actual intent of the parties. If the actual intention of one party was different from that of the other (as appeared to be the case here), there would be no contract.
Raffles v Wichelhaus
(Mutual mistake) The parties corresponded by telegraph, using a code. The plaintiff’s agent used the code carelessly, omitting a vital comma which would have made it clear to which sentence a particular word belonged. The parties supposed themselves to be in agreement, but in fact the plaintiff understood the contract to be for the carriage of copra from Fiji to the United Kingdom, whereas the defendant thought that it concerned the carriage of shale from Sydney to Barcelona. The plaintiff failed in the Supreme Court of New South Wales, and on appeal to the Privy Council.
The court held that the message was ambiguous. The plaintiff was therefore unable to prove that his understanding of it was more likely than the competing version. According to Lord Macnaghten, the defendant would have faced the same insuperable problem had he been bringing an action.
Q. What role if any should culpability have in the disposal of a case such as this?
- It doesn’t matter which party bears the greater responsibility for the misunderstanding.
- The matter properly turns on proof, not fault.
Falck v Williams
(Mutual mistake) The defendant bid for a property but declined to complete the purchase when he found that it excluded three very fine trees (elms) which he had supposed to be within its boundary. He had inspected the land with the plans, and had wrongly concluded that its border was formed by an iron fence on the far side of the trees. In fact the boundary was a row of inconspicuous stumps on the near side of the trees. At first instance a decree of specific performance was made against him. It was discharged on appeal. The court held that the defendant’s mistake was entirely understandable, that it had been induced in part through the carelessness of the vendors, and that it would not be just to compel specific performance.
Note:
- This is not a case of mutual mistake. There was a true state of affairs, and the defendant’s mistaken although understandable view.
- The case is one of unilateral mistake: to suggest that the one party meant to buy with the trees and the other party to sell without them is to distort the situation.
- The court is therefore not engaged in preferring one competing account of a contract above another.
- True cases of mutual mistake are infrequent. Situations which seem amenable to this analysis at first sight will often reveal unilateral mistake as in this case, where the competing understandings of the contract are a mistaken version (however excusable), and the true version.
- Even where that is not so, because it does not appear on the face of the contract what its true understanding is, a broad approach to construction, taking into account the whole matrix of fact, will probably tip the balance for or against the claimant.
Q. Why is this not a case in which the parties were at cross-purposes?
Denny v Hancock
Unilateral mistake
The main point is that the “capture” of an offer by one to whom it was never directed will result in a mismatch between offer and purported acceptance so that no contract comes into being. Another way of putting it, despite the logical problem involved with this form of words, is that the contract is void.
(Unilateral mistake) The defendant sent an order for leather hosing to Brocklehurst. He had an account with Brocklehurst. In fact Brocklehurst owed him money, so that the defendant would have a set-off against the price of the goods. Unbeknown to the defendant, Brocklehurst had transferred his business to his foreman earlier in the day on which the order arrived. The foreman supplied the goods.
The court held that the defendant had intended to contract with Brocklehurst, to whom his offer had been exclusively made. The foreman was not able to substitute himself as offeree, thereby depriving the defendant of the benefit of his set-off. Since there was therefore no contract between the foreman and the defendant, the foreman could not sue to recover the price of the goods.
Note:
- Bramwell B: When one makes a contract in which the personality, so to speak, of the particular party contracted with is important for any reason, whether because it is to write a book or paint a picture, or do any work of personal skill, or whether because there is a set-off due from that party, no one else is at liberty to step in and maintain that he is the party contracted with, that he has written the book or painted the picture, or supplied the goods; and that he is entitled to sue, although, had the party really contracted with sued, the defendant would have had the benefit of his personal skill, or of a set-off due from him.
Q. The buyer therefore obtains goods without paying. Is the foreman without a remedy?
- This decision is very obviously unfair to the plaintiff. Nevertheless, he would probably have been able to bring an action in the tort of conversion against the defendant, and the fact that the goods no longer existed would have been no obstacle to the recovery of damages. The modern law would provide a restitutionary remedy to prevent the defendant’s unjust enrichment.
