Solle v Butcher [1950] 1 KB 671

KEY POINTS

• A contract could be voided in equity if both parties shared a fundamental misunderstanding about facts or their respective rights, as long as the party seeking to void it was not at fault.

• The court could nullify a contract if it was deemed unfair for one party to exploit a legal advantage they gained from the misunderstanding.

FACTS

• Mr. Butcher leased a flat to Mr. Solle with both parties initially believing that rent regulations didn't apply. Later, Solle sought reimbursement for excessive rent paid, while Butcher counterclaimed that the contract should be void due to a mutual misunderstanding about rent regulation.

• The Rent Acts did, in fact, apply, requiring the correct rent to be set at a lower amount. Despite a business partnership between Butcher and Solle, their deteriorated relationship led to Solle seeking restitution for overpaid rent, and Butcher counterclaimed for contract rescission based on mutual mistake.

COMMENTARY

• The Rent Acts' application to the leased property underscored the legal framework for regulating rents and protecting tenants' interests. Despite the business partnership between the parties, the court's analysis focused on their contractual relationship. 

ORIGINAL ANALYSIS

• Plaintiff agreed to lease his property to Defendant for £250 per year but they later found out that because of the status of the property (to which they were both mistaken), rent was limited to £140 unless a notice of increase was served at the time the lease was offered, which had not been done.

• CA said that Plaintiff could rescind the contract on an equitable basis, provided he agreed to offer Defendant a new lease for £250 together with the notice of increase. 

Denning LJ

A contract was liable in equity to be set aside, if the parties were under a common misapprehension either as to the facts or as to their relative and respective rights, provided that the misapprehension was fundamental and that the party seeking to set it aside was not himself at fault.

• The court could set aside a contract where it was “unconscientious for the other party to avail himself of the legal advantage which he had obtained.” 

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