The parties contracted for the hire of a ship. They were each under a mistaken impression as to its position, and a penalty became payable. The hirer claimed that the equitable doctrine of mutual mistake should forgive him liability.
Held: Over the years there had been a conflict caused by Lord Denning’s creation of an equitable doctrine of common mistake. That could no longer be allowed to continue, and no such doctrine could apply, and rescission was not available. There was no clear way of distinguishing mistakes which were fundamental to the contract. The fact that a bargain produced a worse position for one party was insufficient to found a rescission unless the mistake is such that it makes the contract adventure impossible. Two of the elements which must be present if common mistake is to avoid a contract are the non-existence of the state of affairs must render contractual performance impossible; and the state of affairs must be the existence, or a vital attribute, of the consideration to be provided or circumstances which must subsist if performance of the contractual adventure is to be possible.
Lord Phillips MR set out five condition which must be present if a contract was to be avoided as a mistake: ‘(i) there must be a common assumption as to the existence of a state of affairs; (ii) there must be no warranty by either party that that state of affairs exists; (iii) the non-existence of the state of affairs must not be attributable to the fault of either party; (iv) the non-existence of the state of affairs must render performance of the contract impossible; (v) the state of affairs may be the existence, or a vital attribute, of the consideration to be provided or circumstances which must subsist if performance of the contractual adventure is to be possible.’
Judges:
Lord Phillips MR, May, Laws LLJ
Citations:
Times 17-Oct-2002, Gazette 07-Nov-2002, [2002] EWCA Civ 1407, [2003] QB 679, [2002] 2 Lloyd’s Rep 653, [2002] 4 All ER 689, [2002] 3 WLR 1617
Links:
Jurisdiction:
England and Wales
Citing:
Overruled – Solle v Butcher CA 1949
Fundamental Mistake Needed to Allow Rescission
The court set out the circumstances in which the equitable remedy of rescission of a contract is available for mutual mistake. The mistake has to be as to some fundamental element of the contract. What is ‘fundamental’ is a wider category of event . .
Confirmed – Bell v Lever Brothers Ltd HL 15-Dec-1931
Contract – Mutual Mistake Test
Bell was director and chairman of Niger, a subsidiary of Lever Brothers Ltd who dismissed him, offering and paying pounds 30,000 compensation. Lever then discovered that Mr Bell had made secret profits at the expense of Niger for which he could have . .
Appeal from – Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd QBD 9-Nov-2001
The court examined the subject of mistake as a vitiating factor in the law of contract. . .
Cited by:
Cited – EIC Services Ltd European Internet Capital Ltd v Phipps, Paul, Barber CA 30-Jul-2004
Whether issue of additional shares had been properly authorised . .
Cited – Islington v Uckac and Another CA 30-Mar-2006
The council’s tenant had unlawfully secured assignment of a secure tenancy to the defendant. The council sought possession.
Held: A secure tenancy granted by an authority pursuant to a misrepresentation by the tenant is nonetheless valid. The . .
Cited – Graves v Graves and others CA 3-Jul-2007
The parties had divorced and settled financial provision, but the former wife and her children came to need a house and one of the claimant’s properties became vacant, and she was allowed to occupy it as a tenant, with the majority of the rent being . .
Cited – Butters and Others v BBC Worldwide Ltd and Others ChD 20-Aug-2009
In the insolvency of Woolworths plc, a subsidiary sought to have valued its shareholding in a company in which the defendants were co-shareholders. It was argued that an earlier agreement between them had not be fully superceded by a subsequent one. . .
Cited – Heath v Kelly and Another ChD 24-Jul-2009
The defendant and the deceased had purchased a house as joint tenants in equity. The claimant sought to enforce an agreement for the sale of the defendant’s half share. Payment having been made. The defendant argued that the agreement was uncertain . .
Cited – Guardian News and Media Ltd, Regina (on The Application of) v City of Westminster Magistrates’ Court and Another CA 25-Oct-2011
The claimant newspaper sought to appeal against a refusal by the respondent to disclose papers filed in a case before it. The court considered whether it had jurisdiction to hear an appeal.
Held: Under the 1981 Act no appeal would lie if the . .
Cited – Lehman Brothers International (Europe) v Exotix Partners Llp ChD 9-Sep-2019
The parties had contracted to trade global depository notes issued by the Peruvian government. Each made mistakes as to their true value, thinking them scraps worth a few thousand dollars, whereas their true value was over $8m. On the defendant . .
Cited – Green v Petfre (Gibraltar) Ltd (T/A Betfred) QBD 7-Apr-2021
Onerous Contract Terms Unclear – Not Incorporated
The claimant said that he had won a substantial sum on the online gaming platform operated by the defendants, but that they had refused to pay up. The defendants said that there had been a glitch in the game. The court faced a request for summary . .
Lists of cited by and citing cases may be incomplete.
Contract, Equity, Litigation Practice
Updated: 25 October 2022; Ref: scu.177726