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MISTAKE1. The effect of mistake on contracts
There are cases which decide that a contract is VOID from its beginning (void ab
initio) because there has been a mistake. To declare a contract void from the
beginning is a serious step and the courts are reluctant to do it. The cases where it
can be done are Common Law cases. The circumstances of those cases vary
enormously and attempts by academic writers over the past 50 years to provide a
coherent categorisation have failed.
Chen-Wishart distinguishes between a mistake made by only one of the parties
(‘unilateral mistake’) and a mistake shared by both parties (‘common mistake’).
A different categorization is adopted by the editors of Anson — according to what
the mistake is about – i.e. whether the mistake is about the terms of the contract,
the identity of the other contracting party or facts or law relating to the subject-
matter of the contract.
Koffman & Macdonald (Ch 12) divide the topic into two: Agreement Mistake
(mistake either as to terms or identity) and Performance Mistake (mistake as to
subject matter) which is very similar to Anson.
2. Agreement Mistake
Here the parties are mistaken such that there is no real agreement between them at
all:
a) Parties at cross- purposes
b) mistake as to the terms
c) mistake as to identity
a) Parties at cross- purposes
Raffles v Wichelhaus (1864) 2 H and C 906: Contract for sale of cotton to arrive on
the “Peerless” from Bombay. There were two ships named Peerless. One sailed from
Bombay in October the other in December. The evidence showed that the buyer
thought it was the October ship and the seller thought it was the December ship. The
seller failed to recover the price for the cotton that arrived on the December ship.
b) Mistake as to the terms
1
, Hartog v Colin & Shields [1939] 3 All ER 566: D offer for sale some hare skins at £x
per pound weight. Previous negotiations between the parties had been conducted
on the basis of £x per skin. The buyer accepted the offer per pound and sued for
non-delivery. Held: The buyer knew that the offer did not express the true intention
of the seller and he could not therefore claim to have agreed it.
Smith v Hughes (1871) LR 6 QB 597: D inspected a sample of oats and the contracted
to purchase from Cl believing he was buying old oats. In fact the oats being sold by D
were new oats and wholly unsuitable for D’s purpose. Held: D was bound. His
mistake was not as to the terms upon which the oats were being sold – he merely
thought that the oats were old – he could not show that he thought Cl was offering
old oats – he was just offering oats without specifying their age. The buyer had
persuaded himself that they were old oats when they were not.
Centrovincial Estates v Merchant Investors Insurance Co [1983] Comm LR 158: Lease
provided for a rent review. Cl wrote to D suggesting a new rent of £65k p.a. – the
previous rent being £68k p.a. Cl had meant to suggest £126k. Held: unambiguous
offer at £65k had been accepted. D did not and could not have known of the
mistake.
Mistake about the facts upon which the decision to offer is based is irrelevant:
Statoil ASA v Louis Dreyfus Energy Services LP [2008] EWHC 2257 (Comm): The
Claimant (S) chartered a ship to carry cargo from Norway to Mexico for delivery to
the Defendant (L). Unloading took longer than expected and the ship was returned
late. S received a claim for delay from the vessel’s owners and in turn calculated a
claim which it sent to L. S made a mistake in its calculations with the result that it
claimed a lower amount from L than it intended to. L noticed the mistake but did not
tell S. S and L reached an agreement on the claim based on these erroneous
calculations. S later realised its error and sought to claim the balance from L. The
Court held where there was a mistake as to what was the basis upon which the
terms of the contract were agreed, but where that assumption did not itself become
a term of the contract, the mistake did not enable a court to undo the contract
despite L entering into that agreement knowing that S had made a mistake in its
calculations. The other party is not under a duty to draw a mistake to the other
party's attention. (The court went on to find in fact that there was a second later
agreement to pay the claim in full).
c) Mistake as to identity
Here the mistake must be as to the identity of the contracting party and not merely
as to attributes of that person, such as credit-worthiness. The identity of the
contracting party must be a matter of fundamental importance if the mistake is to
render the contract void.
Parties not face to face:
2
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