TOPIC 4 RESCISSION PART 2

Mistake
Confusion in relation to the terms.
Unlikely to lead to rescission unless it is induced by fraud or misrepresentation

Common mistake
A agrees to sell to B a valuable painting. Painting is a fake but A and B believed it to be real.
This is a common mistake.

Mutual mistake
A agrees to sell to B a painting that is real. A has another more valuable painting in his other
house. B believes he is buying that painting and A is unaware of this mistake.
Mutual mistake as to each other’s intention.

Unilateral mistake
Same mistake but A is aware of B’s error. Only one party is mistaken.

Gun v Mccarthy
Background
Clear mistake by one party to terms of the contract (unilateral mistake)
Other party seeks to apply mistaken term
Court won’t allow binding of the term
Held -
Where there is a clear undoubted mistake by one party in reference to a material term of a
contract which he entered into with another, and the other party knowingly seeks to avail
himself othat, and seeks to bind the other to the mistake, courts will not allow such a contract
to bebinding on the parties, but will give relief against it
Unilateral mistakes may be rescindable.
If material mistake of fundamental term can have relief.

A Roberts v Leicester County Council

A party is allowed rectification of a contract upon proof that he believed the term to be
included in the contract and that the other party concluded the contract with the omission
with the knowledge the first party believed the term to be included.

Equitable Recission for Common Mistake

Position in equity was more flexible
Courts permitted rescission of contract on grounds of common mistake where the contract
was valid at common law.
flexible nature of equitable rescission on grounds of common mistake.
Solle v Butcher
Background
Landlord purported to increase rent from £140 to £250.
Parties did not abide by the procedure to vary rent under the Rents Act, as such the actual rent
payable was fixed at £140
Tenant sued Landlord for restitution of overpaid rent
Landlord made a counterclaim for recission of the lease on the ground of common mistake to
avoid paying restitution for rent that was already paid.
Held
Failed and lease set aside on basis of common mistake.
A contract is liable in equity to be set aside if the parties were under a common
misapprehension to the facts or respective rights, provided that the mistake was fundamental
and that the party seeking to set it aside was not himself at fault.

Great Peace Shipping v Tsavliris Salvage International

Background
Tsalviris was a company that offered salvaging facilities to ships that needed help.
Ship suffered damage and called for help.
Great Peace Shipping said they were the closest ship, about 30 miles away.
Tsalviris hired them but they made a mistake and were 400 miles away.
Tsavliris did not cancel immediately (which they could have done within 5 days).
They only cancelled when they found a closer ship.
Issue
Great Peace sued for breach of contract but Tsalviris argued the distance was a common
mistake and would invalidate the contract.
Common mistake and void contract?
Held
Not a common mistake that would void the contract
It was a matter of quality of the performance of the contract
Miles did not matter and did not make the contract impossible to perform
Common mistake requires an element to make contract performance impossible and mileage
was not fundamental enough to render the contract void.
Great Peace entitled to minimum fee and no rescission.