MISTAKE

● A contract based on a mistake of fact negates the idea

of consensus
● The parties objectives did not coincide
NOTE:
● Distinguish from mistake in the ordinary sense (poor
judgment)
● caveat emptor
Tamplin v James
● Premises were offered for sale at an auction
● Buyer assumed the sale included land at the back
● Information showing this was not the case had been availed
but he did not confirm the facts.
● He refused to pay the price he had offered when he discovered
his mistake.
● He was sued
● Test applied: the objective, reasonable man test
● Outcome: Sellers succeeded.
● Lesson: courts wont save you from a bad bargain.
● See also: Smith v Hughes (oats); objective test.
EFFECT:
● The mistake can either be operative or inoperative
● Operative mistake: serious enough to affect the validity of a
contract
● It prevents the agreement from coming into existence
● Inoperative: Does not affect the validity of the contract
NOTE:
The doctrine is interpreted narrowly so as to promote
certainty in contracts.
If the contract allocates the risks in question, then the doctrine
will not apply.
CLASSES OF MISTAKE
Common Mistake
Mutual Mistake
Unilateral Mistake
COMMON MISTAKE
● Misperception about the facts made by both parties at
the time of contracting.
● There is consensus BUT both are mistaken about the
facts
i. Res Extincta : non-existent subject
matter
● Happens where the parties form a contract thinking
that the subject matter exists.
● For the mistake to be operative, one must
demonstrate that the subject matter was not in
existence at the time of forming the contract.
● Effect: total failure of consideration.

● Contract is VOID.
Couturier v Hastie
● Contract for the sale of grain which was in transit
● On 22nd April Captain sold the grain because it was
overheating
● At the time of forming the contract on 15th May the parties
were not aware it had been sold.
● Seller sued for payment arguing that the contract was
based on handing over the shipping documents – risk.
● Held: the seller could not recover the price since he
couldn’t produce the goods. It was not a contract for goods
“lost or not”
Qn: failure of consideration or mistake?
McRae v Commonwealth Disposal
Commission
● There was a K for the salvage rights to a wreck. The buyer spent a
lot in attempting to locate the wreck at the approximate position
given by the Commission. He failed to find it. Turned out the tanker
never existed. He sued the commission. The commission attempted
to rely on the ruling in Couturier by stating there was a mistake
since the subject matter did not exist.
● Held: there was no operative mistake and the K could not be
declared VOID. The plaintiffs had relied on the Commission’s
statement that the wreck existed and was at a specified location.
(Implied Condition) that the goods wreck existed. The commission
and its servants had recklessly asserted that the wreck existed at a
specific location when there was no reasonable basis for that belief.
The commission could therefore not rely on Mistake since it was
induced by the fault of their own servants. Couturier distinguished.
Associated Japanese Bank
(international Ltd) v Credit du Nord SA
● Concerned a leaseback agreement.
● The plaintiff bank bought machines from a client and
leased them back to him under a guarantee from CDN.
● It turned out that the machines NEVER existed.
● Held : The machines were fundamental to the
guarantee so there was no contract.
● NOTE: the mistake must be “common” (shared by) to
both parties at the time of contract formation.
● Steyn J: Consider whether the contract allocates the risk
before turning to the doctrine of mistake.
Read:
● S.8 Sale of Goods Act
“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.”
Couturier v Hastie
Was this case really decided on the doctrine of mistake? Does
the court make reference to the doctrine?
Was this a contract for specific goods?
● Associated Japanese Bank (international Ltd) v Credit du
Nord SA – Steyn J’s assesment of the test in Bell v Lever
Brothers. How does it compare to the McRae case ?
Galloway v Galloway
● A man and a woman obtained a separation deed
● It was determined that the deed was made based on
the assumption that they were married
● Deed was declared a nullity.
● (Mistake regarding the existence of a marriage)
Strickland v Turner
● Contract for the sale of an annuity (life insurance)
● Unknown to both parties, the person whose life was
to be insured had already died at the time they were
contracting
● Held: the contract was void for failure of consideration
ii. Res sua : Mistake as to title
● Where a person contracts to buy what is already his.
