Mistake

WHAT ARE VITIATING FACTORS?

Vitiating factors are simply legally recognized factors, which make an apparent contract lose its validity when it comes to its enforcement. In contract law, a contract is deemed to be vitiated or invalidated if it is found that there are factors, which negate or nullify the apparent consent of one or both of the parties. The vitiating factors recognized by the law are mistake, misrepresentation, duress, undue influence and unconscionability.
Mistake

In contract law, to be mistaken is to be wrong as to a matter of fact that influences the formation or the making of a contract. Mistake as used in contract law has a more restricted meaning than as in ordinary parlance or common speech in that the courts will not declare a contract void simply because one or both partied claim to be mistaken about some fact or simply because one party claims he would not have entered the contract if he had known the true facts.

When does mistake on part of one or both parties have any legal effect on a concluded contract?

What is the Legal effect of mistake?

For mistake to have any effect at all on a contract the mistake must be one which existed at the time the contract was concluded. This means that the assumption made by the parties must have been factually wrong at the time the contract was concluded.

AMALGAMATED & PROPERTY LTD V JOHN WALKER
The plfs were negotiating to buy a commercial property from the defs. Both parties knew that the plfs intended to develop the property and to do that they needed to obtain planning permission from the authorities. The parties also knew that if the property has been listed as a building of special or historic interest, development would be restricted and the value of the property would be considered less. On august 14, before the contract of sale was concluded, the plfs asked the defs whether the building was listed as a special building of historic interest. The def answered in the negative which was true at the time. The contract was later signed on august 25. On this date the property had not been listed as building of special interest. Unknown to both parties, the government had it in mind to do so. On august 26, a day after the special and historic interest and government officials informed defs of this decision. The building was worth much less once it had been listed and the plfs brought the action seeking to have the contract rescinded on the ground of common mistake. Held- in determining the effect of the mistake on the contract, the critical date was the date on which the contract was signed. On that date the parties believed that the building was not listed as one of special interest and that assumption was in fact true. There was no operative mistake at the time the contract was concluded.

What is the Effect of mistake at common law?

At common law mistake operates in some cases to nullify consent. The legal effect of mistake at common law is therefore to render the contract void ab initio. A void contract is a complete legal nullity. That is it confers no rights and imposes no duties on the parties. A third party cannot acquire any valid interest under such contract even if he acquired the interest for value, in good faith and without notice of the fact that the contract under which he derived his title was void.

What is the Effect of mistake in equity?

In equity, mistake has a wider scope but its effect is less drastic. It operates in the following ways:
1. Mistake may be a defence in an action for specific performance
2. Mistake may also entitle the parties to have a written contract rectified
3. Mistake may also be a ground for the rescission of a contract

What are the Different kinds of mistake?

There are three main kinds of mistake which are recognized at common law: mutual mistake, unilateral mistake and common mistake. In mutual mistake the two parties make different mistakes. In unilateral one party makes a mistake, while in common mistake both parties make the same mistake.

Mutual mistake
Mutual mistake is said to exist, although to all outward appearances the parties have agreed, there is in fact no genuine consensus between them because one party makes an offer to the other, which the other accepts in a different sense from that intended by the offeror. The two parties, unknown to each other, are at cross purposes. In deciding whether or not a contract should be deemed to exist, the courts apply the objective test to determine whether an agreement can be inferred from the facts.

Unilateral mistake
A unilateral mistake exists where only one party to the contract is mistaken. The other party is usually aware of the first party’s mistake and makes no mistake himself. The most common example is mistake as to the identity of the person one is contracting with.

Common mistake
This exist where even though there is a genuine agreement between the parties, the parties have both contracted in the mistaken belief that some fact which is the basis of the contract is true when in fact it is not. In common mistake, there is no question of lack of agreement between the parties. The exact offer made by A is accepted by B. The contention however is that since both parties are mistaken about some fact which is the basis of their contract such that the mistake robs the contract of its efficacy and the contract must therefore be declared void by reason of mistake. The court applies the objective test to determine whether the mistake is sufficiently fundamental as to make the contract void on grounds of mistake.

