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Mistake Notes

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UNILATERAL MISTAKE Starting point: the OBJECTIVE approach to contractual formation - the fact that one party was labouring under a mistake is usually irrelevant, because subjective agreement is not needed. BUT there are two exceptions, which allow a party making a unilateral mistake to say that the mistake has prevented a contract being formed: (i) mistake as to terms; and (ii) mistake as to the identity of the other party, in each case as long as the other party knows or ought to know of the mistaken party's mistake There is a third exception, a mistake as to the nature of the proposed contract where the mistaken party signs a written contract ('non est factum). Where these exceptions are made out, the contract is void:
? Neither party can enforce it by legal action. So damages are not available for breach of its terms.
? It cannot transfer title in property, even to an innocent third party.
? The parties' dealings may have given rise to non-contractual remedies - for example, in tort or restitution.
? Parties must return any goods and payments transferred to their original owners.

UNILATERAL MISTAKE AS TO THE TERMS OF THE CONTRACT The doctrine has two elements:It must first be shown that one party made a mistake as to the terms of the offer. In Smith v Hughes, the claimant offered to sell some oats to the defendant. The defendant thought that the oats were old oats and agreed to buy them. They were in fact new oats. The fact that the defendant thought that the oats were old would not be enough; he must have believed that he was promised old oats by the claimant. If the defendant actually thought that the proposed contract contained a promise that the oats would be old, and the claimant knew of this belief then it would not be reasonable for the claimant to rely on the defendant's apparent intent. By looking at the actual intentions of the parties, it is clear that the terms of the acceptance do not coincide with the terms of the offer due to the offeree's mistake.
- Ie no mistake in this case as no mistake to the terms of the contract, D only knew there was a mistake because of the background information that the oats were for the race horses and thus needed to be old oats

? No duty for seller to sound out buyer's mistake, as seller neither said nor did anything to contribute to his deception - Cockburn J
? Law only gives relief where the other party POSITIVELY INDUCES the mistake ie misrepresentationSecond it must be shown that one party knew or should have known of the other's mistake. For example in Hartog v. Colin [1939] (mistakenly offered hair skins for price per pound rather than per piece. Hair skins usually sold at per piece, C ought to have known there was a mistake), the claim was rejected on the ground that the claimant could not reasonably have suppose that that offer contained the offeror's real intention - he was 'snapping up' an offer that contained an obvious error. Accordingly, it was not reasonable for the claimant to rely on the defendant's apparent intent. By looking at the actual intentions of the parties, it is clear that the terms of the acceptance do not coincide with the terms of the offer due to the offeror's mistake.
- Ie if other party knew or ought to have known (based on objective principles), it is a mistake as to the terms
- Illustration of objective principle - Centrovincial Estates v Merchant Investors Assurance [1983] as 65k quid offer for rent instead of 126k quid, held no mistake as D did not know and objectively could not have known about the error When a mistake is triggered by the claimant's fault (e.g. if the offer is confusing), the claimant will be taken to have known of the defendant's mistake (Scriven v Hindley, auction bidding confusing, thought buying something else and C had contributed to the mistake - held C known about D's mistake)

When these two elements are present, on an objective interpretation of the terms of the purported acceptance (i.e. how the terms of the purported acceptance appeared to a reasonable person in the offeror's position), the terms of the purported acceptance do not coincide with the terms of the offer due to the offeree's mistake. The contract is thus void.
- But if mistake not known to or could not reasonably have been known to the other side (ie cannot claim for mistake) -> contract is binding in full from the outset, even if it has not been relied upon (ie even if no reliance, still can't withdraw from contract)- Centrovincial Estates v Merchant Investors Assurance [1983]
Raffles v Wichelhaus (1864) (Peerless) - seen as a case of unilateral mistake due to "latent ambiguity", there was never any consensus reached

UNILATERAL MISTAKE AS TO IDENTITY An offer can only be accepted by the person that it is addressed to. If the offeror makes an offer to A, because the offeror thought A was B, we must ask whether it reasonably appeared to A that the offer was addressed to him. If it does not reasonably appear to A that the offer was addressed to him, there is no valid contract. Ie if not reasonable that offer addressed to A, no contract

