Mistake

Question 1

What do vitiating elements render a contract?

Answer 1

Void: the contract is treated as if it never existed (void ab initio)

(When the breach goes to the heart of the contract)

Voidable: the contract will continue on foot unless the injured party elects to rescind or avoid the contract

(When there is breach of a lesser term)

Question 2

TRUE or FALSE

Mistake is a vitiating element

Answer 2

TRUE

Question 3

What is ‘Mistake’?

Answer 3

It is an error in a contract

Question 4

How is the nature of an agreement determined?

Answer 4

It is determined objectively

Question 5

TRUE or FALSE

Contract law will allow the exploitation or the error of others

Answer 5

FALSE

Question 6

What will mistake render a contract?

Answer 6

Void ab initio (as if the contract never existed)

Question 7

How certain are the courts with the doctrine of mistake?

Answer 7

They are uncertain on the doctrine of mistake due to its uneven application - they are not entirely sure what it is

Question 8

What are the different types of mistake?

Answer 8

• Bilateral or Mutual mistake: both parties have made a mistake on the same thing differently
• Common Mistake: both parties have made a fundamental mistake at the time of or before the formation of the contract - goes to the root of the contract ; performance is impossible or very different
• Unilateral mistake: one party is mistaken

Question 9

Give an example of a ‘Bilateral/mutual’ mistake

Answer 9

• Absence of genuine agreement

Question 10

What are the categories for ‘Common’ mistake

Answer 10

• Mistake as to subject matter of contract
• Mistake as to subject matter
• Mistake as to title/ownership
• Mistake as to possibility of performance of a contract

Question 11

Give an example of a ‘Unilateral’ mistake

Answer 11

• Mistake as to identity

Question 12

What is said about the risk of Mistake and in what case?

Answer 12

Where the risk of mistake is explictly or implidely allocated to one of the parties the doctrine of mistake will not apply. Triple Seven MSN Ltd v Azman Air Services (2018)

Question 13

What are the effects in law of Mistake?

Answer 13

• Contract is made VOID - there is no contract and there has never been a contract
• Contract void ab initio - contract not recognised at common law at all
• Mistake nullifies consent - Lord Atkin in Bell v Lever Bros (1932) ; therefore preventing any agreement from arising so there is no contract or it has no effect at all

Question 14

Give a case law example of bilateral/mutual mistake

This case was the starting point for this doctrine

Answer 14

Raffles v Wichelhaus (1846) 2 H&C 906

• Wichelhaus agreed to buy from Raffles 125 bales of cotton ‘ to arrive [in Liverpool] ex Peerless from Bombay’
• There were two ships called Peerless and both sailed from
  Bombay!
• Wichelhaus meant a Peerless which sailed in October, and Raffles a Peerless which sailed in December

Held:

• There was no contract (void as it goes to the heart of the contract)
  It was impossible to determine which cargo was the subject of the contract and the seller admitted that the buyer was thinking about the other ship

Question 15

What is the general rule of Mistake as to quality ?

Answer 15

A mistake that made by both parties and is generally NOT sufficient to render the contract void since such mistake does not render performance under the contract impossible

Question 16

Give case law examples of ‘Mistake as to quality’ under Common mistake

Answer 16

Bell v Lever Bros Ltd [1932]

• B was the chairman of a company controlled by LB
• LB terminated B’s employment and paid B £30,000 as compensation as part of a termination agreement
• LB then discovered B had committed breaches of fiduciary duty for which employment contract could have
  been terminated
• LB attempted to set aside compensation agreement because it was entered into on mistaken belief that he did not have the right to terminate B’s employment contract
• Bell argued he did not fraudulently conceal the breaches – he simply did not have them in mind when negotiating the compensation payment

Held:
* Lord Atkin: mistake as to quality ‘…will not affect assent unless it is the mistake of both parties’… and the existence of that quality makes the subject completely different from what it is believed to be
* The contract was nothing to do with the £30,000 (this was the quality of it) but concerned Bell’s contract of service which was adressed when it was terminated
* The money should therefore not be repayable because it does not render the contract impossible