Boulton v Jones
Unilateral mistake: The fraud cases
A distinction is drawn in these cases which some regard as impossible to maintain.
What the cases have in common:
- In all these cases, fraudulent misrepresentation is present, so that the misrepresentee would be entitled in principle to rescind the contract into which he has been fraudulently induced to enter.
- The problem is that this remedy may be worth little or nothing in the circumstances.
- Rescission involves recovering the purchase price from the defendant; if the defendant is a fraudster he may have absconded or be penniless.
- Furthermore, the fraudster may have passed the property to a third party who buys without awareness of the fraud.
If the contract with the fraudster can be rescinded before the property passes to the third party, then that person obtains no rights to it (since the fraudster had none left to give following rescission). The misrepresentee recovers it from the innocent third party by an action in the tort of conversion.
If, however, rescission is attempted only after the third party has obtained the property, the third party is invulnerable to an action by the misrepresentee. Rescission is blocked by the common law bar of third party rights.
In this latter instance, the misrepresentee has only one recourse. He may attempt to persuade the court not that the contract was voidable for fraudulent misrepresentation, but that it never came into being at all. It was void because the misrepresentee never intended to contract with the fraudster, but only with the person whose identity the fraudster assumed. On this view there is a mismatch of offer and acceptance. The contract is indeed void.
The difficulty with the argument is this. While the defrauded misrepresentee may sincerely protest that he never meant to contract with a fraudster, the objective view taken by the law suggests that he did precisely that. The misrepresentee will have to show that the fraudster was a mere mechanism by which he contracted (as he mistakenly believed) with “X”. This will be met by the argument (almost certainly put forward by the third party) that the fraudster’s assumption of the identity of “X” was simply the means by which he persuaded the misrepresentee that he would honestly pay, rather than defaulting. The drawing of the line between these competing interpretations has proved troublesome.
Contracts entered into at a distance (through correspondence) v contracts entered into face to face (inter praesentes)
Contracts entered into at a distance:
- The parties to the contract will be identified by construing the contract, quite possibly without regard to parol evidence.
Contracts entered into face to face:
- The courts strongly apply a presumption that the misrepresentee (the seller) legally intended to contract with the person physically present (the fraudster). However, that presumption is not irrebuttable.
(Unilateral mistake - The fraud cases) A fraudster by the name of Alfred Blenkarn hired premises at 37 Wood Street, Cheapside. He then ordered large quantities of handkerchiefs from the plaintiffs, who were linen manufacturers in Belfast. A well-known and respected company called William Blenkiron & Sons carried on business at 123, Wood Street. When ordering the handkerchiefs, Blenkarn signed himself “A. Blenkarn & Co”, in order to take the benefit of Blenkiron & Sons’ presumed creditworthiness and obtain the goods without having to pay for them up front. The firm of Blenkiron & Sons was known to the plaintiffs. They corresponded with the fraudster addressing letters to him as “Messrs Blenkiron and Co”. Blenkarn had been signing his name so that it would readily appear to be “Blenkiron”. He obtained the goods on credit, sold them on to innocent third party buyers, and one of the latter was later sued in conversion by the plaintiffs when Blenkarn failed to pay his debt.
The House of Lords held that the plaintiffs’ action succeeded. No contract had come into existence. The plaintiffs and Blenkarn had never come into contact personally. Therefore the identity of the parties to the purported contract was to be deduced from the correspondence.
Lord Cairns: ‘How is it possible to imagine that in that state of things any contract could have arisen between the respondents and Blenkarn, the dishonest man? Of him they knew nothing, and of him they never thought. With him they never intended to deal. Their minds never, even for an instant of time rested upon him, and as between him and them there was no consensus of mind which could lead to any agreement or any contract whatever. (…) The property remained, as it originally had been, the property of the respondents, and the title which was attempted to be given to the appellants was a title which could not be given to them.’