Where the offeror knows that A is A, but is merely mistaken about A's attributes - there is no offer/acceptance problem and so a valid contract ensues. For example, in Fletcher v Krell [1873], the defendant agreed to act as a governess under the mistaken impression that the claimant had not been married. In fact, the claimant was divorced. The claimant brought an action for breach of contract and the defendant resisted the claim on the ground of mistake. The defence was rejected by the court, as the mere concealment of a material fact, except in cases of insurance policies, does not avoid a contract. However, if the fact that A is who he says he is or possesses a particular attribute is so important to the offeror that the offer is only directed to A on condition that A is who he says he is or possesses that attribute, then we can say that a reasonable person in A's position cannot have thought that the offer was addressed to A.
- Ie yes contract unless the attribute is SO important that offer is only directed to A because he possesses that attribute The archetypal case: Sale of goods on credit by (innocent) A to (wicked) B who impersonates /
pretends to be someone else; B then sells the goods in turn to (innocent) C and disappears with C's money; B's cheque having bounced, A wants to get the goods back. A has a claim for fraudulent misrepresentation against B, but that only makes the contact voidable and rescission is barred because third party (C's) rights have intervened. The only chance A has of recovering the goods is if he can persuade the court that the contract with B was void (in other words, there never was a contract) - that way, B had no title to the goods to pass to C, so C cannot have acquired legal title to the goods. Transactions in person - where A and B were face to face In Shogun Finance v Hudson, HL held that there is a strong presumption in face to face transactions that the innocent party intended to contract with the person in front of him. Therefore in the majority of face to face situations it will be held that the rogue did reasonably believe that the offer was addressed to him. The rogue's claim to be someone else is only a misrepresentation which renders the contract voidable (i.e. valid until set aside). In Ingram v. Little [1961], the claimants put their car up for sale. A rogue introducing himself as a businessman, Mr Hutchinson, offered to buy it. Having agreed a price, the rogue wanted to pay by cheque but the claimants initially refused. The claimants then verified his name and address in a phone book and let the rogue pay by cheque. His cheque was dishonoured and the rogue sold the car to an innocent third party, the defendant. The claimant brought an action,

alleging that no contract had been formed between the claimant and the rogue and so the defendant had not acquired good title to the car. CA held that no contract had been formed between the claimant and the rogue. Pearce LJ gave two reasons why the rogue should not have interpreted the offer as being made to him.?

First, the parties were concerned with a credit [rather than a cash] sale in which both parties knew that the identity of the purchaser was of the utmost importance. The fact that the claimants would have to trust that the cheque did not bounce and that they had made clear their reservations about this form of payment meant that they had made clear to the rogue how important they regarded it that he was who he said he was. Second, the rogue wrote the name and address on the back of the cheque that he had given. Pearce LJ viewed this as an additional indication of the importance attached by the parties to the individuality of Mr Hutchinson.

Transactions where A and B not face to face In Shogun Finance v. Hudson [2004], a rogue fraudulently claimed to be Mr Patel and bought a car via a hire-purchase agreement, which he then sold on to an innocent purchaser, the defendant, before vanishing, leaving most of the price unpaid.
- Majority of HL held that 1 st contract was between Shogun and Mr Patel since they were named, no contract between Shogun and the rogue. But since Mr Patel's signatures were forgeries, no contract between Shogun and Mr Patel For the initial deal, the dealer produced a copy of the claimant's standard form hire-purchase agreement, onto which Mr Patel's details were entered. The rogue signed the document and produced Mr Patel's driving licence. The dealer relayed these details to the claimant, who verified them against the electoral register. The claimant then phoned the dealer and told him that the proposal was accepted and the car was handed over. The claimant argued that it had formed no contract with the rogue. HL held that a distinction must be drawn between situations where the parties are dealing 'face to face' and other situations:Where the parties are not dealing face to face, one works out whom the innocent party intended to contract with by construing the terms of the written document in question.
- If the document clearly identifies the intended other party, this is conclusive and no oral or other extrinsic evidence will be admissible to determine its meaning;
- Where the contract does not clearly identify the other party, extrinsic evidence is admissible.