Leaf v International Galleries [1950]

• C bought a painting believed to be by Constable and it had also been represented by D (seller) as a Constable
• Five years later C tried to sell the painting and it was discovered that it was not a Constable; C argued that the original contract for the sale of painting should be set aside and sued for misrepresentation, but his action failed because of lapse of time
• CA considered obiter the situation in the context of mistake and stated that no alternative remedy for mistake would be available because this was a mistake as to quality only. The fact that the mistake was fundamental/essential did not impact performance under the contract, which indeed had been performed.
• Argument that C contracted to buy a Constable was rejected. Lord Evershed MR commented at p. 93 that ‘what he contracted to buy and what he bought was a specific chattel, namely, an oil painting of Salisbury Cathedral (and) it remains true to say that the claimant still has the article which he contracted to buy’ - therefore held that there was no grounds for mistake

Triple Seven MSN 27251 Ltd v Azman Air Services Ltd [2018]

• Where the mistake is explicitly or impliedly allocated to one of the parties, the doctrine of mistake will not apply
• Defendant was to lease two aircraft from Claimants for 5 years, to transport passengers from West Africa to Saudi Arabia for Hajj and Umrah pilgrimages
• Defendant’s participation in the airlift of pilgrims for the 2016 Hajj was approved by the Nigerian authorities (NAHCON) in May 2016
• BUT on 15 June 2016 defendant ‘s notified that Saudi authorities (GACA) had not given approval
• Notification was received after execution of lease agreements
• Defendant tried unsuccessfully to persuade Saudi authorities to reconsider
• Claimants tried deliver the aircraft but the defendant informed them that it could not take delivery
• Defendant argued that the lease agreements were void for common mistake –> Both parties had made some sort of mistake on the delivery

Held:

• Likely neither party would have entered into the leases had they been aware that the Saudi authorities had withheld approval –> no mistake on the part of Azman
• BUT this was NOT sufficient to render the contract void
• High Court noted the leases were for five years and not just the period of the 2016 Hajj pilgrimage, so that although Azman had been barred from airlifts for the 2016 Hajj, this did not mean it would be barred from future Hajj airlifts as well
• Contract can still be performed

Question 17

What precedent did the case of Bell v Lever Bros Ltd (1932) create?

Answer 17

In no case since Bell v Lever Bros has it been held that a mistake as to quality rendered a contract void and seems like there will be no such case - limits the scope of what can make a contract void

Question 18

What are the elements of common mistake which have the effect of rendering a contract void?

Answer 18

(1) When contract concluded, there must have been an assumption, substantially shared between the parties, about the existence of a state of affairs

(2) That assumption must have been fundamental to the contract

(3) That assumption must have been wrong at the time contract concluded (Azaman did not know that Saudi Arabia has rejected the details until after)

(4) Must be a fundamental difference between the assumed and actual states of affairs
Because the assumption was wrong, the contract or itsperformance would be essentially and radically different from what the parties believed at the time contract concluded OR, the contract must be impossible to perform having regard to the common assumption (contract must be impossible to perform - contract could still be performed as there was still 4 years remaining)

(5) The parties, or at least the party relying on the common mistake, would not have entered into the contract had the parties been aware that the common assumption was wrong

(6) No provision was made in the contract in theevent the common assumption was mistaken

Question 19

What case set out the elements of common mistake that have the effect of rendering a contract void?