Mutual mistake or mistake as to the terms of the contract
It follows that if there is no genuine agreement between the parties, of if the offer does not correspond to the acceptance, no contract should ensue. However, the intention of the parties to the contract are objectively determined so that the intention of the parties by considering their words and conduct as they would have been understood by a reasonable man is used. The contract may be enforced in the reasonable sense even if the actual intentions of the parties are different.

TAMPLIN V JAMES
It was held that if a reasonable man would have understood the contract in a certain sense then despite the party’s alleged ‘mistake’, he would be held bound by the contract in that reasonable sense.

There are however situations where, even though the parties appear to have agreed, mutual mistake or mistake as to the terms of the contract may operate to negate consent and render the contract void.
Where words used are patently ambiguous or rendered ambiguous by surrounding circumstances
Where the terms of the contract suffer from such latent ambiguity that it is impossible to determine objectively what the contract relates to, and the offer is innocently accepted in a sense different from that which was intended by the offeror, the court may be compelled to declare the contract void on the ground that there is no correspondence between the offer and the acceptance. Refer to page 192 for illustration- ambiguity as to the name of the subject matter.

SCRIVEN BROS V HINDLEY & CO
The defendant bid for two lots believing them both to be hemp. Lot A was hemp and B was tow. Plaintiffs sued to enforce the contract and the defendant pleaded mistake. Held- Plaintiff could not enforce the contract since the plaintiff‘s conduct had contributed to the defendants.

Where the offeree knowns that the offeror’s offer does not represent his real intentions
Where due to a mistake in the expression of the offer, the offer does not contain the real intention of the party making it and the other party knows of this mistake and seeks to take advantage of it, the law will not recognize that a contract has come into existence.

HARTOG V COLIN & SHIELDS
Contract for the sale of horse skins. Previous negotiations carried on by quoting the price per piece. Defendant mistakenly quoted price per pound. Plaintiff sought to enforce contract. Held- The law will not allow a party to snap at an offer which he knows does not contain the real intention of the other party. Therefore there was no contract.

It must be emphasized that where the parties agreed from all outward appearance on the same terms and on the same subject matter, even if both parties are mistaken in their innermost minds about the quality of the subject matter, the contract remain valid.

What is Unilateral mistake?- mistake as to the identity of a contracting party

Where a person makes an offer to a particular person, it can only be accepted by the person to whom it is addresses. Another person cannot accept the offer and constitute himself a contracting party with the offeror who never intended to contract with him.

BOULTON V JONES
Boulton had taken over the business of Brocklehurst with whom Jones was used to dealing. Jones sent an order for goods to clear the debt owed him by Brocklehurst. Boulton supplied. Jones didn’t pay. Bolton sued. Held- Jones offer was addressed to Brocklehurst personally. Boulton could not set himself as a contracting party with jones. There was no contract between Jones v. Boulton and therefore jones was not liable to the price of the goods.

Mistake as to identity induced by the fraud of one party
This usually happen when a person contracts with another (rogue who impersonates someone) who later parts with the goods and refuses to pay for them. The goods may then be sold to an innocent party for value in good faith. The central question for the courts is whether the contract between the owner and the rogue is void on grounds of mistake or voidable by reason of fraudulent misrepresentation of the rogue.

Where mistake as to identity is established
If it is established that there was mistake as to the identity of the contracting party the resulting contract is deemed to be void. The rogue does not acquire any rights. In accordance with the nemo dat quod non habet rule the third party acquires no rights either. The third party’s only remedy would be to find the rogue if he can and sue him to recover his money.

Where mistake as to identity of contracting party is not established
If mistake as to identity cannot be established, the resulting contract will not be deemed to be void, but merely voidable on the ground of the rogue’s fraudulent misrepresentation. A voidable contract is one which is valid unless and until it is disaffirmed or avoided. If the rogue sells the goods to the third party before the rogue’s title is avoided, a valid title is passed and the owner cannot recover the goods from the third party.