In Shogun, it was held that the claimant and the rogue were not dealing 'face to face', because the rogue only dealt with the claimant by submitting a written document. The document included Mr Patel's name and details so Shogun intended to contract with him and not the rogue.
- Majority (Lord Hobhouse at [48]) - "credit company only willing to do business with a person" who meets the "credit requirements"
? Andrews supports the result in Shogun as finance companies can continue to rely on credit checking - this is an entirely sensible result
- Majority (especially Lord Hobhouse) did not see this case as raising the issue of principle of how to reconcile the different approaches taken in past cases, rather he saw minority approach as attacks on the certainty The main difference between the majority and minority was whether the fraudster had merely misrepresented that he was the creditworthy Mr Patel, or whether the offer was only directed to him on condition that he was the creditworthy Mr Patel (no offer?). According to Lord Nicholls (minority), a fraudster who says that he is someone else who is creditworthy is just making an ordinary misrepresentation, whether the parties are dealing face to face or in writing: This is because fraudulently asserting one is creditworthy and fraudulently asserting that you are someone else known to be creditworthy are merely two ways you may assert a 'spurious creditworthiness and so in each case you have merely made a misrepresentation Lord Nicholls (minority) argued that it is unacceptable that a subsequent purchaser's rights depend on the precise manner in which the crook seeks to persuade the owner of his creditworthiness. Ie against the face to face v nonface to face distinction However, there is a difference between the two situations. In the latter case, the rogue is claiming to be someone he is not. In credit transactions the identity of the rogue is crucial as the finance company was only willing to do business with a person who had identified himself in the way required by the written document, so as to enable the company to verify his details and ensure that he is indeed creditworthy. The offer was only addressed to the rogue on the condition that he was who he claimed to be. Lord Nicholls and Lord Millett (dissenting):
? Criticised previously common law drew a distinction between (as unsound) (ie shouldn't have this distinction):

1. (ATTRIBUTES) Where a crook fraudulently asserts he is creditworthy - eg King's Norton Metal Co Ltd v Edridge, Merrett & Co Ltd (1897) (There the crook ordered some brass rivet wire from a metal manufacturer. On his writing paper he represented he was in business in a big way, running a large factory and having several depots and agencies. The manufacturer, King's Norton, supplied the goods sought but was not paid. King's Norton was unable to recover the goods or their value from the third party to

whom the crook subsequently sold them) - ie yes contract in this case, title passes, C wins VOIDABLE
? This was a mistaken attribute case as the crook's company did not actually exist so cannot contract with it

2. (IDENTITY) Where a crook fraudulently asserts he is someone else known to be creditworthy - eg Cundy v Lindsay (1878) (Cundy had to pay the linen manufacturers Lindsay & Co for the 250 dozen cambric handkerchiefs the crook acquired from Lindsay by fraudulently representing he was the respectable business firm of Blenkiro - DISTANCE DEALINGS, NOT FACE TO FACE) - ie no contract in this case, title doesn't pass, A wins VOID o Decision in Shogun Finance v Hudson [2004] (fax and telephone with credit card company office, got loan NOT FACE TO FACE) - majority 3-2 held no contract in this case (narrowed endorsed view taken in Cundy, with Cundy as a supporting decision), title doesn't pass, A wins as contract only supposed to be between Shogun and Mr Patel but since Mr Patel's signature was a forgery, no contract
? Minority (Lord Millet and Nicholls) - rejected distinction between FACE TO FACE and non-face to face and rejects Cundy v Lindsay in favour of no contract C wins
? Lord Nicholls - Cundy v Lindsay not reconcilable with Phillips v Brooks which was distinguished on FACE TO FACE point as believes the FACE TO FACE v non-face to face is an untenable distinction
? Lord Nicholls - says Cundy v Lindsay should be rejected in favour of later cases ie Phillips v Brooks where held yes contract between A and B so C wins as: a. Loss more appropriate to be borne by A since A parted with goods without proper checks b. A intended to sell it to anyone who has money, not the specific person mentioned ie doesn't matter if its Sir John Bullock or Duke of Wellington so long have money c. Shouldn't depend on the precise manner of how the crook sold himself ie FACE TO FACE v crook pretending to be creditworthy v crook pretending to be someone else who is credit worthy
? Cf Phillips v Brooks [1919]
- Horridge J held yes contract but because of the FACE TO FACE transaction which Horridge J gave weight to, face to face presumes intention to deal with the person in front of you
? Cf Ingram v Little [1961] (Distinguishes Phillips v Brooks that Pearce LJ said in this case sufficient on the facts that the offer was made to Mr Hutchinson himself and not the rouge) (FACE TO FACE between

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