Mistake Flashcards
Mistake of Fact and Not Law
O’Loghlen v Callaghan [1874]: - Rent level
It must be a mistake of fact and not law. Ignorance of the law is no excuse.
Parties to a lease thought the Act required rent to be paid at certain level. In fact, it was lower. Despite both making mistake, deemed one of law: no relief for tenant.
Mistake of Fact and Not Law
Cooper v Phibbs [1865]: - Fishery - Mistake of law - equitable relief
Distinction bw mistakes of general law and private law. In equity, if re private law it can ground relief; ]: X let a fishery to Y. Both assumed X owned it. In fact, Y was made tenant for life under a private law. Y entitled to rescind the contract in equity.
Mistake of Fact and Not Law
Kleinwort Benson v LCC [1998]
Distinction between mistakes of fact and law abolished in UK
What are the three categories of mistake?
(1) Common Mistake (2) Mutual Mistake (3) Unilateral Mistake
Common Mistake
O’Neill v Ryan [1991]
The parties make or share the same mistake. Parties have reached an agreement
- set out the three criteria for common mistake:
The mistake is substantially shared by the parties
The risk of the mistake is not expressly or impliedly allocated to either party
The mistake is fundamental in nature
Common Mistake - Mistake as to Existence of Subject Matter - Res Extincta
General rule?
If parties enter into a contract believing the subject-matter is in existence at the time and they’re both mistaken, the contract will be deemed void on the grounds of common mistake:
Common Mistake - Mistake as to Existence of Subject Matter - Res Extincta
Couturier v Hastie [1852]: - Corn
Contract for the sale of a cargo of corn that both parties believed was en route to UK but in fact had already been destroyed deemed void on basis of common mistake.
Common Mistake - Mistake as to Existence of Subject Matter - Res Extincta
Strickland v Turner [1852]: - Annuity
An annuity sold on the life of a person who (unbeknownst to either) was already dead, was deemed void for common mistake
Common Mistake - Mistake as to Existence of Subject Matter - Res Extincta
Galloway v Galloway [1914]: - Separation Agreement
Separation agreement entered into by a couple mistakenly believed they were properly married deemed void for common mistake when they found the marriage was a nullity
Common Mistake - Mistake as to Existence of Subject Matter - Res Extincta
S.7 SGA 1893
Renders contracts void where there’s a mistake as to the existence of goods.
Common Mistake - Mistake as to Existence of Subject Matter - Res Extincta
McRae v Commonwealth Disposals Commission [1950]
Common mistake only applies where parties failed to allocate the risk of the mistake e.g. X promises Y it’s a Picasso original. Courts assess the contract to see whether there was an attempt to allocate:
C sold salvage rights to a wrecked oil tanker. It was said to be in a particular location on a reef.
M bought the rights and arranged a salvage expedition, but discovered the ship didn’t exist.
Held in making the representation to M, C impliedly guaranteed the existence of the wrecked ship
Common Mistake - As to Fundamental Underlying Assumption of the Contract - Common Law
Bell v Lever Bros [1932]
B was chairman of subsidiary of LB. To end his employment, a golden handshake was agreed: B paid a large sum of money. Unbeknownst to both, it could’ve been ended without this (for free).
LB tried to have the agreement deemed void on grounds of common mistake as it was v diff to what they thought they were receiving. Rejected: mistake not sufficiently fundamental.
LB entered into bad bargain, but it rewarded B for his past work. Entered into a compensation package and received such. May have paid over odds bc of mistake, but not suff fundamental.
Common Mistake - As to Fundamental Underlying Assumption of the Contract - Common Law
Leaf v International Galleries [1950] - Constable Painting
Both mistakenly believed the painting was by famous artist Constable, but wasn’t.
Held no operative mistake: it was one of quality, which didn’t go to the root of the contract i.e. part contracted for a painting and got a painting.
Common Mistake - As to Fundamental Underlying Assumption of the Contract - Common Law
Western Potato Co-Op v Durnan [1985] - Fertile Potato Seeds
Entered into contract for sale of potato seeds both believing they were fertile. Both mistaken.
Held mistake was one of quality which did go to the root: rendered the contract void.
Common Mistake - As to Fundamental Underlying Assumption of the Contract - Common Law
Associated Japanese Bank v Credit du Nord [1988] - No machines
2 banks victims of scam. AJ advanced the fraudster funds to finance his engineering machines. CN guaranteed his debt. Both banks believed the machines existed, but they didn’t.
AJ sought to rely on guarantee w CN, CN alleged it was void for mistake. Upheld CN’s claim.
Common Mistake - As to Fundamental Underlying Assumption of the Contract - Equity
Equity Position: Solle v Butcher [1950]
After revamping the premises, both believed the work was of such quality that it was no longer subject to rent control legislation. Mistaken. Tenant paid rent far in excess for 2 years.
Held common mistake not suff fundamental to render it void i.e. S contracted for flat and got one
Equity intervened: held mistake could be rendered voidable, so court had discretion to set it aside
Held tenant was given a choice: he could surrender the lease entirely or remain in possession at full rent that would’ve been allowed under the legislation.
