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Mistake Cases | Contract Law

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Contract Law Mistake Cases

COMMON MISTAKE

Couterier v Hastie (1856) 5 HL Cas 673

The plaintiff merchants shipped a cargo of Indian corn and sent the bill of

lading to their London agent, who employed the defendant to sell the cargo. On

15 May 1848, the defendant sold the cargo to Challender on credit. The vessel

had sailed on 23 February but the cargo became so heated and fermented that it

was unfit to be carried further and sold. On May 23 Challender gave the

plaintiff notice that he repudiated the contract on the ground that at the time

of the sale to him the cargo did not exist. The plaintiffs brought an action

against the defendant (who was a del credere agent, ie, guaranteed the

performance of the contract) to recover the purchase price.

Martin B ruled that the contract imported that, at the time of sale, the corn

was in existence as such and capable of delivery, and that, as it had been sold,

the plaintiffs could not recover. This judgment was affirmed by the House of

Lords.

Griffith v Brymer (1903) 19 TLR 434

At 11am on 24 June 1902 the plaintiff had entered into an oral agreement for

the hire of a room to view the coronation procession on 26 June. A decision to

operate on the King, which rendered the procession impossible, was taken at 10am

on 24 June. Wright J held the contract void. The agreement was made on a

missupposition of facts which went to the whole root of the matter, and the

plaintiff was entitled to recover his £100.

Galloway v Galloway (1914) 30 TLR 531

See Cheshire & Fifoot, p239.

McRae v Commonwealth Disposals Commission (1950) 84 CLR 377

The defendants sold an oil tanker described as lying on Jourmand Reef off

Papua. The plaintiffs incurred considerable expenditure in sending a salvage

expedition to look for the tanker. There was in fact no oil tanker, nor any

place known as Jourmand Reef. The plaintiffs brought an action for (1) breach of

contract, (2) deceit, and (3) negligence. The trial judge gave judgment for the

plaintiffs in the action for deceit. He held that Couturier v Hastie obliged him

to hold that the contract of sale was void and the claim for breach of contract

failed. Both parties appealed.

The High Court of Australia stated that it was not decided in Couturier v

Hastie that the contract in that case was void. The question whether it was void

or not did not arise. If it had arisen, as in an action by the purchaser for

damages, it would have turned on the ulterior question whether the contract was

subject to an implied condition precedent. In the present case, there was a

contract, and the Commission contracted that a tanker existed in the position

specified. Since there was no such tanker, there had been a breach of contract,

and the plaintiffs were entitled to damages for that breach.

Cooper v Phibbs (1867) LR 2 HL 149

An uncle told his nephew, not intending to misrepresent anything, but being

in fact in error, that he (the uncle) was entitled to a fishery. The nephew,

after the uncle’s death, acting in the belief of the truth of what the uncle had

told him, entered into an agreement to rent the fishery from the uncle’s

daughters. However, the fishery actually belonged to the nephew himself. The

House of Lords held that the mistake was only such as to make the contract

voidable. Lord Westbury said “If parties contract under a mutual mistake

and misapprehension as to their relative and respective rights, the result is

that that agreement is liable to be set aside as having proceeded upon a common

mistake” on such terms as the court thought fit to impose; and it was so

set aside.

N.B. According to Smith & Thomas, A Casebook on Contract, Tenth edition,

p506, “At common law such a contract (or simulacrum of a contract) is more

correctly described as void, there being in truth no intention to a

contract”. However, Denning LJ applied Cooper v Phibbs in Solle v Butcher (1949) (below).

Cooper v Phibbs (1867)

For facts, see above. The House of Lords set the agreement aside on the terms

that the defendant should have a lien on the fishery for such money as the

defendant had expended on its improvements

UNILATERAL MISTAKE

Webster v Cecil (1861) 30 Beav 62

The defendant, having refused to sell some property to the plaintiff for

£2,000, wrote a letter in which, as the result of a mistaken calculation, he

offered to sell it for £1,250. The plaintiff accepted but the defendant refused

to complete. Romilly MR refused a decree of specific performance.