Answer 19

Triple Seven MSN 27251 Ltd v Azman Air Services Ltd [2018]

• Defendant was to lease two aircraft from Claimants for 5 years, to transport passengers from West Africa to Saudi Arabia for Hajj and Umrah pilgrimages
• Defendant’s participation in the airlift of pilgrims for the 2016 Hajj was approved by the Nigerian authorities (NAHCON) in May 2016
• BUT on 15 June 2016 defendant ‘s notified that Saudi authorities (GACA) had not given approval
• Notification was received after execution of lease agreements
  • Defendant tried unsuccessfully to persuade Saudi authorities to reconsider
  • Claimants tried deliver the aircraft but the defendant informed them that it could not take delivery
  • Defendant argued that the lease agreements were void for common mistake –> Both parties had made some sort of mistake on the delivery

Held:

• Likely neither party would have entered into the leases had they been aware that the Saudi authorities had withheld approval –> no mistake on the part of Azman
• BUT this was NOT sufficient to render the contract void
• High Court noted the leases were for five years and not just the period of the 2016 Hajj pilgrimage, so that although Azman had been barred from airlifts for the 2016 Hajj, this did not mean it would be barred from future Hajj airlifts as well
  
  • Contract can still be performed

Question 20

What is the latin name for Existence of the Subject Matter under Common Mistake?

Answer 20

Res Extincta

Question 21

Give case law examples of ‘Existence as to Subject Matter’ under Common Mistake

Answer 21

Associate Japanese Bank (international) Ltd v Credit Du Nord (1998)

• Non-existent textile machines were sold to C for over £1million the then immediately leased back
• D had guaranteed the payments due under the lease
• This was a fraud- the perpetrator defaulted on the lease payments and disappeared with £1million
• C then sought to enforce the guarantee given by D

Held: guarantee subject to condition that the machines existed; since they did not exist, the guarantee did not become effective and D could not be liable under it

McRae v Commonwealth Disposals Commission (1950) (Australian Case)

• The defendants invited tenders for the purchase of a wrecked oil tanker stated to be lying at a named spot. The plaintiffs made an offer, which was accepted, and incurred expenses in fitting out and sending an expedition to the spot.
• In fact, it was proved that the tanker did not exist and never had existed.

Held: The High Court of Australia held that the plaintiffs were entitled to recover from the defendants damages for breach of the contract promising that there was a tanker at the given locality; that the case was not one of a purported contract nullified by mistake, and that, even if it was one containing an element of mistake, the defendants could not rely on the mistake as it was induced by their servants; and that the damages to be recovered were the purchase price paid and the expenditure wasted in reliance of the promise.

Couturier v Hastie (1856)

• Cargo of corn, was shipped from the Mediterranean to England
• Before corn arrived, Hastie entered into contract of sale for the corn
• Hastie did not know, before he entered into contract for sale, that corn had become heated during voyage, and had perished - the captain has put into the port and sold it
• Contract was concluded, there was in fact no cargo in existence since it had already been sold. The question was whether the buyer was nonetheless liable to pay the contract price.
• The seller argued that the buyer was liable because, in truth, the contract was for the sale of ‘the adventure’—the commercial enterprise which the seller had set in motion
• The seller’s obligation was therefore not to deliver a cargo of corn, but rather to deliver the shipping documents representing the adventure, which the seller was able to do.
• On the other hand, the buyer argued that what was at issue was simply a straightforward contract for the sale of a cargo of corn.
• But both the Court of Exchequer Chamber and the House of Lords held that it was a contract for the sale of the cargo - The seller had not performed his contract and therefore was not entitled to the price.

Held:

• Purchaser was not liable to pay for the corn because the cargo had not been delivered
• Did not decide that the contract was void - therefore it was not authority for any general proposition that a contract of sale is void where the subject matter of the sale ,without the knowledge or fault to the seller, had ceased to exist but it was commonly understood as such - this was incorrect

Per Lord Cranworth LC: “…it plainly imports that there was something which was to be sold at the time of the contract, and something to be purchased.”

Question 22

What legislation did Couturier v Hastie (1856) influence?

