Co4: Mistake - cases

Question 1

Raffles v Wichelhaus (1864) (Exq)

Answer 1

Main point = latent ambiguity case
=> where the parties have different understandings of a term which is objectively ambiguous, the contract is void

Summary (by Kennefick): case abt cotton being shipped from India, parties agreed it would go on a ship called the Peerless – it turned out that 2 ships, both called Peerless, were about to sail from Bombay

Held (Exq) : the contract was void, bcs not possible to say that one interpretation was true and that the other was a mistake / to determine objectively what the contract was

Question 2

Smith v Hughes (1871) (CA) (MP)

Answer 2

Main point : “passive acquiescence of the seller in the self-deception of the buyer did not entitle the latter to avoid the contract” (Cockburn LJ)

+ general rule for UM = doesn’t render the contract void, even where known to the other party

Question 3

Smith v Hughes (1871) (CA) (summary)

Answer 3

S selling new oats, B looked at oats and thought they were old => brought them

S knew B thought they were old and didn’t correct B – B never actually asked, just assumed that they were old => B wants to get out of contract under UM

CA held : in favour of S, who was under no obligation to correct B’s mistake as long as S didn’t induce it
=> B persuaded himself that they were old oats and has only himself to blame for that (caveat emptor)

Question 4

Scriven v Hindley (1913) (HC)

Answer 4

Main point: where the parties (objectively) don’t agree on what is to be the SM of the contract, the contract is void

Summary: D made winning bid at an auction for what he believed to be hemp but was in fact tow

=> bid far to high for tow so auctioneer aware that bid was made under a mistake – D refused to pay once discovered it was tow, P sued and D ag UM

HC held in favour of D : the parties were never ‘ad idem’ as to subject matter of the sale, so there was no contract (void for UM)

Question 5

Hartog v Colin & Shields (1939) (HC)

Answer 5

Main point : contract is void for UM where one of the parties is mistaken as to the terms and the other party knows or ought to have known of the mistake.

Summary: B buying hair skins from Argentina, corresponding in writing – negotiating price per piece, until letter comes from S with price per pound, 1/3 lower than original offer  B accepts it
Issue = could B have reasonably believed that the letter w/ price per pound contained S’s real intention ?

HC held in favour of S: contract void for unilateral mistake as to terms – B must have realised that there was a mistake given that so far the negotiations had been abt price /piece

Question 6

Longley v PB Entertainment (2022) (HC) (MP)

Answer 6

Main point: Requisite state of knowledge for UM = actual knowledge, constructive knowledge per se not enough

/!\ but what someone should know often used to determine what they actually do know

Question 7

Longley v PB Entertainment (2022) (HC)

Answer 7

Summary : C phoned up D betting company to place a bet of £ ‘thirteen hundred’ (£1 300) each way (so £2 600) on a horse. Phone operator misunderstood, believing he wanted to bet £13 000 each way (so £26 000). She informed him she had to get that amount cleared w/ a trader, then that his bet of £13 000 each way was accepted. C was a bit surprised at the amount but went ahead. C claiming winnings, D trying to get out of paying so much.

HC (Ellenbogen J) held in favour of D:

• No matching O&A : C’s initial offer not accepted, D’s misunderstanding can’t be construed as a counter-offer, nor C’s reaction as acceptance
• Even if there was an appartent contract for £13 000 each way, void for UM
• Requisite state of knowledge for UM = actual knowledge, constructive knowledge per se not enough (but what someone should know often used to determine what they actually do know)

Question 8

Cundy v Lindsay (1878) (HL) (MP)

Answer 8

If you make a contract in writing, the contract is with the person named in the text, not the actual witter.

Question 9

Cundy v Lindsay (1878) (HL) (summary)

Answer 9

Summary: F wrote to L (firm in Belfast which makes linen) to buy handkerchiefs => took advantage of the fact his name (Blenkarn) was similar to that of a reputable firm (Blenkiron & Co) + took a room in the same street as the firms to use that address

=> Firm sent the handkerchiefs to ‘Blenkiron & Co’ at F’s address, F sold them to C but never paid L – F insolvent so L sued C for conversion – both L and C innocent / in good faith

Issue = whether there was a contract between L and F (so that F could acquire title and then transfer it to C)

HL held in favour of L: there was no contract btw L and F => F never had title which he could transfer to C => C had to return the handkerchiefs, and F liable to C for value of the goods

Question 10

Cundy v Lindsay (1878) (HL) (Lord Carins)

Answer 10

C never intended to deal with A / knew they were dealing with A => no contract btw them

Question 11

Phillips v Brooks (1919) (HC) (MP)

Answer 11

If you make a contract face to face, the contract is w/ the person in the room => not void even if they’re not who they say they are

Question 12

Phillips v Brooks (1919) (HC) (summary)