Cooper v Phibbs
Cooper took a 3 year lease for a salmon fishery from Phibbs.
It was later determined that Cooper was the life tenant of the
property & therefore the effective owner at the time of the
contract
Held: there was a mistake. Contract was set aside (rescinded)
– the seller had nothing to sell.
NB: decided on the basis of his beneficial rather than his
legal interest. Case was therefore decided on equitable
principles (not common law).
iii. Mistake regarding quality of the
bargain
● General Rule: mistake regarding quality will not render
a contract void.
● “…a mistake 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 without the quality
essentially different from the thing as it was believed to
be.” Lord Atkin in Bell v Lever Brothers
● For the mistake to be operative, it must render the
contract “essentially different” from what was bargained
for.
Bell v Lever Brothers Ltd
● Bell was employed as Chairman of a subsidiary
company and tasked to revive it.
● He revived it and it was merged with another company.
● He was given money for termination of his contract.
● Later, Lever Bros discovered he had breached his
contract by engaging in private business dealings.
● Lever Bros sued to recover the money
Held: No mistake. They had got what they wanted (early
termination of his contract).
Leaf v International Galleries
● Contract for the sale of an oil painting.
● The seller stated that it was painted by Constable (a
famous painter).
● 5 years later, the buyer wanted to sell it and discovered
it was not painted by Constable
● He sought to rescind the contract
● Lord Denning: there was no mistake regarding the
subject matter; just one regarding the quality
● The buyer had bought a painting of the Cathedral in
Salisbury as he wanted.
Salisbury cathedral
from the meadows
Equitable Mistake – Solle v Butcher
● Butcher leased flat to Solle at ₤ 250 per quarter
● Both thought it was not not subject to the controls under the Rent
Restrictions Act. It was, rent should have been ₤ 140. Had the Landlord
known this, he would have applied to increase it because he had made
considerable improvements to the property after the war damage. The
tenant discovered first and sued to have the rent reduced to ₤140, and to
recover the difference already paid. The Landlord argued that the
agreement was VOID for mistake at common law or VOIDABLE in equity
● Held: at common law, the mistake had no effect on the K. it was not
sufficiently serious to make the contract VOID (quality). The court
however said that it would exercise its equitable powers to allow Solle to
stay in the flat for a reasonable period of time. Once the relevant
procedures had been followed (to take the house out of the Rent
Restriction Act), the contract would be set aside. It was therefore
VOIDABLE and NOT VOID. The court disregarded Bell v Lever Brothers
Great Peace Shipping Ltd v Tsalvris
Salvage (International)
● A ship called “Cape Providence” was sailing from Brazil to
China. The “Cape Providence” suffered structural
damages. The “Great Peace’ had been hired to go to the
vessel and stand by to save lives. When they discovered it
was far, the appellants got the services of another vessel
and cancelled the contract with the owner’s of the “Great
Peace”. The respondent’s sought payment of the minimum
5 day hire charge. The appellants argued that:
● the contract was void at common law OR voidable in
equity for mistake because both parties were mistaken in
thinking that the 2 vessels were in close proximity at the
time they contracted. In fact, they were 410 miles apart and
it took the “Great Peace” 39 hours to arrive.
Rationale
● Reasoning: The doctrine of common mistake only applies if the parties
have not made an express provision in their contract.. If a party takes
responsibility for that state of affairs, he assumes responsibility & liability.
(McRae v commonwealth Commissioners)
● Mistakes as to quality do not affect performance of the contract. Position
in Bell v Lever Brothers was reiterated. In a mistake as to quality, parties
are still agreed about the subject matter.
● Test: whether the thing without that quality was “essentially different”
● Solle v Butcher had not sufficiently explained the difference between a
mistake at common law and a mistake at equity. i.e. how could it be
insufficiently fundamental at common law BUT sufficiently fundamental
in equity? In Bell v Lever Brothers the court had stated that if a mistake
was not fundamental, the contract remained valid. The decision in Solle
meant that Bell was wrongly decided. Both decisions could not stand. Solle
was disregarded.