Answer 22

It influenced the wording of Section 6, Sale of Goods Act 1979

Question 23

Describe two interesting things about the Mcrae v Commonwealth Disposals Commission (1950) case

Answer 23

• Australian case so it is not binding as it not part of UK common law - but could be persuasive
• Not actually a case for mistake but rather fruadulent misrepresentation or because of the judgement of the courts and that it was the fault of the defendants and Res Exctincta only arises where unknown to BOTH parties , the subject matter ceased to exist or never existed at the time the contract was entered into

Question 24

What is the latin phrase for Mistake as to title/ownership?

Answer 24

Res Sua

Question 25

When does Res Sua Occur

Answer 25

Occurs where a person contracts to purchase property that, unknown to both parties, the purchaser already owns

Question 26

Give a case law example of mistake as to title/ownership

What does this case say about legal impossibility?

Answer 26

Cooper v Phibbs (1867)

• Cooper agreed to lease a fishery from Phibbs
• Cooper was unaware that the fishery actually belonged to him, after death of his uncle
• Cooper in fact had concluded a contract to lease his own property to himself!

Held (House of Lords):

• Agreement, having been made in mutual mistake, was entitled it to be set aside

This case was seen as a legal impossibility as you cannot lease something from someone else if it already belongs to you

Question 27

When does mistake as to possibility of performance of contract occur?

Answer 27

Occurs when the parties believe that the contract is capable of being performed but that is not the case

Question 28

What are the different types of impossibility?

Answer 28

• Physical Impossibilty
• Legal Impossibility
• Commercial Impossibilty

Question 29

Give a case law example of Physical Impossibilty

Answer 29

Sheikh Brothers Ltd v Ochsner [1957]

• By an agreement a company granted a licence to cut, decorticate, process and manufacture all sisal then or at any time thereafter growing on certain lands in Kenya.
• The contract established the production of sisal fibre in average minimum quantities of 50 tons per month.
• It was alleged that both parties believed, contrary to the fact, that the leaf potential of the sisal area would be sufficient to permit the manufacture and delivery of the minimum quantities of 50 tons but in reality the leaf potential of the sisal area made it impossible to produce the prescribed minimum quantities.

Held -

The contract depended on the sisal area to be capable of producing an average of 50 tons a month throughout the term of the licence - this mistake was essential to the agreement - VOID

Question 30

Give case law examples of Legal Impossibilty

Answer 30

Kleinwort Benson Ltd v Lincoln City Council [1999]

• Kleinwort Benson had made payments to a local authority under swap agreements which were thought to be legally enforceable.
• Subsequently, a decision of the House of Lords, (Hazell v. Hammersmith and Fulham) established that such swap agreements were unlawful.
• Kleinwort Benson then sought restitution of the payments on the basis of a mistake of law.

Held - money paid under a mistake of law could be recovered.

Cooper v Phibbs (1867)

Question 31

Give a case law example of Commercial impossibilty

Answer 31

Griffith v Brymer (1903)

• A hotel room was booked at 11am on 24.06.1902 to see the royal procession
• The procession never happened because the King was operated on the same day at 10am
• Neither party was aware that the coronation had been cancelled prior to the formation of the contract.

Held - the contract was void due to common mistake

Question 32

Give an example of when Commercial Impossibilty was NOT possible

Answer 32

The Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd (2002)

• Defendant urgently required a vessel in order to carry out salvage services and entered into 5 day
  hire contract with Claimant
• Both parties believed The Great Peace was 35 miles away, when it was 410 miles away
• Defendants argued that the distance from the salvage site was a common mistake and the issue whether this was a common mistake that could void the contract

Held:

• Common mistake requires an element that makes contract performance impossible
• Difference in miles from the salvage site was not fundamental enough to render the contract void, as it
  did not make the contract impossible to perform

Not sufficient to be a commercial impossibility - may have been more onerus but not impossible to perform

Question 33

Outline restated test for common mistake in The Great Peace

Answer 33

1. There must be a common assumption as to the existence of the state of affairs
2. Neither party aware that the mistake is being made
3. It is not the fault of either party
4. The non existence of affairs must render performance of the contract impossible
5. The state of affairs may be the existence or the valid attribute of the consideration to be provided or circumstances which must subsist if performance of the contractual adventure is to be possible (state of affairs must be fundamental to the contract)

Question 34

When does Unilateral Mistake arise?

