Mistake cases

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Bell v Lever Bros (1932) AC 161

Facts: Lever Bros appointed the two defendants to run a second company, Niger. Their employment contracts were said to last 5 years. However, the Niger company was not doing well so Lever Bros decided to merge Niger with another company thus making the defendants redundant. Lever Bros created a contract which would mean each defendant got ÂŁ50,000 if they agreed to end their contract - this was accepted. It was later discovered the defendants had made a serious breach of duty when working at Niger where their contracts could have been ended without compensation. Lever Bros claimed there was mistake as there was no legal obligation for them to pay compensation to the defendants so the contract of ÂŁ50,0000 should be void<

Held: Lord Atkin said that it had to be “the mistake of both parties” and a mistake about the “existence of some quality” which made the contract different to the one intended. Therefore, there is no operative mistake because Lever Bros got exactly what they wanted (i.e. the defendants ending the contract) and the fact this could have been done without Lever Bros paying compensation to the defendants DOES NOT MATTER

Cooper v Phibbs (1867) UKHL 1

Facts: A nephew leased a fishery from his uncle. His uncle died. When the lease came up for renewal the nephew renewed the lease from his aunt. It later transpired that the uncle had given the nephew a life tenancy in his will. The lease was held to be voidable for mistake as the nephew was already had a beneficial ownership right in the fishery.

Held: This is an instance of res sua. Normally where a contract is found to have been entered under a common mistake the contract will be rendered void as oppose to voidable. The lease was held to be voidable rather than void as the claim was based in equity as it related to beneficial ownership as oppose to legal ownership

Couturier v Hastie (1856) 5 HLC 673

Facts: A cargo of corn was in transit being shipped from the Mediterranean to England. The owner of the cargo sold the corn to a buyer in London. The cargo had however, perished and been disposed of before the contract was made. The seller sought to enforce payment for the goods on the grounds that the purchaser had attained title to the goods and therefore bore the risk of the goods being damaged, lost or stolen.

Held: The court held that the contract was void because the subject matter of the contract did not exist at the time the contract was made

Cundy v Lindsay (1878) 3 App Cas 459

Facts: A rogue bought linen handerkchiefs from Cundy, writing to him pretending to be a famous business. They then sold the rogue the handkerchieds and the rogue immediately sold them to Lindsay (the defendant). Cundy sued Lindsay for the tort of convergence

Held: The court considered the right of ownership to the handkerchiefs. In this case, the contract was void so the rogue had no title to pass ownership of the property onwards: if a contract is void for mistake, then, the property will be given back to the original owner according to this case

Denny v Hancock (1870) 6 Ch App 1

Facts: The defendant was interested in buying land and he actually went on site to see exactly what the land looked like. The land was divided from the next plot by an iron fence. The problem was that there were shrubs hiding the iron fence so he thought the property included 3 enormous trees, but this was not the case even though the plans were clear. So when he bought the land and found it was not as big as he thought so he wanted contract set aside for mistake.

Held: The contract was not set aside for mistake - the buyer had placed himself in a position to make a mistake. Court held there was no force to make the sale go ahead and allowed damages. So although mistake was not available, damages were available. So if a unilateral mistake does not deem a contract void, equitable relief may be available

Galloway v Galloway (1914) 30 TLR 531

Facts: Both parties under assumption that they were married to each other, made a separation agreement. It was later discovered that the current marriage was invalid because against all odds, the husband’s former wife was still alive

Held: In this case a separation agreement was void because it was entered in the mistaken belief thatthe parties were married to each other and therefore needed a formal separation. However, ittranspired that the husband's previous spouse was still alive

Hartog v Colin & Shields [1939] 3 All ER 566

Facts: Contract law does not usually intervene in circumstances where one party is more knowledgeable than the other, but did in this case. The parties negotiating for the sale of hare skin which was to be bought by the plaintiff (i.e. claimant). The defendant, when they quoted the price, instead of quoting a price per skin he quoted a price per pound and as a result the prize was about a third cheaper than what it would really be. Mistake was discovered so it was pleaded

Held: Court agreed the contract was invalid for mistake because the price was so much smaller than what it would usually be in this particular trade

Ingram v Little [1961] 1 QB 31

Facts: The Ingram sisters were swindled by a rogue who wanted to buy their car, but the contract was made face to face. The rogue had stolen a cheque book.

Held: The court said it was void for mistake (although face to face) – case has not been overruled but has been severely criticised!

Joscelyne v Nissen [1970] 2 QB 86

Facts: A father gave a daughter his business in return for her paying the bills to his house. However, the contract did not express this ‘common continuing intention’

Held: The court could rectify this contract to put in this common continuing intention as there was sufficient proof of her father’s intention

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CONTENT

Lewis v Averay [1972] 3 WLR 603

Facts: The case of Ingram v Little [1961] was criticised here, but not overruled. Lewis sold his car to someone who pretended to be a famous actor. This discussion had taken place face to fact. Lewis sold car to Averay and sued him for tort of convergence.