Note:
- The parties to litigation of this sort are both innocent. What might the law aim to do in this situation? Prioritise the protection of the defrauded seller, or the innocent third party purchaser? Should the answer in fact vary to reflect differences in the facts? Would that lead to unacceptable uncertainty? Would the best course be to apportion the loss between the seller and third party? Or is the best course to let the legal result depend, as it does, on the distinction between a void and a voidable contract? The path taken by the law is currently the last of these.
Q. Can you explain the relevance of the fact that the fraudster was called “Blenkarn”, rather than some completely different name?
Cundy v Lindsay
(Unilateral mistake - The fraud cases)
A fraudster called Wallis obtained a quotation for brass rivet wire from X, and later the goods themselves. He represented that he was carrying on business as “Hallam & Co” of Sheffield, and used headed paper which included a design showing a large factory with a number of chimneys, and a statement that Hallam & Co had depots and agencies in Belfast, Lille and Ghent. It appeared that Wallis had previously ordered goods in the same way and paid for them with a cheque drawn on “Hallam & Co”. On this occasion, when Wallis received the goods, he did not pay for them but sold them on to Y. The plaintiffs sued Y in the tort of conversion. The judge at first instance held that they could not maintain this action, since property in the goods had passed to Wallis and so to Y.
The Court of Appeal upheld this ruling. The question was, with whom did the plaintiffs intend to contract? The only possible answer was that they intended to contract with the writer of the letters. If it could have been shown that there was a separate and real entity called “Hallam & Co”, the case might have been governed by Cundy v Lindsay. Cave J identified the device used by Wallis as a “long firm fraud”, and asked rhetorically whether anybody had ever heard of an attempt being made by a person who had delivered goods to a “long firm” to get his goods back on the ground that he had made no contract with the long firm. The remedy on these facts lay in fraud, but property had passed to the fraudster under a voidable contract and so on to the innocent third party.
Note:
- A “long firm fraud” is one in which the fraudster builds confidence by paying, but with a view to a later default on his credit.
- This case is authority for the proposition that where the fraudster proceeds by the adoption of an invented identity, the contract will be found to be with the fraudster. It is currently regarded as good law.
A closer look:
- One wonders whether the rule in this case may be meant to teach a lesson. To be duped by the assumption of an identity which has no real existence is to be badly duped, or so it is perhaps natural to suppose. The problem with this is the usual one. Care or carelessness is not usually a determinative factor in the analysis of contract formation, and it should not be here.
Q. So, in Cundy v Lindsay, if the sellers’ letters had been to “Blenkarn & Co” they would have failed?
King’s Norton Metal v Edridge
(Unilateral mistake - The fraud cases) A fraudster called North visited the plaintiff’s jewellery shop, and selected pearls priced at £2550 and a ring for £450. As he wrote out and signed a cheque for the total, he said to the plaintiff “You see who I am, I am Sir George Bullough”, and gave an address in St James’s Square. The plaintiff had heard of Sir George Bullough, and consulted a directory to check the address given. He asked North if he would like to take the articles with him; North replied that the plaintiff had better let the cheque clear first, but that he would like to take the ring with him since it was his wife’s birthday the following day. He took the ring, and pledged it with a pawnbroker who gave him £350 for it. His cheque was dishonoured.
It was held that the plaintiff’s action against the pawnbrokers failed.
Note:
- The correctness of this decision is never doubted, but Professor Wade points out one of its troubling aspects. The present state of the law means that the distance seller is relatively protected by comparison with the inter praesentes seller. Arguably, the law’s protection is misplaced. The distance seller has time to verify the facts on which he relies. The inter praesentes seller is put on the spot.
