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=== Mistake as to a Quality of the Subject Matter === * The mistake must make the subject matter "essentially different from the thing it was believed to be" (Lord Atkin in Bell). * Bell v Lever Brothers, Ltd [1932] AC 161 (Leading Case) ** Facts: Lever Bros paid large sums to terminate directors' service contracts *** Unaware the directors had committed prior breaches that would have allowed termination for free. ** Issue: Was the compensation agreement void for common mistake? ** Held: NO. The mistake related to the quality (terminability) of the service contracts, not their existence. *** The subject matter (the service contracts) still existed. *** The fact Lever Bros would not have contracted if they knew the truth was irrelevant. ** Principle: Sanctity of contract prevails. A bad bargain is not voidable for mistake. ** Strict Test: Mistake must render the item essentially different. * Scott v Coulson [1903] 2 Ch 249 ** Facts: Sale of a life insurance policy. Both parties believed the assured was alive. He was dead, making the policy more valuable. ** Held: Contract set aside for common mistake. ** Principle: A policy on a living life is fundamentally different from a policy payable on a death that has already occurred. *** The subject matter of the bargain was fundamentally altered. * Associated Japanese Bank (International) Ltd v Credit du Nord S.A. [1989] 1 WLR 255 ** Facts: Guarantee given for lease payments on four machines. The machines did not exist. ** Held: Guarantee void for common mistake. *** A guarantee for a lease of non-existent machines is "essentially different" from a guarantee for a lease of existing ones. *** Also held a party cannot rely on a mistake where they had no reasonable grounds for their belief. * Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2002] EWCA Civ 1407 ** Facts: Hire of a ship (Great Peace) to escort a vessel in distress *** Based on a mistaken belief they were 35 miles apart *** Was actually 410 miles. ** Issue: Was the contract void for common mistake? ** Held: NO. The contract was not impossible to perform; services could still be rendered, just later. *** The mistake was not fundamental enough. ** Principle *** Contract must be impossible to perform due to the common mistake. *** Impossibility must not be attributable to the fault of either party. *** Must be no warranty (express or implied) by either party that the assumed state of affairs exists. **** i.e. the risk of the mistake must not have been allocated by the contract. *** Doctrine is narrow. Cases will be "few and far between". *** Overrules the separate equitable jurisdiction for common mistake (see Part II).
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