Establishing mistake as to the identity of the contracting party
In all cases of alleged mistake as to the identity of the contracting party, the courts have to determine whether the contract is void for mistake or voidable for fraudulent misrepresentation. This depends on whether mistake as to the identity of the contracting party can be established.

To prove mistake as to the identity of the contracting party, the party pleading the mistake must generally prove the following:
1. That he intended to deal with some person other than the person whom he had apparently made a contract and the latter was aware of this intention. The pleading party must show that not only did he not intend to deal with the person with whom he contracted, but that he actually had an identifiable person, other than the person with whom he contracted, with whom he intended to deal. Mistake must relate to the identity of the party not his attributes such as whether he is solvent.

CUNDY V LINDSAY ,
The rogue, Blenkarn hired a room near a firm called Blenkiron & Co. he placed orders for handkerchiefs from Lindsay. He signed the order for his signature to appear like Blenkiron v. Co. he sold some of the goods to the defendant against whom the plaintiff claimed in conversion. The house of Lords held that Lindsay intended to deal with the well-known firm of Blenkiron v. Co of whose existence they were aware and not Blenkarn of whom they have never heard. No contract had been concluded with Blenkarn and accordingly the property in the goods had remained vested in the plaintiffs.

KING’S NORTON METAL CO LTD V EDRIDGE, MERRIT & CO
The rogue, Wallis had newspaper printed in the name of Hallam &Co and pretending to be carrying on business in that name ordered goods from the defendant. The plaintiffs promptly delivered the goods on credit and Wallis sold to the defendant. Held- A contract had been concluded between the plaintiff and Wallis under which property in the goods had passed. The case must be distinguished from Cundy v. Lindsay. King’s Norton intended to deal with whoever was the writer of the letters. The rogue had not misrepresented himself but only his attributes. The mistake was to attribute and not identity

2. That at the time of entering into the contract, he regarded the identity of the other party as a matter of crucial importance
3. That he took reasonable steps to verify the identity of that party
Contracts inter praesentes- where the parties contract in each other’s’ presence
Where the parties deal with each other face to face, with one party fraudulently misrepresenting himself to another existing person. There is a strong presumption that the offeror intended to contract with the person who was physically present and no one else.

PHILLIPS V BROOK,
A rogue, North entered the plaintiff’s jewellery shop and selected for some jewellery and wrote out a cheque for 3oo pounds. He stated that he was Sir George Bullough and gave an address in St. James Square. Plaintiff referred to a directory and found that Sir Bullough indeed lived at the address. He allowed and North pledged the ring to the defendant for 350 pounds. The check was dishonored. Per Horridge J.”Although he believed the person to whom he was handing the ring was Sir George Bullough, he in fact contracted and deliver it to the persons who came into his shop.” . The contract thus made was not void but simply voidable on grounds of the fraudulent misrepresentation. Since the plaintiff had not avoided the rogue’s title by the time he sold the goods to the third party, the latter obtained a valid title to them, and the owners could not recover the goods.

INGRAM V LITTLE.
A rogue, Hutchinson, negotiated with the plaintiff for the purchase of their car which had been advertised. 717 pounds was agreed. Rogue wanted to pay cheque. Plaintiff refused. Rogue said he was P.G.M Hutchinson, gave his name and address. On hearing one of the plaintiffs went to find out from the telephone directory. Assured, car was sold to rogue. Rogue sold to defendant and disappeared. Held- The plaintiff intended to deal with PGM Hutchinson and no one else therefore the rogue could not intend to accept the offer. The contract was void on the grounds of mistake as to identity and the rogue acquired no title to the car and transferred no title to the third party , who was required to return the car to the owner.

In LEWIS V AVERY , the court declined to follow the decision in INGRAM V LITTLE.