Answer 34

When:
* one party is genuinely mistaken as to the term of a contract and that mistake induced mistaken party to enter into the contract
* the mistake is known to the other party
* mistaken party is not in anyway at fault

Question 35

What are the types of Unilateral Mistake?

Answer 35

• Mistake as to identity of the Person Contracted with
  ○ Face to face contracts
  ○ Distance contracts
• Mistake as to terms of contract
• Mistake as to the nature of the document signed
  ○ Plea of Non Est Factum
• Rectification

Question 36

What are the exceptions to a Unilateral Mistake?

Answer 36

• Non-mistaken party is aware
• Non-mistaken party has generated the mistake

Question 37

What is the general rule of Mistake as to Identity?

Answer 37

• the seller can only pass the title of goods if the party posses the title in the first place (nemo dat)
• thus if obtained fraudulently then a rogue does not have goods title and cannot pass it
• Consequently, the seller could recover the property in the goods from Initial Buyer
• To do so S must prove mistake as to identity regarding the party with whom they have contracted i.e. R
• Contract void for mistake and as a result allows recovery of property from IB as they will have goods obtained by conversion to which they have no title
• Unfair results for the bona fide buyer and therefore there are numerous exceptions to the nemo dat rule in the Sale of Goods Act 1979

Question 38

What is the general rule for face to face negotiations?

Answer 38

When parties contract face to face, and and one obtains goods by pretending they are someone else, contract NOT void for mistake as to identity because of the presumption that the parties intended to deal with the person physically present

End result is that the innocent seller is out of pocket - the seller would have no legal recourse against the third party buyer

Question 39

Give case law examples of face to face negotiations

Why did the courts conclude these contracts were valid?

Answer 39

Phillips v Brooks Ltd [1919]

• Jeweller had ring for sale
• A rogue went to see jeweller, said he liked the ring and enquired about price
• Rogue said that he was prepared to buy it at that price and pulled out a cheque book
• Seller hesitated – he had never met this man before and was concerned if cheque would be honoured
• Rogue noticed seller’s hesitation so quickly said to jeweller ‘I am Sir George Bullough of 11 St. James’ Square’
• Held: Contract VALID - claimant intended to make the contract with person in front of him!

Lewis v Averay [1971]

• A rogue claimed: “I am Richard Greene, the film actor of the Robin Hood series”
• He wrote a cheque to buy the car from Lewis
• Lewis was reluctant but the rogue showed him an official Pinewood Studios pass to the Pinewood Studios, with the name ‘Richard A. Green’ and his own photograph, so Lewis accepted the cheque
• Rogue sold car to third person who bought in good faith

Held:

Per Lord Denning MR:

The real identity of the rogue did not prevent a valid contract being created between him and Lewis, because there was a face-to- face interaction, as per Phillips v Brooks, where the law presumes contract

Question 40

Why was the contract in the case Ingram v Little (1960) found to be void for mistake?

unlike the other face to face negotiations

Answer 40

The Ingrams intended to sell to the real PGM Hutchinson, and this was not the person to whom they ultimately sold the car

• The Ingrams had a car for sale
• Rogue purchaser pretended to be a P.G.M. Hutchinson of Stanstead House, Stanstead Road, Caterham
• Ingrams checked his details in phone book and ascertained there was such a person, though it turned out the purchaser was NOT this person!

Held:

Contract was VOID for mistake

Question 41

How did the courts reach their decision in Ingram v Little (1960) ?

Answer 41

The majority of the court of Appeal was influenced by the fact that the ladies intended to sell to the real Hutchinson, and this was a crucial mistake as to identity

Question 42

What was the dissenting view in Ingram v Little and who held it?

