Mistake Flashcards
Common Mistake
Both parties are mistaken in exactly the same way about the same thing. Won’t usually have an affect on the contract unless the mistake is fundamental
Mutual Mistake
Where the parties are mistaken but not about the same thing, about different things. They are often said to be at “cross-purposes”
Unilateral Mistake
Where only one of the parties is mistaken. How can one be mistaken and the other not? Intentionally misleading of one party by the other, failure to carefully read a contract.
Common Mistake at Common Law
Courtier v Hastie [1856]
Bell v Lever Brothers [1932]
Fitzsimons v O’Hanlon [1999]
Courtier v Hastie [1856]
It was said that a contract to buy and sell corn would be void if the food had, unbeknownst to the parties, perished. This case established the principle that a contract based on a fundamental mistake as to the subject matter of the contract is void.
Bell v Lever Brothers [1932]
Bell agreed to a so-called “golden handshake” payment with his employer to get rid of him.
He and his employer understood that his employment could not be terminated in any other manner. They then found out that Bell had been guilty of misconduct, and so could have been legally and summarily dismissed.
Lever Bros argue that the contract was void under mistake, and could recoup their payment.
Court held that the mistake was not fundamental enough. Lever Bros paid Bell to end his contract, and the contract ended. They got what they wanted. The fact they could have got what they wanted in a cheaper way, was not reason enough to void the contract
Fitzsimons v O’Hanlon [1999]
A settlement was reached in a case concerning the estate of a deceased individual after a row about who should get the money.
The litigating parties were agreed that the plaintiffs in the action would be paid £60,500 with the balance of the estate (circa £150,000) to go to the defendant
Prior to finalising the settlement, the parties made effort to identify and trace all assets. Suddenly, a new bank account is discovered with another £58,000. Now, the Plaintiff is unhappy with the settlement.
When they agreed to take £60,000, they believed the estate was worth £210,000. This was a mistake
Plaintiff wants a bigger cut of the remaining £60,000
Argue agreement should be set aside due to common mistake.
When the agreement was entered, both parties believed that all assets had been located and the value of it was £210,000. Both of those beliefs were mistaken
The Court disagreed with this. Noticed that this litigation had initially come about was because of an individual who came forward, claiming to be a non-marital child of the deceased. And thus, if a person is secretive enough to have a secret child, they are secretive enough to have secret bank accounts.
Mistake was not enough to render the contract void.
Budd J invoked the interests of commercial convenience to uphold the contract and held that the mistake here went to the quality of the consideration rather than an essential ingredient of the subject-matter of the contract.
Common Mistake in Equity
Equity did not render a contract void ab initio for mistake but rather voidable, which, as is customary in the context of equitable jurisdiction, gives the courts greater flexibility to do justice as between the parties
Cooper v Phibbs
The parties contracted to allow the plaintiff to lease a salmon fishery in Sligo.
Both plaintiff and defendant assumed the defendant’s father was the erstwhile owner of the fishery which had then descended to the defendant by his will.
In actuality, the plaintiff had been made tenant for life by a Private Act of Parliament.
The House of Lords set aside the lease, declared the plaintiff/appellant the owner but ordered that the defendant/respondent possess a lien on the property for monies expended on improvements.
Great Peace Shipping Ltd v. Tsavliris (International) Ltd [2002]
Trivial facts: Ship that is sinking, the owners look around to find a nearby ship that may be able to assist in any rescue operation
They ask their brokers to do this. The brokers are informed by a reputable organisation that the nearest ship is The Great Peace, that was only 12 hours away
The defendants instruct the brokers to charter, The Great Peace for five days to provide assistance
They subsequently discover that the information given to the brokers was incorrect. Had it been correct, The Great Peace, ought to have been 35 miles away, but it was over 400 miles away.
Defendants discover this two hours after they enter the contract. They look for a nearer vessel and find one, and they hire the second rescue ship
What happens to TGP? Defendants argue it is void for common mistake. When we entered it, both contracting parties thought it was 35 miles away.
Court says that mistake was not fundamental enough. Didn’t immediately cancel the contract but entered a second one, and then looked to cancel the first one. Had their been no nearer ship, the contract would have continued. Common Mistake in Law not found
As for Common Mistake in Equity, Court didn’t recognise it. COA took the view that Lord Denning’s view that a contract could be voidable in Equity was inconsistent with Bell v Lever Brothers and Solle v Butcher.
Toulson J reached the bold conclusion that the view of the jurisdiction of the court expressed by Denning LJ in Solle v Butcher was “overbroad” by which he meant wrong
In England, is mostly gone. Don’t really know Irish position on this Equity. Clark considers that “[t]he pattern set by the Irish judiciary has been to continue to uphold a narrow jurisdiction to hold contracts may be void for common mistake while using equitable principles to set aside contracts.”