LEWIS V AVERY: A rogue, posing as Richard Greene, the well-known film actor, offered to buy plaintiffs car. Plaintiff accepted offer and was given cheque signed R.A.Green. Plaintiff refused to accept the cheque. Rogue produced a special pass of admission to Pinewood studios bearing official stamp. Plaintiff handed over log book. Roque took car. Rogue sold to defendant. Cheque was dishonored. Plaintiff sued. Held- The action must fail. Where the parties transact face to face, the offeror is deemed to have intended to contract with the person who was physically present and no one else. The contract between the rogue and the owner was not void for mistake but simply voidable on the ground of the rogues fraudulent -misrepresentation and therefore the third party obtained a valid title.

Rebuttal of presumption in contract inter praesentes
Where the rogue dishonestly claims that he is acting as an agent for another person the presumption which applies in contract inter praesentes will be deemed to be rebutted. This is because the contract is not purported to be made with the rogue himself but with the supposed principal.

HARDMAN V BOOTH
Plaintiff visited Gandell & Sons.met rogue, Edward Gandell. Rogue was not member of Gandell & sons and had no authority to act on its behalf. Rogue convinced plaintiff that he was authorized to act as agent. Rogue placed order. Plaintiff supplied goods. Goods intercepted by rogue. Rogue sold to innocent 3rd party. Plaintiff sued. Held- There was no contract between owner and Edward Gandell since contract was not supposed to be made with him personally but rather with Gandell & Sons (the supposed principal). Also Edward Gandell had no authority to bind the firm in any way. Apparent contract was void even though it was face to face. Plaintiff can acquire goods from third party who acquired no title.

LAKE V SIMMONS,
Appellant was a jeweler insured with company against loss by theft except “jewellery entrusted to customer’’. Fraudulent woman posed as wife of wealthy customer. Few purchases were made to inspire confidence. She was allowed to take two pearl necklaces of considerable value. Whether loss was covered by insurance policy or within the exception clause. Held- Even though, parties transacted inter praesentes, no contract ensued between them because plaintiff was made to know he was dealing with different person and was on this footing that he parted with goods. Loss did not fall within exception clause as there was no contract between appellant and impersonated woman. Case was distinguished from Philips v. Brooks.

SHOGUN FINANCE LTD V HUDSON
The rogue applied to buy Mitsubishi Shogun on hire purchase. Rogue gave name as Mr. Patel, produced Mr. Patel’s driving license. Although negotiations were held with car dealer, written contract under false name was signed with Finance Company. Finance Company did credit check on Mr. Patel. Satisfied, rogue from was allowed to drive car away. Rogue sold car to Hudson. Under Hirer Purchase Act 1964, a non-trade buyer of a car who buys in good faith a hirer under the hire purchase agreement becomes the owner. Therefore if contract between shogun finance and rogue was valid, Hudson would be owner. Shogun Finance claimed against Hudson for conversion. Held- This was not contract inter praesentes, since the apparent contract was formed with the finance company and not the car dealer with whom the negotiations were made. The third party was therefore deprived of the protection under section 27 of the Hire Purchase Act, 1964.

Common mistake
This arises where the two parties have in fact reached agreement, but that agreement is based upon a fundamental mistaken assumption which is shared by both parties. There is a correspondence between the offer and acceptance. The courts are only prepared to declare a contract void on account of common mistake if the mistake is such that it empties the contract of all its content or if the mistake radically affects the substance of the contract.
Common mistake may arise in different forms: mistake as to the existence of the subject matter of the contract, mistake as to title and mistake as to the quality of the subject matter of the contract

Mistake as to the existence of the subject matter
Where unknown to both parties the subject matter, at the time of the contract was made does not exist (res extincta), the contract may be void on grounds of common mistake. The decision involved the interpretation or construction of the contract only. If, on the true construction of the contract, it is found that one party guaranteed or impliedly promised that the subject matter was in existence, and it turns out to be false, the contract is not void and the party who made the promise can be sued for damages for breach of contract.