● Effect: No remedial flexibility. A contract is either VOID or VALID
MUTUAL MISTAKE
● Occurs where parties are at cross purposes regarding
the meaning of the contract.
● In essence, parties misunderstand each other.
● Also referred to as agreement mistakes
Mistake as to the identity of the
subject matter
Raffles v Wichelhaus
● Contract for the sale of 125 bales of cotton aboard a vessel called
“Peerless” which was sailing from Bombay.
● In fact, there were two vessels called “Peerless” carrying cotton
from Bombay to Liverpool; one arriving in October, the other in
December.
● Wichelhaus thought he’d bought the October consignment;
Raffles sent the cotton in Dec.
● Wichelhaus refused to accept the cotton. Raffles sued for breach.
● Outcome: there was no common intention. VOID
● Rationale: the agreement is not sufficiently certain to be enforced.
● Lesson: avoid ambiguity in drafting
Scriven Bros & Company v Hindley & Co
● At an auction, both hemp & tow were on sale but
both had similar markings. (tow is an inferior quality
of hemp)
● Buyer placed a high bid thinking he was buying the
higher quality hemp.
● Held: contract was VOID. The buyer intended to buy
hemp. The seller intended to sell tow. It was
impossible to state that one or the other commodity
was being contracted for.
Smith v Hughes
Test: The objective test
● The plaintiff offered to sell oats to the defendant.
● The defendant thought they were “old’ oats.
● When they were delivered, he found that they were new oats
which were of no use to him.
● Held: there was no mistake. For there to be one, it had to be
shown that the plaintiff thought that a term in the K made
reference to old oats. It also had to be shown that the other
party knew about this misconception...An error of judgent
regarding the quality of the subject matter will not result in a
MISTAKE.

● Also: Tamplin v James

UNILATERAL MISTAKE
● Only one of the parties is mistaken.

Types:
i. Mistake as to terms
ii. Mistake as to identity
iii. Mistake as to the nature of the document
i. Mistake as to terms
Hartog v Colin & Shields
● The defendant offered to sell hare skins and quoted their
price per piece during oral negotiations
● Their written offer quoted a price per pound which was
much lower
● The plaintiff accepted the offer
Held: VOID for mistake.
● Hare skins were generally sold per piece.
● The plaintiff must have realized the mistake. Anyone with
knowledge of the trade must have realized the mistake
(Arising from standard trade practice)
ii. Mistake as to identity
For the mistake to be operative, you must demonstrate
that:
i. you intended to deal with another person
ii. The person you contracted with was aware of this
iii. Identity was crucial at the time of contracting
iv. Reasonable steps were taken to verify the identity of
the person one contracted with
(Anson)
Face to Face Transactions
● Contract is formed with the person who is physically present
irrespective of the identity they assume.
Lewis v Avery Ltd.
● A crook who was buying a car represented himself as being
Richard Greene, a famous actor at the time. His cheque
bounced and the owner of the car traced it to someone who
had bought it. He sued the new owner to recover the car.
● Held: the seller had been induced into believing that he was
contracting with a famous actor but he had done no more than
contract with the person who he dealt with. The mistake was
not operative. The contract was NOT VOID.
● Effect on third parties rights?
Phillips v Brooks Ltd
● North (a crook) selected expensive jewellery in a shop. He wrote out a
cheque for some of the amount claiming he was Sir George Bullough
(whose address was listed in the phone book). He persuaded the
jeweller to allow him to leave with a ring and leave the rest of the
jewels untill his cheque cleared. The cheque bounced and the jeweller
attempted to recover the ring from a pawnshop where North had sold
it. He sued arguing that his K was based on mistaking North’s
identity.
● Held: he could only have intended to contract with the party who he
dealt with face to face. The pawnshop had therefore acquired good
title to the goods since they had bought in good faith without any
notice of defect in title. NOT VOID
Ingram v Little [1961]
● A crook introduced himself as Mr. Hutchinson to the
sellers of a car. The owners of the car checked the
directory and found that such a person existed at the
address he claimed to live in. The crook paid for the
cheque using his fake name.
● Held: They intended to contract with the real
Hutchinson. K was therefore VOID.