Common Mistake - As to Fundamental Underlying Assumption of the Contract - Equity
Bell and Solle left the law in uncertain state. Resolved in the UK by:
Greate Peace Shipping Ltd v Tsavliris Salvage Ltd [2002]
Ship damaged while sailing Indian ocean and another ship (GP) asked by the salvage co (T) to deviate from its course to help the stricken ship until T could organise the salvage of the ship.
T entered into agreement w G on mistaken understanding it was the closest ship to the other
Turns out it wasn’t 35 miles but 410 away. When T found out, they didn’t immediately seek to end the contract as common mistake, instead checked to see if there were other closer ships.
Once it discovered there was, then they tried to rescind the contract as common mistake.
Held mistake was material but not suff fundamental. T got what it contracted for: a charter ship.
One indication why the location wasn’t a crucial mistake was bc T didn’t seek cancel immediately
No jurisdiction to grant rescission where the contract is valid and enforceable in common law.
Common Mistake - As to Fundamental Underlying Assumption of the Contract - Equity
In Ireland, the courts still follow Bell and Solle as in O’Neill v Ryan and more recently in:
Intrum Justitia v Legal & Trade Financial Services [2005]
IJ contracted to buy subsidiary of L. Neither knew 3rd party had embezzled funds from it.
Strict approach: held this not a fundamental common mistake as the effect of the fraud didn’t mean the subject matter of the share purchase agreement was essentially different.
Bought co w objective of accessing client base, employees and revenue. None of these affected.
Mutual Mistake
General rule?
Parties made different mistakes &, subjectively, there’s been no agreement. It can be said no contract came into existence. But, courts use an objective test to see if a contract has come into existence:
Mutual Mistake
Smith v Hughes [1871] TEST
Whether a reasonable man would conclude, based on his observations, an agreement came into existence and on what terms. If he concludes no agreement, then the contract’s void for mistake.
Mutual Mistake
Clayton Love v BI [1970]:
Dispute re transportation of frozen fish. Held reasonable man would’ve concluded when the offer was made it was on basis the fish’d be transported at atmospheric pressure.
Mutual Mistake
Clayton Love v BI [1970]:
Dispute re transportation of frozen fish. Held reasonable man would’ve concluded when the offer was made it was on basis the fish’d be transported at atmospheric pressure.
Mutual Mistake
Mespil v Capaldi [1986] Irish - Not even reasonable man could determine
Position confused when not even a reasonable man can determine if a contract came into existence:
Contract was to be a ‘full and final settlement of all disputes bw the parties’. One thought it meant all matters incl. ones not before the court, other thought it only meant the ones before the court.
SC held it void on grounds of mistake: impossible to determine if a contract came into existence
Unilateral Mistake
Webster v Cecil [1861] 2k - 1250(2250)
C refused to sell land for £2k. W then got letter from C saying he’d sell for £1250. W accepted.
Then C realised his mistake (should’ve said £2.25k in latter) and notified W. Held the contract was void for unilateral mistake of which W should have been aware.
Unilateral Mistake
Hartog v Shields [1939] - HAres - piece not pound
Agreement for hare skins to be sold by the pound. Well-established custom that skins were to be sole by piece and not by pound. Held H should’ve known of C’s mistake. Void for UM
Unilateral Mistake
Chwee Kin v Digilandmal Com [2005]
D mistakenly advertised printers online for $66 not $3k. C ordered 1000 printers.
Once mistake realised, D sought to repudiate contract. Held void for UM: C was aware some mistake had been made re the pricing and just sought to take advantage of the situation.
Unilateral Mistake - Mistaken Identity
Cundy v Lindsay [1878] Blenkiron v Blankarn
Mistake must be one of identity (entirely different person) not some attribute.
Thought they were selling goods to respectable firm ‘Blenkiron’ but sold to fraudster ‘Blenkarn’ at similar address. Fraudster then sold them on to an innocent third party.
Objectively, C always intended to deal with Blenkiron not Blenkarn. Contract held void.
Unilateral Mistake - Mistaken Identity
Phillips v Brooks [1919] - Sir Bullough
Fraudster entered jewellers and bought ring. Signed cheque as ‘Sir Bullough’ and gave address. P confirmed address. Delighted with sale to prominent person. Fraudster sold ring on to B.
Held P intended to sell to man in front of him. To have succeeded in voiding the contract, he had to prove he wanted to deal with Sir Bullough and no one else. Couldn’t, so contract not void.
Unilateral Mistake - Mistaken Identity
Ingram v Little [1961] - Mr. Hutch - Phone directory - Concerned re Credit
Fraudster went to I’s house. Offered to buy car w cheque. Refused, so he said he was “Mr Hutch” a prominent business man and gave address. Confirmed address in phone directory. Happy, sold.
Fraudster sold car on to L. Court held the contract void for unilateral mistake.
Unilateral Mistake - Mistaken Identity
Lewis v Avery [1972] - Moviestar, followed Phillips
Fraudster posed as famous actor and met with L to buy car. F offered cheque, L first refused to allow him take car, then F produced a pass from a film studio, sold car. F sold on to A.