COUTURIER V HASTIE
Contract for the sale of a cargo of corn. Parties believed was on board a vessel a voyage from Salonica to England. Vessel before the date of contract become so heated that had been unloaded at Tunis and sold what it could be obtained. Buyer contends cargo is not in existence so will not pay price. Held- Buyer was not liable to pay for the corn. The contract contemplated the sale of existing goods and the parties excepted that there was something which was to be sold at the time of the contract and something to be purchased. Therefore since the object of the contract was no longer in existence, the buyer was not bound to pay the price

MCRAE V COMONWEALTH DISPOSALS COMMISSION
The defendants invented tenders for the purchase of an oil tanker which they described as lying on Jourmand Reef, with its content oil. Plaintiff submitted tender of 285 pounds which was accepted. No such tanker was there or a place known as Jourmand Reef. Plaintiff sued for damages for breach of contract. Defendants argued that contract was void because subject matter of contract did not exist. Held- Defendants were held liable for damages. They had promised that the tanker existed and were therefore in breach of contract. Here there were no assumption that tanker existed. Defendants stated that the tanker existed and the plaintiffs merely relied on the assertion made by the defendants.

Section 9 of the sale of goods act imposes an obligation on the seller of goods to ensure that the goods are in fact in existence at the time property is to pass.

What is Mistake as to title?

Where a person agrees to purchase property which, unknown to himself and the seller, is already owned by the buyer, such contract may be void by reason of the common mistake as to title. Here the contract is treated as a nullity because the transferor had nothing to sell or convey. Section 10 of the sale of goods act states that there is an implied warranty on the part of the seller that he will have right to sell the goods at the time when the property is to pass.

COOPER V PHIBS
A agreed to take a lease of salmon fishery from B. both believed fishery was B’s property. A was actually owner of fishery. Held- Contract was set aside in equity on the ground that it was legally incapable of performance since A was already the owner of the property.
What is Mistake as to the quality of subject matter?

Generally, if the parties are clearly agreed on the same terms with respect to the same subject matter, the courts are most reluctant to declare a contract void simply because the parties were mistaken as to the quality of the subject matter.

BELL V LEVER BROS LTD.
Lever bros appointed Mr. Bell and Mr. Snelling (the two defendants) as Chairman and Vice Chairman to run a subsidiary company called Niger. Under the contract of employment the appointments were to run 5 years. However, due to poor performance of the Niger Company, Lever bros decided to merge Niger with another subsidiary and make the defendants redundant. Lever bros drew up a contract providing for substantial payments to each if they agreed to terminate their employment. The defendants accepted the offer and received the payments. However, it later transpired that the two defendants had committed serious breaches of duty which would have entitled Lever bros to end their employment without notice and without compensation. Lever bros brought an action based on mistake in that they entered the agreement thinking they were under a legal obligation to pay compensation. The House of Lords held that this was only a mistake as to quality and did not render the contract essentially different from that which it was believed to be. The action therefore failed.

For a mistake as to quality to operate to render a contract void it must be a mistake as to a certain quality without which the identity of the subject matter would be radically different from what it was believed to be.

LEAF V INTERNATIONAL GALLERIES LTD
Plaintiff bought from defendant a picture. Both believed was painted by Constable. Years later when plaintiff tried to sell it, he found out that picture was not painted by Constable. Plaintiff sought to rescind contract on grounds of common mistake. Held- Mistake was not sufficiently fundamental to make contract void there was no mistake at all about the subject matter of the sale. It was a specific picture called “Salisbury Cathedral”. The parties were agreed in the same terms on the same subject matter. That was sufficient to make a contract.

HARRISON & JONES V BUNTEN & LANCASTER ,
Buyers agreed in writing to buy from sellers “100 bales of Calcutta Kapok, Sree brand”, equal to standard and sample. Sellers delivered goods which in all respect answered the description. Both parties believed that “Calcutta kapok, Sree Brand” was pure kapok and consisted of tree cotton.it rather contained a mixture of bush cotton and was commercially a different and inferior category of goods. Buyer argued common mistake as to quality rendered contract void. Held- When goods are sold under a known trade description without misrepresentation and without breach of warranty, the fact that both parties are unaware that the goods of that known trade description lack any particular quality is completely irrelevant. The parties are bound by their contract and. the common mistake as to the quality of the subject matter of the contract was not sufficiently fundamental as to render the contract void.