● Dissent by Devlin: a reasonable man would conclude
that they wanted to contract with whoever they had
met.
**case is bad law. Rarely cited as precedent
At a Distance (inter absentes)
Cundy v Lindsay
● Blenkarn hired a room on Wood Street. Another highly respected
firm, Blenkiron & Company had premises on the same street.
Blenkarn ordered for a large quantity of handkerchiefs from
Lindsay’s. His signature was designed to be confused with that of
Blenkiron & Co. The goods were supplied and billed in the name of
Blenkiron & co and were of course not paid for. Blenkarn had sold
some of them to Cundy before the fraud was detected. Lindsay sued
to recover the goods from Cundy.
● Held: The K was void for mistake. Lindsay were able to show that the
identity of the person they were contracting with was material to the
formation of the K. The 3rd party therefore obtained the goods from
Blenkarn without title.
● Principle: nemo dat quod non habet
● NB: VOID = harsh. Consider: Position of the 3rd party
Kings Norton Metal Co Ltd v Edridge,
Merret & Co Ltd
● Wallis contracted under the name of “Hallam & Co” and
bought expensive items. Hallam & Co was a fictitious
entity. The goods were supplied but he did not pay.
Metal Co sued the person who had bought them from
Wallis to recover the goods.
● Held: The K could not be void for mistake. There was no
mistake regarding identity (since Hallam Co did not
exist); they were more mistaken about Wallis’s credit
worthiness. (Attribute) *3rd party had acquired good
title
iii. Mistake regarding signed Document
● General Rule: L’Estrange v Graucob
a party is bound by written agreements which he has
signed. He cannot say he did not understand it or it
was too technical Or too hard to read.
Exceptions:
1. Misrepresentation
● Exception(s): Curtis v Chemical Cleaning & Dyeing
Company [1951] 1 KB 805 – where the contents of a
contract were misrepresented to the signatory by the
cleaner.
2. Non est factum
● One can also avoid liability by claiming that they only
signed the document as a result of a genuine mistake
regarding the nature of the document signed [NB nature of
doc, NOT its contents].
Conditions for use of this defense
1. the party who signed is subject to some weakness which
the other party exploited e.g. senility, blindness.
2. The other party must also have misrepresented the nature
of the document.
3. The document must be materially different from what the
party intended to sign.
4. The party also must not have been negligent in signing it.
Lewis v Clay
● A party was asked to sign as a witness to a family
document. The contents of the document were
covered ostensibly to maintain confidentiality. In fact,
the documents were promissory notes in which the
party undertook to pay large sums of money.
● Held: he was not bound by his signature.
Foster v Mackinon
● A senile man was induced to sign a Bill of Exchange
● He was told it was a guarantee
Held: He did not incur any liability
Thoroughgood’s case
● An illiterate woman was induced to execute a deed
● In the deed, she released a man whom she had claims
against
● She was convinced that it concerned rent arrears
Held: the deed was a nullity
Saunders v Anglia Building Society
● An elderly widow (Mrs Gallie) decided to transfer her property to
her nephew on the condition that she would live there for the
remainder of her life. The idea was to allow him to take a loan to
start a business using the house as security. The document was
drafted by Lee, a dishonest friend of the nephew. He drafted a
document allowing him to take a mortgage on the house. Mrs Gallie
signed the document w/o reading the contents. Lee took a loan
against the property and defaulted. The lender sued to reposses the
property. The widow (bank on her behalf) pleaded non est factum.
● Held: the nature of the documents was not suffciently different since
in both, she gave up her rights to the property. She had also not done
enough to check the nature of the documents. (burden of proof is on
the person seeking to establish this as a defence).
Remedies
At common law, the contract can be declared VOID
In equity:
1. Rectification – Webster v Cecil
2. Rescission
Not available for “equitable mistake” Great Peace Case
See : Cooper v Phibbs
3. Refusal of grant of specific performance – Webster v Cecil
4. Granting an order for specific performance – e.g. Landlord in
Tamplin v James where it was held there was no mistake.
Atiyah: doctrine of mistake is not necessary.
The contract should allocate risks carefully
** Task: Mistake of law