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Mistake
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Lecture notes of 17 pages for the course Law of Contract at UoS (Mistake)
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MistakeIntroduction
When contract is made, one party or both parties may be mistaken about certain
fact.
In English law, mistake affects contract only in very limited circumstances.
Where mistake doesn’t affect contract, contract will be void, not just voidable.
Thus, title to goods cannot pass, and seller can claim goods from third party.
This is why mistake may be invoked by representee in misrepresentation case.
Categories of Mistake
Mistake that negatives consent (agreement mistake):
One party or both parties made a fundamental mistake as to the terms of the
contract, which prevents agreement (although parties may believe that there
is an agreement).
Mistake that nullifies consent (common mistake):
Parties reached agreement, but agreement is impossible to perform because
both parties made a fundamental mistake.
Agreement Mistake
Objectively, there is no agreement, even though each party may assert that there is
agreement on the basis of the terms as that party understood them.
Claims of agreement mistake are rarely successful.
Two types of agreement mistake:
Cross-purposes mistake:
Each party makes a mistake, but the mistakes are different.
Unilateral mistake:
Only one party is mistaken, but the other knows or ought to know
mistake.
Cross-Purposes Mistake
Often called ‘mutual mistake’, but this may lead to confusion with common (shared)
mistake.
Each party may assert that contract exists on terms favourable to that party, but
objectively it is impossible to resolve ambiguity.
It is rare – there are a few cases.
o Raffles v Wichelhaus (1864).
The complainant, Mr Raffles, offered to sell an amount of Surat cotton
to the defendant, Mr Wichelhaus. This Surat cotton would be brought
to Liverpool by a ship from Bombay, India. This ship was called the
Peerless, but there were two ships that had this name.
The complainant and the defendant were both thinking about a
different Peerless ship when they agreed to make the sale.
One of the ships was due to leave Bombay in October, which was
what the defendant had thought for his Surat cotton delivery, but the
complainant was referring to the ship that was to leave in December.
, When the Surat cotton arrived in Liverpool, Mr Wichelhaus refused to
pay, as in his mind, it was months late.
The complainant sued the defendant for breach of contract. The issue
in this case was whether there was an enforceable contract between
the parties.
It was held that the contract between the complainant and defendant
was not enforceable.
When the contract was being discussed, there was ambiguity in the
Peerless and what ship was being referred to, as well as no agreement
on the terms on the sale.
There had been no consensus ad idem or meeting of the minds
between the parties to form a binding contract.
The objective test made it clear that a reasonable person would not
have been able to identify with certainty what ship had been agreed
on.
Scriven Bros & Co v Hindley & Co (1913).
The complainants, Scriven Bros and Co, instructed an auctioneer to
sell large bales of tow and hemp on behalf of them at an auction.
The bales looked rather similar in the way they were packaged and
the samples that were on display to potential bidders were not easily
distinguishable.
The defendants, Hindley and Co, believed they were bidding for two
lots of hemp, when actually one of the lots was tow.
The bid that was made was overpriced, but was accepted by the
complainants. When the defendants found out that it was tow, they
refused to pay for the lot and the complainant sued them for the
price.
The issue in this case was whether there was a contract between the
two parties or if it would be void for mutual mistake as to the subject
matter of the contract.
The court held that there was no contract between the complainant
and defendant, due to faults on both sides. This meant that there was
no consensus ad idem or meeting of the minds to make it a binding
contract.
The complainant had not made the hemp and tow samples
sufficiently clear and the defendant had not brought a catalogue
along to the auction, as well as inspected the samples thoroughly
before bidding.
The defendant’s negligence contributed to the mistakes of the
complainant in this case.
, Smith v Hughes (1870).
The complainant, Mr Smith, was a farmer and the defendant, Mr
Hughes, was a racehorse trainer.
Mr Smith brought Mr Hughes a sample of his oats and as a
consequence of what he had seen, Mr Hughes ordered 40-50 quarters
of oats from Mr Smith, at a price of 34 shillings per quarter.
To begin with, 16 quarters of oats were sent to Mr Hughes.
When they arrived, he said that the oats were not what he had
thought they were.
As he was a racehorse trainer and he needed old oats, as this was
what the horses had for their diet.
The oats that were sent to Mr Hughes were green oats, the same type
as the initial sample.
Mr Hughes refused to pay Mr Smith for the delivery and remaining
order.
Mr Smith argued that Mr Hughes had breached the contract as he had
not paid for the delivery and future oats to be delivered.
The issue in this case was whether the contract could be avoided by
Mr Hughes, as Mr Smith had not delivered the type of oats he had
expected.
It was held that there was a contract between Mr Smith and Mr
Hughes and that it would not be avoided.
There had been no discussion between the parties regarding the
delivery of old oats.
An objective test revealed that a reasonable person would expect the
sale of good quality oats in a similar contract, since there was no
express discussion of old oats.
The sample gave him the chance to inspect the oats and this was an
example of caveat emptor (buyer beware).
Blackburn J.
‘If, whatever a man's real intention may be, he so conducts himself
that a reasonable man would believe that he was assenting to the
terms proposed by the other party, and that other party upon that
belief enters into the contract with him, the man thus conducting
himself would be equally bound as if he had intended to agree to the
other party's terms’.
Unilateral Mistake
Only one party is mistaken.
Other party’s view coincides with objective view.
General rule – there is an agreement.
Mistake by one party is ignored.
No contract if one party knew or could have known that other party was under
mistake.
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