FREDRICK E ROSE LTD V WILLIAM PIM,
Plaintiffs ordered for “Moroccan horse beans” described here as “feveroles”.plaintiff did not know what feveroles were. Defendant said they were the same as horse beans and could supply. Oral contract was made for the purchase of horse beans which was later put into writing. Defendant delivered horse beans to plaintiff. Plaintiff delivered to Egyptian firm. Egyptian buyers found that horse beans were not same as feveroles and claimed damages for breach of warranty. Plaintiff sought to have contract rectified and claimed contract was void for mistake. Held- Even though it was clear that the parties contracted under a common mistake (they supposed that feveroles was just another name for horse beans which was not), the mistake was not one which rendered the contract void from the beginning.

NICHOLSON & VENN V SMITH-MARRIOT
Defendant put up for auction table napkins described as bearing crest of Charles I and the authentic property of the monarch. In reliance plaintiff bought for 787 pounds. Napkins was discovered to be Georgian which cost 105 pounds. Held- The plaintiff had acquired an article “essentially different from the thing as it was believed to be” within the test laid down by Bell v. Lever Bros.

Whenever it can be inferred from the terms of the contract or its surrounding circumstances that an agreement has been reached based on a particular contractual assumption which is fundamental to the continued validity of the contract and that assumption is not true, the contract may be declared void on that ground.

SHEIK BROS LTD V OCHSNER ,
Appellants contracted with respondent to grant him license to cut, process and manufacture all sisal grown on a particular estate in Kenya of which they were lessees. Respondent in return deposited certain sum of money and undertook to deliver to the appellants 50 tons of sisal fiber, manufactured by him every month. Estate was not capable of producing such quantity of sisal to meet the requirement. Held- Following the test laid down in Bell v. Lever Bros that the contract was void.

ASSOCIATED JAPANESE BANK (INT’L) V CREDIT DU NORD
Fraudster, Jack Bennet, approached plaintiff bank with scheme to raise money by the sale and lease back of a number of engineering machines. Bank agreed to buy machines for a little over a million pounds and lease back to him. Plaintiff bank wanted transaction to be guaranteed. Defendant became guarantor. The machines however did not exist. Bennet disappeared after obtaining a million pounds. Plaintiff sought to enforce guarantee against the defendant bank, neither bank having bothered to verify the existence of machines. Held- Steyn J. the action must fail on the ground that as a matter of construction of the contract of guarantee, it was either an express or implied condition that the machines existed. Secondly, Steyn j sated that he would be prepared to hold that the contract of guarantee was void on grounds of common mistake.

What is Mistake in equity?

Equity seeks to mitigate the harsh effects of the restrictive approach adopted by the common law to cases involving mistake. Equity follows the law. Thus if a contract is void at common law equity will also treat it as a nullity. Beyond this, equity is certain cases will intervene to relieve one of the parties from the effects of the mistake even where the contract is deemed to be valid at common law in spite of the mistake. Thus in some cases a contract, which is deemed to be valid at common law in spite of a mistake, may be held to in some manner to be unenforceable in equity, particularly when an equitable remedy is what s sought as the instrument of the enforcement of the contract.

The remedies provided by equity ay take three forms: rescission, the refusal of specific performance and rectification.

Rescission
This is an equitable remedy the essence of which is setting aside of a transaction. In some cases even where a mistake is deemed at common law not to be sufficiently fundamental as to render a contract void, the court, in the exercise of equitable jurisdiction may grant the remedy of rescission and set the contract aside so as to relieve the party the party prejudiced by it from hardship. However, the court generally will only do so if it can do justice to the other party to the contract.
In equity a contract is liable to be set aside or rescinded if the parties were under a common misapprehension either as to facts or as to their relative and respective rights, provided that the misapprehension was fundamental and the party seeking to set it aside was not himself at fault.