Held: The court held the presumption was Lewis wanted to contract with the rogue and not who he was intending to contract with so the contract was valid

McRae v Commonwealth Disposals Commission (1951) HCA 79

Facts: This is an Australian High Court case. An oil tanker shipwreck (off the coast of Australia) was sold by CDC to McRae and he was told it still contained oil. It turned out the tanker never existed. CDC argued they could not be liable because the subject matter did not exist and there had been a mistake

Held: The contract was NOT void for mistake, but there was a contract so McRae could get damages despite there being NO subject matter

Merrill Lynch International v Amorim Partners (2013) EWHC 74

Facts: Merrill Lynch bought an action for damages against the defendant. The two parties had entered a contract so the defendant could buy some shares in an Italian company. The issue lied with the instructions the defendant gave to the bank – they had said they wanted 150,000 shares. The bank got told the Italian company shares had been oversubscribed and warned the defendant. As a result, the value of shares plummeted and the defendant lost lots of money. The defendant argued there had been misrepresentation and mistake

Held: The court found in favour of Merrill – the court had to answer whether there was agreement to buy shares, whether there was a misrepresentation (here it didn’t work because there was a non-reliant clause [exclusion clause]), abd whether the contract could be void for unilateral mistake.

Raffle v Wickelhaus (1864) EWHC Exch J19

Facts: There was no contract here because there was no consensus between the parties: this lack of consensus was the fault of neither party. Here there was a contract for the sale of cotton. It was seemingly agreed that the cotton would be shipped from Bombay to Liverpool on a ship called ‘The Peerless’. However, unbeknown to the parties there were two ships called The Peerless carrying Cotton from Bombay to Liverpool but at different times. The buyer wanted cotton delivered on first ship but seller meant the second ship. When the first ship didn’t carry the cotton the buyer didn’t pay

Held: There was a genuine ambiguity through no fault of either party so there was a unilateral mistake

Saunders v Anglia Building Society [1971] 3 All ER 961

Facts: Case involved a 78 year old widow. She wanted to help her nephew financially raise money. The nephew was going through a divorce and got a friend to help with the transaction. The widow wanted to let her nephew live at the house rent free for life. A document was drawn up to give effect to the agreement and she signed it without reading it because she did not have her reading glasses. She said that there was non est factum

Held: Court refused non est factum because what she believed to occur was not much different from the reality of what happened (e.g. here she was relinquishing her right of ownership of the property)

Scriven Brothers & Co v Hindley & Co [1913] 3 KB 564

Facts: This case involved the sale of Hemp and Tow. The buyer wanted to buy hemp (Hemp is a higher quality than tow). The catalogue defined which cargo in the ship was hemp and tow. The seller was misleading in the catalogue as to what was hemp and tow, so when the buyer thought he had bought hemp he had bought tow.

Held: There was a mistake, due to a misleading offer, so the contract could be set aside. That mistake had been engineered by the seller – this is NOT misrepresentation

Sheikh Bros v Ochsner [1957] AC 136

Facts: Performance of the contract was physically impossible. A contract was entered into for te purchase of land to grow crops. It was found the land could not physically grow the amount of crops contracted for

Shogun Finance Ltd v Hudson [2003] UKHL 62

Facts: The rogue went to buy a car on a hire purchase basis so that he wouldn’t have to pay anything. The negotiation was done face to face but the showroom had to send the details of the so called Mr Patel through fax to the plaintiff (i.e. claimant) to see if he was happy to provide a finance agreement so the rogue could buy the shogun car - the plaintiff agreed. The rogue left with the car and immediately resold it to Mr Hudson. Mr Patel did not repay the installment with the plaintiff, which is when the problem was discovered. Some of the negotiation was done face to face but some was done by correspondence. It was hoped the court would abandon the arbitrary distinction between face to face and correspondence negotiation when it comes to determining if there has been mistake.

Held: The majority held it was mainly done by correspondence so contract should be void. The minority (e.g. lord Nicholls and Millet) endorsed the proposition of Denning in Lewis v Averay who said face to face negotiated contracts should always be voidable, so Hudson should get the car. As this case did not abolush the distinction between face to face and correspondence, there is a clear issue here with the law

Solle v Butcher [1950] 1 KB 671

Facts: Butcher agreed to lease a flat to Solle. The contract was created for 7yrs and the rent was ÂŁ250/annum. Both parties, through a mistake of the contract, were not subject to rent review. Solle sued to try and get the difference. Butcher counter claimed saying the contract should be rescinded

Held: The Court of Appeal held that the landlord could set the contract aside, but the ratio is quite unclear. Denning said in equity this should be an actionable mistake: Denning argued for their to be equitable relief the mistake must be “fundamental” and the innocent party must not be “at fault”

Statoil ASA v Louis Dreyfus Energy Services LP [2008] EWHC 2257

Facts: There was a mistake of payment of a demurrage cost (when you hire a vessel you have to pay for the hiring of that particular vessel over a certain amount of time including loading and unloading times – demurrage costs is a technical term that defines the party who hires the vessel for before and after shipping for loading/unloading). It was argued there had been disagreement about amount of demurrage to be paid. The party hiring the vessel argued there was a clause limiting the demurrage time, limiting the price they have to pay

Held: There was no mistake at equity so had to pay the amount they didn’t want

Tamplin v James (1880) 15 Ch D 215

Facts: Tamplin wanted to buy some property. He went to look at some plans of some property to satisfy what he wanted. Through his own carelessness he thought the property was much bigger than it was, so when he bought them he wanted the contract set aside

Held: The court said he could not do this because his own carelessness was the reason for the mistake

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