Answer 42

Devlin LJ dissenting:

• held that the presumption that a person is intending to contract with the person to whom he is actually adressing words of contract is a very strong one and was not rebutted in this case (this dissenting reasoning was applied to Lewis v Avery and the contract was thus seen as valid)
• He also recognised that there was a way for this presumption to be rebutted and that is for the rogue to be acting as an agent for another party - in this case there would not be a contract as the rogue does not have any authority to act as an agent

The overall judgment was criticised and two members of the HoL said it was wrong - questions as to whether the courts just wanted to protect old ladies

Question 43

Give a case law example of contracts made in writing/distance contracts

Answer 43

Cundy v Lindsay (1878)

• Lindsay received an order by post for a large number of goods from a Mr Blenkarn of 37 Wood Street, Cheapside
• Mr B, in preparation for his fraud, rented a room at an address down the road from the offices of a highly respectable firm - Blenkiron & Co (known by the Cundy, the Defendant)
• Mr B signed his name to look like he was Blenkiron and Lindsay sent the goods addressed to Mr B’s address, but did so under the assumption that they were dealing with Blenkiron & Co
• Mr B received the goods at his address and sold them to Cundy (Defendant), who bought them in good faith!

Held:
* Contract was void because of the mistake as to identity of Mr B (B’s identity here was crucial)

• Also, Mr B could not pass any title to Cundy: no contract between him and Lindsay, who intended to
  deal only with the real and reputable company, Blenkiron & Co, and not with Mr B - Nemo dat quad non habet rule applied
• The court of appeal and the HoL held that Lindsay intended to deal with the well - known firm of Blenkiron & Sons and not with Blenkarn
• Court decided two innocent parties should suffer because of the fraud of the third party:
• Cundy suffered because he did not have the title to the handkerchiefs and had to pay the value for the goods to Lindsay despite paying in good faith
• Lindsay suffered because he sent goods to the wrong address and lost the goods (but still got money)

Question 44

What case applied the judgment given in Cundy v Lindsay (1878)?

another contract in writing/distance contract

Answer 44

Hudson v Shogun Finance [2003]

• Finance company (Claimant) entered into written agreement with a man whom it believed to be Mr Patel, providing him with finance for the purchase of a car from a dealer
• Claimant checked Mr Patel’s name and address against the electoral register, his credit rating and whether any county court judgments or bankruptcy orders were registered against him and compared his signature with the signature on his driving licence
• Man was a rogue who dishonestly acquired the real Mr Patel’s driving licence and forged his signature
• Dealer handed the car to the rogue who sold it to the defendant, a private purchaser acting in good faith!

Held:

• Cundy v Lindsay followed - contract was void
• Mistake as to identity AND the identity of a real person had been stolen

Question 45

Why was the decision in Hudson v Shogun finance (2003) considered controversial?

Answer 45

• Lord Hobhouse offered strong support for the Parole Evidence rule that: where the contract is written down the identityof the partiesto the contract is established from the written document and nothing else

BUT:

It was crucial for the Finance company to deal with the real Mr Patel and therefore the offer could not be accepted by R

The contract in this case was concluded in writing because they were not dealing face to face - although the rogue was in the presence of the dealer, the dealer was not acting for the finance company, if the dealer had been authorised by the finance company the face to face principle would have applied

Shogun finance is a modern application of Cundy v Lindsay (1878), both instances saw owners of issued goods think they were dealing with a particular person known to them who did exist - the offer could have only been accepted by that particular person

Question 46

What case was contrasted with Cundy v Linday (1878)?

Answer 46

King’s Norton Metal Co v Edridge [1897]

• R named Wallis established a bogus business called ‘Hallam and Co’ and had written to C on headed paper showing a large factory, suggesting that that was a well - established and thriving firm. Wallis ordered a ton of brass river wire from C, which C supplied to Hallam and Co on credit
• These goods were immediately sold to D (innocent third party buyer)
• C claimed that the contract was void for mistake and tried to recover goods from D
• CA held:
• contract not void for mistake; C had intended to deal with the writer of the letter whoever he was.