- The result reached in this case cannot be explained on the basis of the ‘snapping up’ analysis, because the mistake operating in those cases to disrupt offer and acceptance have to relate to the terms of the contract (here, the true identity of the buyer is not contractual)
Q. Would the decision have been different had North disguised himself as Sir George Bullough?
Phillips v Brooks Ltd
(Unilateral mistake - The fraud cases) The plaintiffs, X, were joint owners of car which they had advertised for sale. They were visited by a fraudster, who said that his name was Hutchinson and that he lived in Caterham. After some negotiations, a price of £717 was agreed for the car. “Hutchinson” then produced a cheque book, but X1 said that under no circumstances would she take a cheque. That led to a discussion which it later fell to the judge at first instance (Slade J) to interpret. He took the view that the deal failed at this point, since the parties were not ad idem with regard to payment terms. The negotiations resumed; “Hutchinson” gave more information about himself to establish his credentials, saying that he was P.G.M.Hutchinson of Stanstead House, Caterham, and that he had local business interests. X2 meanwhile went to the post office to check that there was a person of that name living at that address. Since there was, the vendors parted with the car in return for a cheque which was later dishonoured. They sued a third party recipient of the car in conversion.
The Court of Appeal upheld the judgment at first instance, holding by a majority (Devlin LJ dissenting) that no contract had come into existence.
Pearce LJ: ‘It is not easy to decide whether the vendor was selling to the man in her drawing-room (fraudulently misrepresented as being a man of substance with the attributes of the real Hutchinson) or to P.G.M.Hutchinson of Stanstead House (fraudulently misrepresented as being the man in her drawing-room)…’
Note:
- For this view to work, it would seem necessary to credit Elsie Ingram with having made the following offer: “The car is for sale on credit to P.G.M.Hutchinson”.
- It is equally necessary to find that she did not mean “The car is for sale to you on credit (and the reason for my change of mind is that you have convinced me you are honest and will pay)”.
- Devlin LJ, in his dissenting judgment, based himself on the presumption that a person intends to contract with the individual to whom he is actually speaking. He did not deny that the presumption could be rebutted, but declined to speculate what facts might justify that outcome. The question in cases such as this was which of two innocent parties was to suffer for another’s fraud. Devlin LJ proposed that a power to apportion the loss between them could appropriately be introduced by Parliament
- This was rejected by the Law Reform Commission because of its likeliness to lead to complex difficulties in practice.
Q. Can the question whether the car was being offered to P.G.M.Hutchinson or to the man who claimed to be him ultimately be resolved?
Ingram v Little
(Unilateral mistake - The fraud cases) The owner of a car made an agreement for its sale to a man who said he was Richard Greene, a well-known actor (well-known, incidentally, in the role of “Robin Hood”). The fraudster wrote out a cheque in the name “R.A.Green”. When it became clear that he wanted to take the car away immediately, the seller asked him if he had anything to prove his identity. The fraudster produced an entry pass to Pinewood Studios in the name of Richard Green, which included a photograph of him and an official stamp. He took the car, sold it to a third party, and the cheque was dishonoured.
The Court of Appeal unanimously allowed the third party’s appeal against the seller’s successful action for conversion in the County Court. The contract had been voidable, not void.
Lord Denning: *Ingram v Little *was wrongly decided, since it was indistinguishable from *Phillips v Brooks. *
- The rights of the innocent third party purchaser should be preferred in principle, so that contracts should be held merely voidable in all such cases.
Q. Was the fraudster snapping up the offer to sell?
Lewis v Averay
(Unilateral mistake - The fraud cases) This case concerned the validity of a written hire-purchase contract between the finance claimant finance company and the party who was named in the contract as Durlabh Patel. Pursuant to the contract, the company was to receive hire purchase payments from that person, who meanwhile would have the use of the car which he would ultimately buy by this means. In fact the finance company had been induced to enter into the agreement by a fraudster, who had purported to be Durlabh Patel (a real person wholly unconnected with the transaction). The company’s willingness to be party to the agreement was based on credit checks it had run on the real Durlabh Patel. The fraudster sold the car to the defendant, and the claimant finance company sued the defendant in conversion.