SOLLE V BUTCHER
After structural alterations to flat, defendant let it out to plaintiff for 7 years at rent of 250 per year. Both believed at the time of letting, alteration had altered identity of flat to make it a new dwelling house so released from controlled rent imposed by the rent act. This was not the case. Plaintiff brought action against defendant claiming rent he had overpaid since controlled rent of flat was 140 pounds. Defendant counter claimed alleging he was entitled to eject the lessee as the lease had been entered into under a common mistake and was therefore void. Held- although there was mistake as to the identity of the flat and this was in the social context a mistake on a matter of considerate importance, nevertheless the lease was not void at ca common law. The mistake could be a ground for relief in equity even though it did not render contract a nullity from the beginning. Lord Denning-a contract is also 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 the misapprehension was fundamental and that the party seeking to set it aside is not himself at fault.

GRIST V BAILEY ,
House was sold at very low price because parties believed it was still occupied by statutory tenant. Unknown to parties at the time of contract tenant died. Value was higher than agreed price. Plaintiff sued for specific performance. Defendant counterclaimed for rescission on ground that contract was void for mistake. Held- Contract was set aside on terms even though mistake did not render the contract void at common law.

MAGEE V PENINE INSURANCE CO, LTD,
Agreement between defendant and plaintiff to pay a certain sum to the assured (plaintiff) on the occurrence of certain risk. Plaintiff signed insurance form stating he held provisional license which was false. Plaintiff had not been honest but had in fact misread form. Was the basis of contract of insurance that plaintiff answers were true? Plaintiff car had accident and claimed 600. Insurance company found plaintiff had no license and refused to pay. Held- That this common mistake did not make contract void under common law but it made the contract liable to be set aside in equity.

LAURENCE V LEXCOURT HOLDING LTD
Case involve lease of office premises. Parties at time of letting assumed there was planning permission for whole of premises to be used as offices. Permission related only to part of premises. Tenant asked lease agreement to be set aside on ground of common mistake. Held- Lease agreement was rescinded on this ground of common mistake.
Refusal of specific performance
This is a discretionary remedy. The court would grant this remedy only if, having regard to all the circumstances it would be fair and just to do so. In exercise of its discretion the court may refuse an application for an order of specific performance on the ground that the party against whom the contract is to be enforced made a mistake. This would be done if the defendant made an honest mistake and if the enforcement of the contract would impose a heavy burden on the party who has contracted under an accidental mistake.

WEBSTER V CECIL ,
The plf was offered land by C for £1250 soon after sending the offer letter he def realized he should have set the price as £2250 and informed W immediately. The plf must have been aware of the def’s mistake as the def had already refused an offer of £2000 from the plf. Held- the court refused specific performance because the plf had not acted equitably. In that he must have been aware of the def’s unilateral mistake and therefore had not come to court with clean hands.

MALINS V FREEMAN.
The def went to an auction intending to bid on property A. he arrived late but in time to hear the auctioneer describe Lot 3 in terms which were wholly applicable to property to A. he began to bid for Lot 3, supposing it to be property A, and in due course Lot 3 was knocked down to him for an extravagant price. Lot 3 was quite a different property. The def’s mistake could not be ascribed in any way to the conduct of the plf or his agents. Held- specific performance should not be issued to compel the def to perform the contract. The court was of the view that the def never meant to enter into the contract and therefore it would not be equitable to compel him to perform it.

This case is distinguished from TAMPLIN V JAMES because in that case, there was little excuse for the defendant’s misapprehension since the plans of the property to be sold was clearly exhibited at the auction.

Rectification
This remedy is available where the terms of the contract have been reduced into writing and the parties made a mistake in recording an oral agreement previously made. Where an agreement has been reduced into writing, and owing to a mistake shared by both parties, the written document does not reflect the intentions of the parties as revealed in their previous oral understanding or agreement, the court in exercise of it equitable jurisdiction may rectify the contractual document so as to make it conform to the real intentions of the parties and enforce the contract as rectified.