For mistake as to identity to operate, one existing entity had to be mistake for another existing entity. There was only one existing entity here (the rogue using an alias) and C must have intended to deal with that person.

Therefore contrasting with Cundy v Lindsay (1878) because the firm being impersonated was real. It was impossible that the identity of the party it was dealing with was crucial, since Hallam and Co was fictional. King’s Norton was only concerned with the attributes and not the company itself

Question 47

When does Mistake as to terms of the contract arise? Give a case law example

Answer 47

Arises where one party makes an offer and they are aware that the other party is fundamentally mistaken as to the nature of the promise contained in the offer

Smith v Hughes (1871)

• D, a racehorse owner, wanted to buy some old oats; they had to be old not new. A sample of new oats was inspected and D agreed to purchase the whole amount.
• When the oats were delivered it was discovered that they were new. D refused to pay. When sued for the price D argued that the contract was void for mistake.

Held -
contract bindingdespite D’s mistake, because any reasonable onlooker would conclude that the parties were in agreement about what was being sold

Question 48

What did Atkins LJ say about mistake as to terms of contract?

Answer 48

“if one party has made a mistake as to the terms of the contract and that mistake is known to the other party, then the contract is not binding”

despite agreed terms, “it is clear that they are not in agreement”

Question 49

What is the general rule of Mistake as to the nature of the document signed?

Answer 49

A person’s signature on a document binds that person to its contents

Question 50

What is the Latin phrase that describes Mistake as to the nature of the document signed?

Answer 50

Non Est Factum - ‘it is not my deed’

Question 51

Give a case law example at the failed attempt to sue on the grounds that it was not their deed Non Est Factum

Answer 51

Gallie v Lee (1971)

• Mrs Gallie, a 78 year old widow was visited by her nephew and a Mr Lee
• Lee asked her to sign a document, which he told her was a gift of the house to her nephew
• She had broken her glasses and could not read the document, which was in fact a deed of sale to Lee, not to her nephew!
• Mrs Gallie sued on grounds of mistake – it was not her deed (non est factum)

Held:

• No mistake: document not fundamentally different from the one that she thought she was signing, even though tricked into signing it

In line with the case of L’Estrange v Graucob (1939) that established that you are bound by what you sign

Question 52

What are the equitable remedies for mistake?

Mention where latter part of description is from

Answer 52

Recission - contract void
* Unjust Enrinchment
* Specific Performance

Rectification - correction of written agreement
* specific performance of Rectified Contract

Rectification arises where a written document does not represent the common intention for the parties

Rectification NOT available where there is a mistake as to the subject matter of the contract but only where there is an error on the contractual document

Question 53

Give case law examples of rectification

Answer 53

Joscelyn v Nissen [1970]

• A daughter owned a house, which was also occupied by her parents. Her father agreed to transfer his business to her and in return she agreed to pay him a weekly sum and to pay household bills and expenses
• The eventual written agreement referred to the payment of a weekly sum and ‘to discharge all expenses in connection with the whole premises’
• Following a dispute, the daughter stopped paying the household bills and father sought rectification of the document containing their agreement to make explicit their original intention

Held

• court agreed to rectify their agreement as it was satisfied that the father’s version of the agreement did reflect what had actually been agreed between them

Swainland Builders Ltd v Freehold Properties Ltd [2002] EWCA Civ 560,

LJ Gibson set out the necessary requirements for the parties seeking rectification:

• The parties had a common continuing intention in respect of a particular matter in the agreement to be rectified
• There was an outward expression of accord
• The intention continued at the time of the execution of the instrument sought to be ratified
• By mistake, the instrument did not reflect that common intention - rectfication granted

Question 54

Give a case law example of rectifcation being denied and why?

