Mistake Summarised Notes for the Contract Law module, LLB, at City, University of London (achieved a 1st class using these) - can of course be used for other universities as well!
Would really recommend the full bundle of notes
MISTAKE
No general ‘doctrine’ of mistake – but 3 categories of mistake to make contract void
Common mistake: where both parties make the same mistake
Mutual mistake: where the parties are at cross-purposes but each believe other is in agreement
Unilateral mistake: where one party is mistaken and the other knows and takes advantage of
mistake
Common mistake= complete agreement between parties, but both are mistaken to a fundamental
point or quality of the subject matter – 3 types of common mistake:
Res extincta: refer to mistake as to existence of subject matter
oCouturier v Hastie (1856)*: contract was for sale of a cargo of Indian corn, both parties believed
corn existed at time of contract, during voyage, cargo became overheating which the captain of
the ship sold the cargo, claimant claimed on basis the D accepted risk and should pay for corn
Held: contract void
Contained in s.6 of Sale of Goods Act 1979: Where contract is for sale of specific goods without
knowledge of seller have perished, the contract is void
Principle applies where parties contract on a mistaken assumption – Scott v Coulson (1903)
where claimant contracted to sell D a policy for life insurance for a third party, but third party was
already dead void
Res sua: refers to shares mistake as to ownership of subject matter
oCooper v Phibbs (1867)*: Uncle mistakenly told nephew that he (the uncle) was entitled to a
fishery, after uncle died, nephew was acting in reliance of late uncle’s statement and entered into
agreement to rent fishery from uncle’s daughters but fishery actually belonged to
nephewHeld contract void
Mistake as to quality: mistake to quality is not sufficiently fundamental
Leaf v International Galleries (1950)*: purchaser brought paint believing it was a Constable, 5
years later tried to resell and found it was not constable, worth much less contract valid due to
absence of actionable misrep
Bell v Lever Brothers (1932)*: Lever Brothers entered n agreement with one its employees (Bell)
to leave the company for £30k compensation, later revealed termination could be without
compensation as he breached contract of employment Held: HOL said contract valid as mistake
was not of a ‘fundamental character’
oStill some indications that courts can find contract void for common mistake as to quality of
mistake- Greatpeace
Great Peace (Shipping) Ltd v Salvage International Ltd (2002)*:
The defendant required assistance for his ship, so arranged it with the claimant who told the
defendant that he was 30 miles away, which was a mistake, he was actually over 400 miles
away
The defendant ‘cancelled the contract’ and contracted with another party for assistance
The claimant sued for the contract fee
Held: difference in miles doesn’t matter – it did not render the K impossible to perform
Exam tip: important point is that whether mistake is so fundamental that party would not have
entered agreement if they knew accurate information
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, Mutual mistake: parties do not realise there is a misunderstanding to terms of contract or subject
matter of contract
Terms of contract
oRaffles v Wichelhaus (1864)*: claimant entered into contract to sell cotton, contract specified
cotton will be arriving from the ship ‘Peerless’ from Bombay, there were 2 ships named Peerless
from Bombay, one departing in October and the other December D though was cotton should
be for October, and claimant thought for December. When December Peerless arrived, claimant
tried to deliver it D repudiated the agreement say it was for cotton on the October Peerless
Subject matter of contract
oScriven Brothers v Hindley (1913)*: Defendants bid at auction for 2 lots, both believing to be
hemp – but in fact Lot A was hemp and Lot B was tow (tow is value much less). Both lots had
same mark ‘SL’ and were shown hemp as samples of the SL goods, it was unusual for different
goods to be under same mark Ds declined to pay for Lot B Held reasonable person could not
determine if contract was for hemp or tow so contract void
oBut not void if one party is mistaken as to quality of goods – Smith v Hughes (1871)
Smith v Hughes (1871)*: D took samples of oats. Bought the oats, but it was new oats not old
oats needed old oats to feed horse, new of no use to him. The seller was aware of the mistake
of the claimant but said nothing. claimant brought an action against the seller based on mistake
and misrepresentation Held silence does not amount to misrep + mistake was not fundamental
term but mistake to quality
Unilateral mistake: one party is mistaken and other party is aware of mistake (or should be aware):
normally mistake of: identity of one of the contracting parties; terms of the contract; nature of
signed document
identity of one of the contracting parties – contract will be void if identity is fundamental +
mistaken party says this before or at time of contract
o Contract that is made face to face considered to be with actual person irrespective od identity,
even where there is an intermediary (Shogun Finance Ltd v Hudson), reasonable steps should be
taken to know identity
terms of the contract: where mistaken statement of intent by one and the other party knows=
void
oHartog v Colin & Shields (1913)*: D were selling ’30,000 hare skins at 10d (pence) per skin’
when final offer mistakenly written as ‘30k hare skins at 10d per ib would be 75% off price
Held: claimant must have realised Ds error, since it was a term of the contract, contract is void
Nature of signed document (non-est factum): must have a fundamental difference between legal
effect of document signed and that which the contracting party had thought they signed, mistake
must not be from carelessness of claimant
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