Answer 12

Summary: F pretended to be someone rich and famous (whom he looked like), brought a ring from C’s store – C allowed him to take the ring before the check cleared bcs of who he believed him to be – F pledged the ring (as in RL pignus) to D for £350

=> issue = whether D lb to C in conversion

HC held in favour of D : C had contracted w/ F, the person in the room (even though intended to contract different = who he believed F to B)
=> the contract btw C and F was valid (voidable for fraud but NOT void for UM) => D was not lb to C in conversion

Question 13

Ingram v Little (1961) (CA) (MP)

Answer 13

In contracts made face to face, there is a presumption that a party intends to contract w/ the person in the room – can be rebutted by evidence that the other’s identity was important to the mistaken party

/!\ mixed judicial consideration : result was rejected in Shogun Finance

Question 14

Ingram v Little (1961) (summary)

Answer 14

Summary: 3 sisters (S) selling a car, F offered to buy it, pretending to be someone famous and paying by check. F gave name and address, S checked that someone lived at the address then sold the car, F sold the car to innocent party B, S never got their money  sued B for conversion

CA held in favour of C: trying to reconcile Cundy and Phillips

=> in contracts made face to face, there is a presumption that a party intends to contract w/ the person in the room

BUT this presumption can be rebutted if F’s identity is shown to have been important to the mistaken party

Question 15

Ingram v Little (1961) (Pearce LJ)

Answer 15

gives eg of shopkeeper selling goods to customer = transaction where ID doesn’t matter => presumption operates

≠ buying a painting by unknown person pretending to be famous artist = transaction where presumption is rebutted bcs ID matters

Question 16

Lewis v Averay (1972) (CA)

Answer 16

Summary: similar situation to Ingram – sale of a car, F shows up and pretends to be famous actor (which he looks like) to get A to accept cheque instead of cash, F gets the car, sells it to C and disappears => A sues C in conversion

CA held in favour of C : A had made a valid contract w/ F, presumption in FTF dealings not rebutted

+ Denning obiter : UM as to ID should make contract voidable, not void

Question 17

Shogun Finance Ltd v Hudson (2003) (HL) (MP)

Answer 17

Confirmed distinction in approach btw face to face and other (written) contracts for UM as to ID

Question 18

Shogun Finance Ltd v Hudson (2003) (HL) (Summary)

Answer 18

Summary : F wanting to get a car. Showed driving licence (which belonged to Mr P) to a dealer, who put F in touch w/ C. F entered written HP agreement w/ C after C checked creditworthiness of Mr P. F paid by check, sold the car to D and disappeared, C never got their money and sued D in conversion.

HL held in favour of C (/!\ split 3-2) : title never passed to F, because the written agreement was btw C and Mr P, not C and F => nemo dat => D never got title

+ evidence of face to face dealing not admissible to displace terms of the written contract

Question 19

Shogun Finance Ltd v Hudson (2003) (Dissent)

Answer 19

= Lords Millet and Hobhouse : the distinction btw face to face and other dealings makes no sense (eg phone / video call etc) and should be abolished

=> new rule = where A contracts w/ B, presumption that A intends to contract w/ B even if B is pretending to be C and A believes B to be C – very difficult to displace (Millet even seems to be suggesting rule of law rather than presumption)

Question 20

Couturier v Hastie (1856) (HL) (MP)

Answer 20

common mistake as to the existence of the subject matter renders the contract void (see also s6 SGA 1979*)

Question 21

Couturier v Hastie (1856) (HL) (Summary)

Answer 21

C chartered ship to transport corn from Greece to London, and entered ag w/ D for D to sell the corn. D sold corn to X (before ship arrived), turned out that the corn had already been sold in Tunis at the time the contract was made.

=> C sued D for price he was entitled to under sale to X
=> D claimed that contract w/ C was void due to common mistake (no corn to sell)

HL held in favour of D: the contract with X was void, as there was no corn to be sold

Nb: now codified in s6 SGA 1979

Question 22

Bell v Lever Brothers (1932) (HL) (MP)

Answer 22

CM as to a quality will only render a contract void if the relevant quality is sufficiently fundamental, so that absence of it renders the thing “essentially different”

Question 23

Bell v Lever Brothers (1932) (HL) (summary)

Answer 23

D employee was let go (bcs merger) and compensated under severance ag, C company (LB) later discovered facts that would have enabled them to fire D without compensation
=> argued that this mistake rendered the severance ag void

HL (split 3-2) held in favour of D : the company’s mistake was not as to a ‘quality’ sufficiently fundamental to render the contract void.