Rectification is based on one of the exceptions to parole evidence rue, under which parole evidence is admissible to establish that the intention of the parties expressed in the written agreement does not represent their true intention as expressed in their previous oral agreement.

Before this remedy can be granted a number of conditions must be satisfied.
1. Legal issue- there must be a legal issue between the parties as to their rights under the contract. It would not be granted in a vacuum. It is only available within the context of a dispute between the parties as to their rights arising from the contract as documented
2. Prior common intention- there must be some outward expression of accord or agreement on the terms up to the moment of the execution of the written contract. There is no need for a prior binding contract.

JOSCELYN V NISSEN
A father agreed with his daughter that she would buy his business and in return pay his home gas, electricity and coal bills. The contract did not express this ‘continuing common intention’. The daughter stopped paying and the father brought an action to have the contract rectified. Held- There could be rectification, because there was ‘convincing proof’ of the intention.

3. Literal disparity between the previous agreement and written document- clearly, a document which accurately records the oral agreement of the parties cannot be rectified. This is so even if the parties entered into the contract with an inner misapprehension as to the meaning of the terms they agreed on.

FREDERICK E ROSE LTD V WILLIAM PIM
Frederick E Rose (London) Ltd was asked to supply ‘up to five hundred tons of Moroccan horse beans described here as feveroles’ to an English firm in Egypt. So, Rose asked an Algerian supplier, William H Pim Junior & Co Ltd, what feveroles were. Pim replied ‘feveroles means just horsebeans’. They contracted for the supply of ‘horsebeans’. Both believed horsebeans were feveroles. However, little did Rose know, there are three bean sizes, feves, feveroles and fevettes. Rose got feves delivered, which are larger and cheaper. The English firm had a claim for the wrong beans being delivered, and Rose in turn brought a claim against Pim. Rose sought to rectify the contract to put in the word ‘horsebean’. Held- because both parties were agreed on horsebeans, and the contract was not void for mistake, nor could the contractual document be rectified in this instance. In order to get rectification, it is necessary to show that the parties were in complete agreement on the terms of their contract, but by an error wrote them down wrongly.

4. Rectification generally available only where the mistake is shared by both parties- this remedy is granted in respect of common mistake.

RIVERLATE PROPERTIES V PAUL
A landlord mistakenly inserted in a lease a lower rent than he had intended to demand. Held- In the absence of knowledge of the mistake by the other contracting party even equity will not give relief in the case of a purely unilateral mistake. Equity follows the law; it is to correct its defects, not to take its place.

Summary of law on mistake

Steyn J in ASSOCIATED JAPANESE BANK LTD V CREDIT DU NORD outlines the following as steps that the courts are likely to follow in order to determine whether an operate mistake exists for which some remedy must be given.
1. Before one can turn to the rule of mistake whether at common law or equity, one must first determine whether the contract itself by express or implied condition precedent or otherwise, provides for who bears the risk of the relevant mistake. There is scope for invoking the law on mistake only if the contract is silent on this point
2. Whether the case will be treated under the rule of common law or equity will depend on the remedy demanded.
3. If common law is pleaded, the court must first consider this plea and determine in accordance with the principles of common law whether the contract is void at common law on grounds of mistake, if the contract is void at common law, no question of mistake in equity arises.
4. However, if it is determined that no operative mistake at common law, the court will then have to go on to consider whether the mistake in equity can be established, that is, the courts then consider whether any of the equitable remedies discussed is available to the parties.

GRIST V BAILEY
House was sold at very low price because parties believed it was still occupied by statutory tenant. Unknown to parties at the time of contract tenant died. Value was higher than agreed price. Plaintiff sued for specific performance. Defendant counterclaimed for rescission on ground that contract was void for mistake. Held- there was no mistake sufficient to avoid the contract at common law. However, the court upheld the def’s counterclaim for rescission of the contract.