Gone in England, could still exist in Ireland
Mespil v Capaldi [1986], Mutual Mistake
In Civil Law, the majority of cases are settled out of Court. The Judge does not issue a judgement, the parties themselves agree to a settlement, and this is relayed to the judge
On the very day where a case is to be heard in the Court, on the morning of the trial, will often settle the dispute in Ireland
Things can be frantic and informal in Court, and the circumstances in which the settlement is reached can be less than satisfactory
Settlement is binding, but what happens if the parties have different ideas of what the settlement consists of? Parties had many disputes, but came to a settlement
Prior to the commencement of these proceedings, however, the defendants had settled existing litigation concerning the same premises under an agreement which referred to a “full and final settlement of all matters”
One party, believed this to be just the present dispute, the other believed it to be ALL disputes. At cross purposes
Court satisfied that the settlement arose out of this mutual mistake: “It is of the essence of an enforceable simple contract that there be a consensus ad idem, expressed in an offer and an acceptance. Such a consensus cannot be said to exist unless there is a correspondence between the offer and the acceptance. If the offer made is accepted by the other person in a fundamentally different sense from that in which it was tendered by the offeror, and the circumstances are objectively such as to justify such an acceptance, there cannot be said to be the meeting of minds which is essential for an enforceable contract”
Phillips v Brooks [1919] UNILATERAL
Crook, North. Mr North, the fraudster, visits a jewellery store and selects a number of expensive items, worth £3,000. Pays for the items by Cheque
North proceeded to write a cheque saying he was Sir George Bullough and giving an address in St James Square. The plaintiff jeweller had heard of Sir George Bullough and verified the address given in the phone book
Fraudster asks if he can take one item away while they wait for the Cheque to clear. Owner agrees. Mr North leaves with the ring and pawns it off for £450, knowing his scam will be uncovered. Takes cash and disappears, never to be heard off again
When the error is discovered, he wants to ring back. Now in possession of pawn broker who has purchased the ring in good faith
Two deserving parties, the original owner and the pawn owner. Court in a difficult position
Jewellery shop owner would argue that his contract with the fraudster is void by mistake → didn’t sell it to who he thought it was! Fraudster knew they weren’t the person they impersonated. Only one party is mistaken, due to the misleading behaviour deliberately creating the mistaken belief, and taking advantage of it
Is the mistake fundamental enough to render the contract void?
If this is true, title will never pass from the jewellery owner to the fraudster. VOID AB INITIO → VOID FROM BEGINNING
If he doesn’t have title to the property, he cannot pass this onto a third party. Must prove this
Contract not void for mistake. In essence, they take the view that the key mistake that the jewellery shop owner made, was not actually in relation to this person’s identity, because the Jewellery shop owner intended to sell the ring to the person standing physically in front of them, and that is exactly what they did
The only mistake here was regarding the customer’s creditworthiness and not his identity. Not fundamental enough to render the contract void.
Ingram v Little: Contrary Decisions to Phillips
The plaintiffs were three elderly ladies who had advertised their Renault car for sale.
A rogue viewed the car and agreed to purchase it for £717. When the plaintiffs refused to accept the rogue’s cheque, he told them he was a Mr PMG Hutchinson of Stanstead House in Caterham
One lady slips away to verify the info in the phonebook, the others continue in conversation. Verified that it existed. The ladies then accepted the cheque which was later dishonoured and the car was sold to a third party
Ladies want car back, innocent 3rd party, who wins out? COA held that the contract was void for mistake, Mr Hutchinson never had title, so could never sell on to a third party. Old ladies got to keep their car
The only apparent difference between Phillips v. Brooks and Ingram v. Little is that the plaintiffs in the latter case were three old ladies rather than a businessman as in Phillips. This was not a satisfactory state for the law to be in,
Lewis v Avery: Back to PvB
In Lewis the plaintiff was a post-graduate student who advertised his car in the newspaper. A rogue viewed it and offered to buy it at the given price.
Rogue referred to himself as Richard Greene, famous actor. Bore a physical resemblance, and produced a pass to Pinewood Studios Purchases the car, pays by cheque
The plaintiff asked him for ID and was given a forged special stamped admission pass to Pinewood Studios. The plaintiff was satisfied by this and let the rogue leave with the car
Subsequently this car was sold to the defendant
Plaintiff sued the defendant for conversion, and COA held that he could not recover the vehicle on the basis of the mistake
Went back to Phillips v Brooks, despite Denning
The plaintiff had intended to deal with the person standing in front of him, and had done little to verify the rogue’s identity
Mistake in relation to the attribute of a person, is not fundamental enough
The contract between the plaintiff and the rogue had conferred a voidable title upon the rogue, which title had been conferred on the defendant
Lord Denning: Seller fumbles bag, doesn’t have to accept cheque, doesn’t have to believe purchaser, don’t give them item until cheque clears, etc! Prudent.
Non-Est Factum
Non Est Factum - “it is not my deed.” Originally a plea created to protect vulnerable parties
Literacy rates were very low, some people could just not read, or were labouring under a disability which prevented them from reading.
Created a danger. Such a person, when they were entering a contract, signing a contract, would not know what the contract actually said. Relying on a 3rd party to tell them what was actually in the contract
Created the following danger; what if the vulnerable person is entering a contract, and asks for the contract to be read out to them, the person is happy with this, and signs. Only, to later discover that the contract they actually signed is a very different document than they were led to believe they were signing
A successful plea of non est factum renders a contract void, not voidable. Because the general rule must be that persons are taken to be bound by the contents of a document which they sign
Many attempts in Ireland in recent years to rely on this, even though many of the parties are large business owners with experience, commercially wise, not vulnerable parties
These attempts will often be unsuccessful and will often arise from a personal guarantee, not a very wise document to sign. Proceed with caution.
