Mistake Flashcards
(30 cards)
Raffles v Wichelhaus (Distinguish from common mistake)
Raffles v Wichelhaus illustrates the concept of “mutual mistake” - where both parties make different mistakes, the two parties are at cross purposes and never ad idem. E.g. here the two parties were referring to different ships of the same name, so no contract ever materialised.
Cf common mistake - agreement is reached, but vitiated by the common mistake.
What is the crucial difference between mistake and misrep?
Misrep only renders a contract voidable, which is vital for 3rd party rights due to nemo dat.
Name the three situations in which English law will allow contracts to be vitiated for unilateral mistake.
- The mistake is as to the IDENTITY of the person C appears to be contracting with
- The mistake is in the terms of the proposed contract.
- The mistake is as to the very nature of the proposed contract where the mistaken party signs a written contract – NON EST FACTUM
When will a contract be vitiated for a unilateral mistake as to terms?
- C made a mistake as to the terms of the offer.
- D knew or ought to have known of the mistake, so that he could not reasonably accept C’s conduct as evincing an intention to accept an offer on the terms he provided.
When will a contract be vitiated for a unilateral mistake as to terms?
- Smith v Hughes
- Hartog/Scriven
- C made a mistake as to the terms of the offer (i.e. he must have thought he was being promised old oats, rather than just hoping the oats would be old - Smith)
- D knew or ought to have known of the mistake, so that he could not reasonably accept C’s conduct as evincing an intention to accept an offer on the terms he provided (Hartog) or D was at fault in triggering C’s mistake (Scriven)
In impersonation (3-party) cases, when will unilateral mistake of identity vitiate the contract?
When A’s mistake is so important that he only makes an offer to “B” subject to the condition that B is who he says it is, for if so “B” cannot validly accept the offer
What is the crucial difference between mistake and misrep? In which category of cases is this most apparent?
Misrep only renders a contract voidable, which is vital for 3rd party rights due to nemo dat.
This is most apparent in the impersonation cases relating to unilateral mistake over identity, where if the test is not met then the contract is voidable only for misrep of the fraudster but is in the meantime capable of conferring valid rights on 3rd parties.
Where a fraudster C impersonates B in contracting with A, when will unilateral mistake of identity vitiate the contract?
When it would reasonably have appeared to a person in C’s shoes that A only makes an offer to “B” subject to the condition that B is who he says he is
Shogun Finance, drawing a distinction between written and oral contracts for mistake of identity.
o If the contract is written and on a proper construction of its terms states that the parties to it are A and B, then the authorities suggest that contract may be void for mistake (e.g. Philips)
o If the contract is oral then the strong presumption (of fact) is that A intended to contract w/ the person in front of him (Ingram largely disapproved)
What was the substance of Lords Nicholls and Millett’s dissent in Shogun Finance?
There is no principled basis for distinguishing between face-to-face situations and other scenarios or strongly favoring innocent third party purchasers only in face-to-face cases. It is “absurd that a subsequent purchaser’s rights depend on the precise manner in which the crook seeks to persuade the owner of his creditworthiness”.
What was the substance of Lords Nicholls and Millett’s dissent in Shogun Finance? What approach did they prefer?
There is no principled basis for distinguishing between face-to-face situations and other scenarios or strongly favoring innocent third party purchasers only in face-to-face cases. It is “absurd that a subsequent purchaser’s rights depend on the precise manner in which the crook seeks to persuade the owner of his creditworthiness”.
They preferred a universal presumption that A intends to contract w/ the party he was dealing with “as between two innocent parties the loss is more appropriate borne by the one who takes the risks inherent in parting w/ his goods w/o receiving payment”
What alternative approach does Stevens suggest to that adopted by the HoL in Shogun Finance?
Stevens suggests the better approach is that based on Scriven - to deny the existence of the contract, A must show that
(i) The mistake was one concerning the identity of B
(ii) B knew of the mistake
(iii) The identity of B was a term of the contract
He notes that on this test the decision in Shogun was correct.
What are the three key elements of non est factum?