The House of Lords held by a bare majority that the ratio of Cundy v Lindsay applied to this case. The correct approach was to construe the agreement to discover who the parties to it were, rejecting extraneous evidence on the authority of the parol evidence rule. It was clear, taking that approach, that the fraudster was not a party to the agreement. The only person qualified to enter into the agreement with the finance company was the real Durlabh Patel, who had not in reality or in law done so. In the opinion of the minority, however, Cundy v Lindsay led to the drawing of unreasonable and unprincipled distinctions between modes of contract formation, and should be departed from. The finance company’s contractual partner was the fraudster, so that the contract had been voidable for fraudulent misrepresentation until the time when the fraudster passed the goods on to the innocent third party.
Lord Phillips:
- Favoured maintaining the strong presumption that in cases of personal contact, the parties should be deemed to have contracted with each other in their true identities.
- Therefore, in the vast majority of face-to-face situations, a valid contract will be formed.
- Where there was only a written contract, there was no need for the presumption. The contract was to be consulted in order to discover the identities of the parties to it.
Lord Nicholls (dissenting):
- The legal principles to be applied could not sensibly differ according to the means by which the deal was concluded. In every case the owner of goods agreed to part with them before receiving valid payment. The essence of the transaction was the same in each case, and the law should therefore apply a single analysis (that of Phillips v Brooks).
- It is little short of absurd that a subsequent purchaser’s rights depend on the precise manner in which the crook seeks to persuade the owner of his creditworthiness and permit him to take the goods away with him.
Q. Ultimately, can a principled distinction be drawn between contracts made in writing and those made face to face?
Shogun Finance v Hudson
Common mistake
The label ‘common mistake’ is used to denote cases in which the parties do not misunderstand each other, nor is one misled by the other. They contract on a basis which proves to have been fallacious, because they share a mistaken assumption about some basic aspect of the contract’s subject matter.
Two sub-categories of common mistake are covered by long-standing rules. These are the cases of
- a) res extincta (agreeing to deal in something which in fact has no existence); and
- b) res sua (agreeing to deal in something which transpires already to belong to the party which is to acquire it).
In these cases, the contract will be void. This makes sense, because performance of such agreements is in fact impossible.
Other shared mistakes as to the subject matter of the contract may make it void even though it is not literally impossible of performance, provided the mistake is of a wholly fundamental character. This in itself is a slightly puzzling idea if one pauses to give it thought; why should such contracts be void? It is said that mistakes of this sort do not negative agreement, but nullify consent. This means that there is no disruption on the level of contract formation of the type which explains the outcome in cases of true mutual mistake or unilateral mistake where offer and acceptance fail to match. Agreement is present, but the law applies a rule to cancel its effect because of the parties’ mistake. The contract is void. One explanation of this outcome is that the parties lacked the necessary contractual intention to make the agreement which in form they made.
The main themes within this area are
- a) the gravity of the mistake which must be shown for the contract to be void; and
- b) the discovery by Lord Denning of an equitable jurisdiction to rescind contracts for somewhat less grave mistakes – before that jurisdiction was declared by the Court of Appeal to be illusory.
a) Res extincta
If the subject matter of the contract does not exist at the time the contract is concluded, then the contract is void.
This principle is codifed by section 6 of the Sale of Goods Act 1979: “Where there is a contract for the sale of specific goods, and the goods without the knowledge of the seller have perished at the time when the contract is made, the contract is void”.
This principle found its way into the Sale of Goods Act from the difficult mid-nineteenth century case of Couturier v Hastie (1856). Here, one party agreed to sell and the other to buy a cargo of corn, both unaware that at the date of the contract the corn had deteriorated and had already been sold in Tunis. The seller argued that the buyer had acquired all the risks associated with the sale, and should pay the contract price upon receipt of the shipping documents. The court held that the buyer was not liable since the contract supposed there to be something in existence which was capable of being sold/bought, when in fact there was not.