King’s Norton Metal v Edridge Merret (1897) TLR 98

A rogue named Wallis ordered some goods, on notepaper headed “Hallam

& Co”, from King’s Norton. The goods were paid for by a cheque drawn by

“Hallam & Co”. King’s Norton received another letter purporting to

come from Hallam & Co, containing a request for a quotation of prices for

goods. In reply King’s Norton quoted prices, and Hallam then by letter ordered

some goods, which were sent off to them. These goods were never paid for. Wallis

had fraudulently obtained these goods and sold them to Edridge Merret, who

bought them bona fide. King’s Norton brought an action to recover damages for

the conversion of the goods.

It was held by the Court of Appeal held that if a person, induced by false

pretences, contracted with a rogue to sell goods to him and the goods were

delivered the rogue could until the contract was disaffirmed give a good title

to a bona fide purchaser for value. The plaintiffs intended to contract with the

writer of the letters. If it could have been shown that there was a separate

entity called Hallam & Co and another entity called Wallis then the case

might have come within the decision in Cundy v Lindsay. In the opinion of AL

Smith LJ, there was a contract by the plaintiffs with the person who wrote the

letters, by which the property passed to him. There was only one entity, trading

it might be under an alias, and there was a contract by which the property

passed to him.

MUTUAL MISTAKE

Wood v Scarth (1858) 1 F&F 293

The defendant offered in writing to let a pub to the plaintiff at £63 pa.

After a conversation with the defendant’s clerk, the plaintiff accepted by

letter, believing that the £63 rental was the only payment under the contract.

In fact, the defendant had intended that a £500 premium would also be payable

and he believed that his clerk had explained this to the plaintiff. The

defendant refused to complete and the plaintiff brought an action for specific

performance. The court refused the order of specific performance but the

defendant was liable in damages.

Raffles v Wichelhaus (1864) 2 H&C 906

The plaintiff agreed to sell cotton to the defendant which was “to

arrive ex Peerless from Bombay”. When the cotton arrived the plaintiff

offered to deliver but the defendants refused to accept the cotton. The

defendants pleaded that the ship mentioned was intended by them to be the ship

called the Peerless, which sailed from Bombay in October and that the plaintiff

had not offered to deliver cotton which arrived by that ship, but instead

offered to deliver cotton which arrived by another ship, also called Peerless,

which had sailed from Bombay in December.

Judgment was given for the defendants. It was held that there was nothing on

the face of the contract to show which Peerless was meant; so that this was a

plain case of latent ambiguity, as soon as it was shown that there were two

Peerlesses from Bombay; and parol evidence could be given when it was found that

the plaintiff meant one and the defendants the other. If this was the case,

there was no consensus ad idem, and therefore no binding contract.

Scriven Bros v Hindley [1913] 3 KB 564

The defendants bid at an auction for two lots, believing both to be hemp. In

fact Lot A was hemp but Lot B was tow, a different commodity in commerce and of

very little value. The defendants declined to pay for Lot B and the sellers sued

for the price. The defendants’ mistake arose from the fact that both lots

contained the same shipping mark, “SL”, and witnesses stated that in

their experience hemp and tow were never landed from the same ship under the

same shipping mark. The defendants’ manager had been shown bales of hemp as

“samples of the ‘SL’ goods”. The auctioneer believed that the bid was

made under a mistake as to the value of the tow.

Lawrence J said that as the parties were not ad idem the plaintiffs could

recover only if the defendants were estopped from relying upon what was now

admittedly the truth. He held that the defendants were not estopped since their

mistake had been caused by or contributed to by the negligence of the

plaintiffs.

Foster v Mackinnon (1869) LR 4 CP 704

The defendant, an elderly gentleman, signed a bill of exchange on being told

that it was a guarantee similar to one which he had previously signed. He had

only been shown the back of it. It was held that there should be a new trial.

Byles J stated:

“It seems plain, on principle and on authority, that if a blind man, or

a man who cannot read, or who, for some reason (not implying negligence)

forbears to read, has a written contract falsely read over to him, the reader

misreading it to such a degree that the written contract is of a nature

altogether different from the contract pretended to be read from the paper which

the blind or illiterate man afterwards signs; then at least if there be no

negligence, the signature obtained is of no force. And it is invalid not merely

on the ground of fraud, where fraud exists, but on the ground that the mind of

the signer did not accompany the signature; in other words, he never intended to

sign and therefore, in contemplation of law, never did sign the contract to

which his name is appended. In the present case,… he was deceived, not merely

as to the legal effect, but as to the actual contents of the instrument.”

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