Saunders - Where a
i. Party signing a document
ii. has made a fundamental mistake as to the character or effect of the proposed contract
iii. through no fault of his own
United Dominions (non est factum)
To show that he was not at fault, the signatory bears the BoP of showing that he acted carefully.
Where a fraudster C impersonates B in contracting with A, when will unilateral mistake of identity vitiate the contract? (Hector v Lyons)
When it would reasonably have appeared to a person in C’s shoes that A only makes an offer to “B” subject to the condition that B is who he says he is.
Hector v Lyons - where the identity of the purchaser is of direct and important materiality in inducing the vendor to enter into the contract
Shogun Finance, drawing a distinction between written and oral contracts for mistake of identity.
o If the contract is written and on a proper construction of its terms states that the parties to it are A and B, then the parol evidence rule provides that no oral evidence may be adduced to contradict the written document by showing that A intended to contract with the rogue C, not B.
o If the contract is oral, then the strong presumption (of fact) is that A intended to contract w/ the person in front of him (Ingram largely disapproved, Lewis approved)
What was the substance of Lords Nicholls and Millett’s dissent in Shogun Finance? What approach did they prefer?
There is no principled basis for distinguishing between face-to-face situations and other scenarios or strongly favoring innocent third party purchasers only in face-to-face cases. It is “absurd that a subsequent purchaser’s rights depend on the precise manner in which the crook seeks to persuade the owner of his creditworthiness”.
They preferred a universal presumption that A intends to contract w/ the party he was dealing with “as between two innocent parties the loss is more appropriate borne by the one who takes the risks inherent in parting w/ his goods w/o receiving payment” than the 3rd party purchaser. The effect would be that in most cases of mistake as to identity the contract will be voidable, not void.
What is the analytical framework for common mistake outlined in Associated Japanese Bank?
- Does the contract, on a proper construction including both expess and implied terms, allocate the risk of the mistake?
- If not, then does the doctrine of fundamental mistake apply?
What is the basic position on when a contract may be set aside on the ground of common mistake?
The mistake must be fundamental. It is more likely to be fundamental when it relates to the existence of the subject matter (Couturier) than when the mistake is as to the quality of the subject matter (Bell), even if the mistake turns out to be fundamental to one party.
Bell v Lever Bros ratio. What is the problem with the ratio?
“Mistakes as to quality…will not affect assent unless it is the mistake of both parties, and is as to the existence of some quality which makes the thing w/o the quality essentially different from that with the quality”
As OSh observe, if these facts did not satisfy the “essential difference” test then it would never be satisfied; indeed there are practically no cases where Bell formed the ratio, w/ reference to the test in Associated Japanese Bank being obiter only.
How does MacMillan explain the outcome of Bell v Lever Bros?
The case was argued primarily on grounds of fraud and thus mistake was argued only as an afterthought following C’s “failed case of fraudulent misrep”, which may have contributed to the finding that the mistake was insufficiently fundamental.
How does MacMillan explain the outcome of Bell v Lever Bros (2 points)?
- The case was argued primarily on grounds of fraud and thus mistake was argued only as an afterthought following C’s “failed case of fraudulent misrep”.
- The particular and exceptional circumstances led to a finding that the mistake was insufficiently fundamental (e.g. D had made only modest profit from trading on his own account and was in failing health, C had benefited considerably from D’s services and D’s conduct was not so reprehensible as to strip him of all compensation)
Bell v Lever Bros ratio. What is the problem with the ratio?
“Mistakes as to quality…will not affect assent unless it is the mistake of both parties, and is as to the existence of some quality which makes the thing w/o the quality essentially different from that with the quality”
As OSh observe, if these facts did not satisfy the “essential difference” test then it would never be satisfied; indeed there are practically no cases where Bell formed the ratio, w/ reference to the test in Associated Japanese Bank being obiter only. Lord Atkin himself failed to give any examples of the test being satisfied - he only discussed cases where it wasn’t.
What is the modern restatement of the doctrine of common mistake in Great Peace Shipping?
The common mistake would only render the contract void if “it transpires that one or both of the parties have agreed to do something which is impossible to perform; the contract was valid since it was not impossible to perform”
