用戶:Hinnia/Mistake

Mistake at Common Law

Introduction

Definition and Nature

• A contract may be held defective
  • If one or both parties enter into it under some misapprehension or misunderstanding
  • But would not have done so had they known the true position.
• Objective approach to agreement (What a reasonable person would infer from conduct)
  • Mere subjective mistake is insufficient to set a contract aside.
• Central Policy Tension
  • Law must balance certainty in transactions (favouring a narrow doctrine)
    • Against the desire to protect a party from a bargain radically different from what was intended (favouring a wider doctrine).
• Terminological Confusion: Terms are used inconsistently.
  • Common Mistake: Both parties make the same mistake (e.g., both believe a painting is an original).
  • Unilateral Mistake: Only one party is mistaken.
  • Mutual Mistake: Both parties are mistaken, but about different things (they are at cross-purposes). This term is ambiguous and often avoided.
• Key Distinction: Void vs. Voidable
  • Void (ab initio): Contract is a nullity from the start
    • Produces no legal effects.
    • Crucial for third-party rights (if A's contract with B is void, B gets no title and cannot pass title to C).
  • Voidable: Contract is valid until the aggrieved party chooses to set it aside (e.g., for fraud).
    • Until avoided, a rogue can pass good title to an innocent third party.

Brennan v Bolt Burdon [2004] EWCA Civ 1017

• Establishes that for common mistake to void a contract,
• Mistake must render the contract impossible to perform.
• Mistake about the state of the law (e.g., the effect of a court judgment) does not necessarily satisfy this test if the contract remains performable.

Absence of Genuine Agreement

A mistake can prevent the formation of a contract if there is no true meeting of minds (consensus ad idem).

• Raffles v Wichelhaus (1864) 2 H & C 906
  • Facts: Contract for cotton "ex Peerless from Bombay". Two ships of that name. Buyer meant October ship; seller meant December ship.
  • Held: No contract formed due to latent ambiguity. The parties were at cross-purposes. Illustrates that an objective appraisal can reveal no agreement was reached.
• Scriven Bros. & Co. v Hindley & Co. [1913] 3 K.B. 564
  • Facts: Auction of two lots (hemp and tow) with identical shipping marks. Buyer bid for both, thinking they were both hemp. Auctioneer’s fault created the confusion.
  • Held: No contract for the tow. A party at fault in inducing or failing to notice the other's mistake cannot enforce the contract against the mistaken party.

Common Mistake

A shared fundamental mistake that nullifies consent. The modern, narrow test is from Great Peace.

Mistake as to the Existence of the Subject Matter

• Couturier v Hastie (1856) 5 HLC 673
  • Facts: Sale of a cargo of corn. Unknown to both, it had perished and been sold before the contract.
  • Held: Buyer not liable for the price. Rationalised as a contract void for common mistake. Codified in S.6 Sale of Goods Act 1979.
• McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 (HCA)
  • Facts: Sale of a non-existent tanker. Buyer (McRae) incurred salvage expenses.
  • Held: Commission liable in damages. The contract was NOT void for mistake.
    • Construction: The Commission had warranted the tanker's existence (they assumed the risk).
    • Fault: The mistake was induced by the Commission's own fault (no reasonable grounds for belief).
• Key Takeaway: Shows the importance of construing the contract to see if one party has assumed the risk of the mistake. If they have, the contract stands.

Mistake as to the Possibility of Performance

• Sheikh Brothers Ltd v Ochsner [1957] AC 136
  • Facts: Licence to cut sisal based on a fundamental assumption the land could produce 50 tons/month. It could not.
  • Held: Contract void. The assumption was the "very basis of the contract"; its falsity rendered the contractual adventure impossible.
• Cooper v Phibbs (1867) LR 2 HL 149
  • Facts: A agreed to lease a fishery from B. Unknown to both, A already had a life interest in it.
  • Held: Agreement set aside. A contract to transfer a right one already owns is legally impossible (naturali ratione inutilis).
• Griffith v Brymer (1903) 19 TLR 434
  • Facts: Hire of a room to view the King's coronation procession. Contract made minutes after the irrevocable decision to cancel, but before parties knew.
  • Held: Contract void for mistake.
    • Common fundamental assumption (procession would happen) was false at the time of contracting.
    • Analogous to frustration, but the frustrating event had already occurred.

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 (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.
    • Principles Laid Down (Synthesis of the Law):
      • 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).