Answer 54

Chartbrook v Permission Homes (2009)

• agreement held that Permission was to obtain planning permission, construct development on Chartbrook’s site and sell properties
• Price payable to

Rectification denied - there was no limit to the amount of “red ink” or verbal rearrangement which the court was allowed in determining whether there was a clear misake.

All that was required was that it should be clear that something had gone wrong with the language and that it should be clear what a reasonable person would have understood the parties to have meant.

The courts stated that the evidence of continuing common intention must be assessed objectively. i.e . whether a reasonable observer would consider there to be such intention and not what the parties later claim their intention to have been

Question 55

What case rejected the principle set out in the Chartbrook v Permission Homes (2009) case?

Answer 55

FSHC Group Holdings Ltd v Glas Trust Corp Ltd [2019]

• Parties had entered into a private equity financing transaction in 2012 which required C to provide security over a shareholder loan which was part of the overall funding
• In 2016 it was discovered that the relevant security documentation had either never been provided or could not be located, and so C sought to provide that security by way of two accession deeds
• By a mistake, those deeds led to C assuming far more onerous obligations than were required. FSHC Group Holdings Ltd sought rectification of two deeds.

Held- rectification granted.

The Court of Appeal rejected Lord Hoffman’s opinion in Chartbrook and decided that before a written contract might be rectified for common mistake, it was necessary to show either that the document failed to give effect to a prior concluded contract or that, when the parties executed the document, they had a common intention in respect of a particular matter which,by mistake, the document did not accurately record.

Question 56

What difference can mistake make to a contract in common law vs equity

Answer 56

Common law: void ab initio
Equity: voidable

Question 57

Give a case law example of mistake in equity

Answer 57

Solle v Butcher (1950)

• D had agreed to lease a flat to C for several years at £250/year; rent agreed as both C and D believed that the property was not subject to rent control under the Rent Acts.
• C subsequently discovered that the property was subject to rent control under the Rent Act and that the rent should only have been £140/year
• C sought to recover the overpaid rent over 2 year period and a declaration that he was entitled to continue in occupation for £140 per year
• D counterclaimed for the lease to be set aside for mistake

Held-

contract not void for common mistake at common law but in equity it could be set aside.

If equity had allowed the contract to be void as at common law, this would have resulted in an inequitable solution for the tenant since he would have been dispossessed of his lease (made homeless)

• CA therefore offered him a choice of either surrendering the lease or continuing it but on the basis of paying the full rent of £250

Question 58

In your own words what did Lord Denning say in Solle v Butcher (1950)

Answer 58

Contract can be liable in equity if both parties were under the wrong assumption as to the facts or their rights, provided if this assumption was fundamental and was not the fault of the party setting it aside

Question 59

In what cases were Solle v Butcher (1950) applied

Answer 59

Grist v Bailey (1967)
Magee v Pennine Insurance Co ltd (1969)

Question 60

Give a case law example of specific performance not being granted as one of the Equitable remedies for mistake

Answer 60

Mallins v Freeman (1837)
* D bid for and bought one lot (a house) at an auction believing that he was buying a totally different lot.
* C sought specific performance, ie. order for D to buy the house

Held
the plea for specific performance refused

Question 61

Give a case law example for specific performance being granted

Answer 61

Tamplin v James (1880)

• D mistakenly believed that he was buying an inn and adjoining gardens of a property well known to him
• Sale particulars clear that gardens were not included in the property on offer, but D did not examine the particulars
• C sought specific performance; D pleaded mistake

Held specific performance was granted; D could not resist specific performance on the ground of mistake.

Question 62

What case overruled Solle v Butcher (1950) and what other case confirmed this?

Answer 62

The Great Peace (2002) decided that where the contract is not void at common law for mistake, there is no jurisdiction to grant rescission on the basis that such a conract could be voidable in equity confirmed by Pitt v Holt (2013)