Question 24

McRae v Commonwealth Disposals Commissions (1951) (HCA) (MP)

Answer 24

common mistake about existence of sm will not render a contract void IF it is made without reasonable ground

=> approved in Associated Japanese Bank v Credit du Nord

Question 25

*McRae v Commonwealth Disposals Commissions* (1951) (HCA) (summary)

Answer 25

CDC invited tenders for purchase of a wreckd tanker, C’s offer won. Later discovered that there was no tanker at the location provided by D => C sued for breach, D claimed contract was void for CM as to ESM **HCA** held in favour of C, the contract was not void (despite mistake) because D had no reasonable grounds for their mistake => induced C to make the same mistake

Question 26

*Associated Japanese Bank v Credit du Nord* (1988)

Answer 26

Approved australian decision in *McRae*: a common mistake as to existence of sm made without reasonable ground does not render a contract void

Question 27

*William Sindall v Cambridgeshire CC* (1994) (CA)

Answer 27

**Main point: before applying rules on mistake, check whether contract allocates risk ** **Summary**: WS (developper) purchased land from CC, contract included duty for CC to disclose all latent easements and liabilities known to it. WS later discovered a sewer under the property (which had fallen in value) and sought recission on ground of mirepº or CM. It turned out the CC’s files for the period when sewer was built had been destroyed. **CA** held in favour of CC: relevant term of the contract required it to disclose easements and lb of which it had knowledge or means of knowledge => outisde of these, risk of existence of other incumberances was on WS

Question 28

*William Sindall v Cambridgeshire CC* (1994) (CA) - Evans LJ

Answer 28

* Relying on Denning’s judgement in *Solle*: idea that there are 2 categories of common mistake: o “fundamental” => equitable remedy of recission o “serious and radical” => contract is void at law => the former is wider than the latter, CL limited to mistakes as to SM * Here : csq of discovery of sewer relatively minor, so not a fundamental enough mistake for there to be recission (even if equitable category broader)

Question 29

*The Great Peace* (2002) (CA) - situation

Answer 29

D offered salvage services to damaged ship => entered contract w/ C, believing C’s ship to be 35 miles away. D then discovered C’s ship was acc 410 miles away => D waited until they entered contract w/ nearer ship before cancelling contract w/ C. D refused to pay cancellation fee on grounds that contract w/ C void or voidable on grounds of fundamental mistake (= belief that the 2 ships were near each other) **CA** held in favour of C : the contract was not void (or voidable) on the grounds of CM

Question 30

*The Great Peace* (2002) (CA) - holdings (5)

Answer 30

* Test = whether mistake as to distance btw the 2 ships made the services C’s ship was able to provide “essentially different from what the parties had agreed” * Answer = no – as shown by the fact that D didn’t cancel the contract right away = still hetting smth out of the contract  performance of contract not made impossible by the mistake  contract stands (/!\ debatable) * “no equitable jurisdiction to grant rescission for common mistake in circumstances that fell short of those in which the common law held a contract void”  rejecting previous CA decision in Solle (Denning) * “the doctrine of equitable rescission was irreconcilable with the leading common law authority” = HL decision in Bell v Lever Brothers * Recognition that CL not v flexible – but greater flexibility should come from statute, not equity

Question 31

*Brennan v Bolt Burdon* (2005) (CA)

Answer 31

**Main point: for a CM of law to vitiate a contract of any kind, it must render the performance of the contract impossible** **Summary**: C (Brennan) suing landlord for injury sustained due to faulty boiler (gas leak), both parties believed C’s claim was time-barred  entered into ‘compromise agreement’ Subsequent court ruling meant that claim was not time-barred  issue = whether compromise agreement void for common mistake of law **CA** held: that the contract was not void : common mistake of law capable of making a contract void, but only if it renders performance of the contract impossible

Question 32

*Solle v Butcher* (1950) (CA) (MP)

Answer 32

Denning’s equitable doctrine of / remedy for CM = recission on terms - A (not so) different test for CM ? “A contract is […] liable in equity to be set aside […] provided that the misapprehension was fundamental and that the party seeking to set it aside was not himself at fault” - A different remedy : court should consider the contract voidable, not void, and impose terms for it to be voided.

Question 33

*Solle v Butcher* (1950) (CA) (summary)

Answer 33

Situation: L & T entered ag to rent flat shorlty after the war, later turned out flat was subjected to rent restriction, T sued for the money he overpaid, L (encouraged by Denning) ag that contract should be rescinded bcs of their CM **CA** held that contract could be rescinded on certain terms = L offer to rent flat at restricted rate so that T wouldn’t end up homeless

Question 34

*Solle v Butcher* (1950) (CA) (pb)

Answer 34

Pb = distinguishing from Bell => tests are so similar, when does one apply and when does the other ? eg see *Magee v Pennine Insurance Co* (not on reading list, mentioned in Great Peace) : Situation = Insurance company would’ve been able to get out of the contract for nothing if had known of a set of fact, but instead paid a lot of money to get out of a contract that they could’ve got out of for nothing (// facts in Bell v Lever Brothers) => Winn LJ dissenting said this is basically the same as Bell, where the contract was void = we cant decide differently here BUT court decided that contract was voidable