However, an ostensibly shared mistake as to the existence of a contract’s subject matter does not always make the contract void.
(Common mistake - Res extincta) In this case, a quantity of corn was sold whilst on board ship. Unbenown to the parties, by the time the contract was made the corn had deterioriated so much that it had been lawfully disposed of by the ship’s master to someone else. The seller brought an action for the price and the question was whether the purchaser was bound to pay it. The seller tried to argue that the purchaser took the risk of deterioration in the cargo and was thus bound to pay, but both the Court of Exchequer Chamber and the HL disagreed - the purchaser was not bound to pay the price.
This case can be interpreted as supporting a rule of law that renders a contract automatically void because of common mistake as to the existence of the subject matter (and this was the view adopted by the draughtsmen of the original Sale of Goods Act 1893), but it is clear that it should not be read in that way. The whole question in the case turned upon the construction of the contract (Lord Cranworth).
The lesson to be drawn from this is that while such serious mistakes will often result in the contract being void, this will not be the case if the contract is construed as placing the risk on one of the parties. It is a matter of construction.
Couturier v Hastie
(Common mistake - Res extincta) Y invited tenders for the purchase of a wrecked oil tanker said to be lying off Jourmand Reef, Papua, together with its cargo of oil. The plaintiff’s tender of £285 was accepted. Upon consulting a map, the plaintiff found that Jourmand Reef was not marked, and therefore requested precise latitude and longitude. These were provided. The plaintiff then spent a large sum of money equipping and employing an expedition to find the tanker. It transpired that there was no tanker. Y was found to have been grossly negligent in asserting that there was.
The High Court of Australia held that the contract was not void for non-existence of the contract’s subject matter at the time of its conclusion. Couturier v Hastie and section 6 of the Sale of Goods Act were carefully considered, and found to have no application to this situation. The parties had not shared a mistaken assumption that the tanker existed. Y had warranted that it did, and had breached the contract since it did not exist. The only mistake made by the plaintiffs had been to believe what Y had warranted. Couturier v Hastie was explained as a case which by no means led inexorably to the principle which the draftsman of the Sale of Goods Act had taken from it. The plaintiffs were entitled to damages.
Note:
- One should not too readily hold an ostensibly shared mistake as to the existence of a contract’s subject matter to make the contract void. A different legal submission may be more compelling in all the circumstances.
- The crucial fact in this case is that the Y was found, through its conduct, to have undertaken the risk that its assumption would be false. The claimant had only Y upon which to rely, and could not be judged to have taken on an equal share of the risk. Application of the res exincta doctrine here would have caused injustice. Therefore it was circumvented.
Q. Is this a case which properly turns on the culpability of Y?
McRae v Commonwealth Disposals Commission
b) Res sua
Where a contract purports to grant rights to a person who already has those rights, it will be void.
(Common mistake - Res sua) This case concerned the three year lease of a salmon fishery in County Sligo, Ireland. It later transpired that, as a result of multiple confusions, the party who was to become the lessee of the fishery already held the life interest in it. He had no need of the lease and, more to the point, the other had no power to grant the lease.
The House of Lords held that the agreement had been entered into upon a common mistake. It was therefore “liable to be set aside” on such terms as the court thought fit to impose.
Note:
- Most analysts have concluded that the contract in Cooper was void, rather than voidable. That is to say that the rule applied was the common law rule that consent had been negatived.
Q. Should such an agreement be void or voidable?
Cooper v Phibbs
Common mistake as to subject matter
Where the parties make a fundamental mistake about the subject-matter of their contract, it may be found to be void. However, as the leading case in this area shows, a mistake must be singularly grave before it will have this effect. If a mistake can be regarded as going only to the “quality” of the subject-matter, as opposed to its identity, it is doubtful whether it will be regarded as sufficient to overcome the contract.