CA followed Phillips and rejected Ingram. Contract not void.
Difference: Ingram went to great lengths to confirm identity and prove only wanted to deal w Mr H. They first refused and then they checked the directory. Creditworthiness v important to them. But in other two the creditworthiness didn’t seem as important.
Unilateral Mistake - Mistaken Identity
Shogun Finance Ltd v Hudson [2004] Clarified law
F bought car under hire-P agreement. Completed the HP forms at dealership and said name was Mr P and gave licence of P. Forms then faxed to HP co who did credit check but not re identity
Approved Phil/Lew. But more like Cundy: No contract: Mr P only person who could’ve entered.
Remedies for Mistake - Non-Est Factum
General rule?
Generally, a person is bound by a contract they’ve signed whether they’ve read it or not. However, you may be able to void for mistake if you can prove your ‘mind didn’t accompany the signature’.
Remedies for Mistake - Non-Est Factum
Tedcastle McCormack Ltd v McCrystal [1999] Test One must show:
There is a fundamental difference between what was signed and what he thought he signed
The mistake was as to the general character of the doc as opposed to its legal effect; and
Lack of negligence: signee took all reasonable steps to find the real content of the document
Remedies for Mistake - Non-Est Factum
Bank of Ireland v McManamy [1916] - Manure order v Bank Guarantee
Co-op manager insisted members of the co-op sign docs which they thought were order forms for manure (really bank guarantees). Docs held void: entirely different in effect that parties thought.
Remedies for Mistake - Non-Est Factum
Saunders v Anglia Building Society [1971] Nephew v 3rd - Interest transfer
Elderly W signed doc believing it transferred her house to her nephew who was starting a business. Didn’t read it. In fact, it actually sold the house to a third party.
Held couldn’t plead non est factum: she intended to transfer her interest + that’s what happened
Remedies for Mistake - Non-Est Factum
AIB v Higgins [2010] - Reading 7y - No reasonable steps
D claimed NEF for debt as he’d the reading of a 7 y/o so didn’t understand the docs he signed.
Turns out he was a seasoned businessman & could fly helicopters, so he was at least of average intelligence. Didn’t take any reasonable steps to find out meaning of docs. Thus no NEF allowed.
Remedies for Mistake - Non-Est Factum
Friends First Finance Ltd v Lavelle [2013] - Trust v Loan - Faith in H
L’s signed doc her H told her was a family trust in her favour. Turned out to be a loan facility w F for €1.75m. FF admitted they never actually met with her. Granted through H. She trusted her H.
Did she act negligently? No, she’d no reason to doubt it wasn’t a trust. H managed fin affairs.
Remedies for Mistake - Rectification
Nolan v Graves and Hamilton [1946]: 5.55k oral v 4k written
Available where oral agreement has been concluded but written agreement inaccurately records it.
Agreed prop price at £5550 orally but auctioneer recorded £4kN tried to enforce sale at written price, but court rejected and ordered written doc be amended
Remedies for Mistake - Rectification
Lucy v Laurel Construction [1970]
Limited: Only relates to mistakes in the doc and not in the contract.
Held a mistake not communicated to the other party won’t be operative and won’t be rectified.
Builder’s plan mistakenly depicted more land than was intended. Not rectified as the site plan was an objective manifestation of the B’s intention. L did nothing dishonest. Rectification only if:
Shared/common mistake between them in drafting of written instrument after oral agreement
When one party sees the mistake and is aware the other party hasn’t but signs it anyways.
Remedies for Mistake - Rectification
Irish Life Assurance Co v Dublin Land Securities [1989]
IL selling portfolio of land, but wanted to exclude some lands: portfolio mistakenly included them
Agent for DL was told certain lands would be excluded but held not to be notice in the circs.
Rectification refused: can’t rectify contract in writing in absence of proof the contract, as a result of mistake, failed to give effect to the common intention of the parties’ previous accord.
Remedies for Mistake - Rescission
Webster v Cecil [1861]:
A mistake common to both parties relating to a fundamental matter of fact (e.g. continued existence of goods) will prevent the contract coming into existence & the price paid will be returnable. Equitable.
- Court rectified the contract w option to rescind instead.
Remedies for Mistake - Specific Performance
Tamplin v James
No automatic right to SP in mistake. If misrepresentation or ambiguity, courts decline
Remedies for Mistake - Specific Performance
Patel v Ali
Also must have acted equitably
Remedies for Mistake - Damages
Harlington Ltd v Hill Fine Art [1990] - Need something more for damages
Not available unless court can also find a warranty or fraudulent or negligent missrep was made.
- Painting turned out to be forgery, but no warrant or misrep found so remedy of damages denied.
Remedies for Mistake - Damages
Sykes v Taylor Rose [2004]: Murder house - Difference in value
Ds didn’t tell P the house was the scene of a murder. P sold house on and told buyers. Sought the diff in price they could’ve got w/o the history and price they got. No damages.