BetterLawNotes-5 (2)

CONTRACT LAW

MISTAKE

Introduction

Everyone makes mistakes. This includes parties making a contract. Suppose that B buys a sofa from S’s store thinking it will fit perfectly in her lounge. When B gets the sofa home, she discovers it is far too big. What is B to do if S refuses to take the sofa back? As we will see, the general approach adopted under English law is that a mistake will not invalidate a contract. In other words, each party bears the risk of its own errors. So, B will be stuck with the sofa. But that is not to say that relief is never available when one or both parties have made a mistake.

In order to make sense of English law’s approach to the topic of mistake, it may help to identify two broad categories of case. The first arises where both parties enter into a contract making the same mistake. For example, A may agree with B to hire B’s nightclub for A’s birthday party the following month. However, unbeknown to the parties, the nightclub was completely destroyed by fire a few hours earlier. Alternatively, A agrees to buy the tv which B is selling, both parties assuming, wrongly, that it is a smart tv. These are examples of common, or shared, mistake. Both parties make the same mistake.

The second category comprises those cases where the parties are, in one way or another, at cross-purposes. A agrees to buy B’s phone. A thinks that B is selling their iPhone 14. B is actually trying to get rid of their older iPhone 12. An alternative scenario arises where A thinks that the car they have just agreed to buy from B is petrol-fuelled. B knows that A thinks this but also knows that in fact the car takes diesel. Both can be treated as examples of a unilateral mistake. Some treat the phone example as a mutual mistake and the car example as a unilateral mistake, but we will follow Professor Burrows in treating a unilateral mistake as ‘a mistake of one party which is not shared by the other party and which may, or may not, be known about by the other party’ (A Casebook on Contract, 7th edn, 2020 at 690).

A notable difference between unilateral and common mistake is that with the former it can be asked whether the parties have reached agreement at all. For this reason, unilateral mistake is sometimes referred to an ‘offer and acceptance’ mistake and it said that the effect of a such a mistake is to negative consent. With common mistake, the fact of agreement is clear: the question is whether the parties should be held to their agreement. With common mistake, the question is whether the mistake nullifies (rather than negatives) consent. We begin below with an examination of unilateral mistake before moving on to common mistake.

Before doing so, it is worth mentioning two other types of mistake case, both of which are of much more limited scope. The first arises where one party signs a document under some fundamental misapprehension as to its nature. The plea of ‘non est factum’ may be available to the mistaken party. The second arises where a written document fails to accurately record what the parties agreed. In some circumstances the remedy of rectification will be available to correct the mistake.

Unilateral mistake

To reiterate, unilateral mistake arises where one party to a contract, A, makes a mistake which is not shared by the other, B. B may, or may not, know of A’s mistake. A unilateral mistake may render the contract invalid:

(1) where there is genuine ambiguity as to what was agreed

(2) where B contributed to A’s mistake

(3) where A is mistaken as to a term of the contract and B is aware of A’s mistake, or

(4) where A is mistaken as to B’s identity and B is aware of A’s mistake.

Unilateral mistake and the objective approach

In some of the cases reference is made to a requirement of consensus ad idem, or a meeting of the minds. To the extent that this means that the parties must subjectively, or actually, have the same intentions, the phrase does not accurately reflect the law. What generally counts is not what one party actually thought or intended but what the other party reasonably believed the first party to intend.

‘The judicial task is not to discover the actual intentions of each party: it is to decide what each was reasonably entitled to conclude from the attitude of the other.’

Gloag on Contract, 2nd ed. (1929), p. 7.

Put simply, the objective approach focuses on what a party appears to think or intend and not what they actually, or subjectively, think or intend. Note that there’s a certain element of pragmatism at work here: in practice a wholly subjective approach would not work: it’s often impossible to know what another person is thinking: ‘the Devil himself knows not the intent of a man’ (Bryan CJ in 1477). Further, a system based on subjective intention is open to abuse: only A really knows what A was thinking – and A might not be completely honest when questioned at some later date.

So generally in contract what matters is not what a party, A, actually thought but what the other party, B, would reasonably have thought that A meant. Note that it is what the other party reasonably believed the first party to mean, which is not necessarily the same as what the other party actually believed the first party to mean. Put another way, what counts is what a reasonable party standing in B’s shoes would have thought that A meant.

‘If, whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party’s terms.’

Smith v Hughes (1871) LR 6 QB 597, 607 (Blackburn J).

Tamplin v James (1880) 15 Ch D 215

The claimants were selling a property, ‘The Ship Inn’, at auction. The sale particulars clearly set out, both verbally and by way of a plan, the extent of the property which amounted to around 20 perches (around 500 m2). The property was not sold at the auction, but immediately afterwards the defendant agreed to buy it. However, the defendant mistakenly thought that the property included two adjacent plots amounting to another 20 perches. When the defendant discovered his mistake, he refused to proceed with the contract. Held: the defendant was bound by the contract and the claimants were entitled to an order for specific performance.

There is genuine ambiguity as to what was agreed

In Smith v Hughes, Blackburn J said that ‘if one of the parties intends to make a contract on one set of terms, and the other intends to make a contract on another set of terms, or, as it is sometimes expressed, if the parties are not ad idem, there is no contract, unless the circumstances are such as to preclude one of the parties from denying that he has agreed to the terms of the other’.

Smith v Hughes (1871) LR 6 QB 597, 607.

Raffles v Wichelhaus (1864) 2 H & C 906

• The parties agreed the sale of 125 bales of cotton ‘to arrive ex Peerless from Bombay’.

• The seller brought an action for damages on the ground that the buyer refused to accept delivery and pay for the goods.

• The buyer pleaded that he had meant a ship called the Peerless sailing from Bombay in October and the cargo which the seller had tendered came from a different ship, also called the Peerless, which had sailed from Bombay in December.

• The Court of King’s Bench gave judgment for the buyer.

Why did the seller’s action fail in Raffles v Wichelhaus? In short, the seller had not shown that the buyer’s meaning was not reasonably held. As such, and applying Blackburn J’s statement, the buyer was not precluded from denying that he had agreed to the seller’s terms. The same applied in the next case:

Falck v Williams [1900] AC 176

F was a shipowner from Norway. W was a shipbroker in Australia. To maintain the confidentiality of their dealings, F and W communicated by means of code. F brought an action against W for breach of a contract to load a cargo of copra in Fiji for delivery to the UK. In his defence, W said that he had understood that the offer was one to load a cargo of shale in Australia for delivery in Spain. The PC held that there was no contract in fact. Further, F’s offer was not so clear and unambiguous that W could not be heard to say that he misunderstood it.

‘Now, it is impossible to contend that there was a contract in fact. Obviously the parties were not at one. Obviously the acceptance by Williams as he meant it to be understood had no connection with or reference to the proposal which Buch intended to make and thought he was making . . .

‘In their Lordships’ opinion there is no conclusive reason pointing one way or the other . . . It is not for their Lordships to determine what is the true construction of Buch’s telegram. It was the duty of the appellant as plaintiff to make out that the construction which he put upon it was the true one. In that he must fail if the message was ambiguous, as their Lordships hold it to be. If the respondent had been maintaining his construction as plaintiff he would equally have failed.’

Lord Macnaghten at 180-181.

B contributed to A’s mistake

Scriven Brothers & Co v Hindley & Co [1913] 3 KB 564

• S instructed an auctioneer to sell certain bales of hemp and tow, each bearing the same shipping mark.

• H’s buyer, McGregor, examined samples of the hemp before the sale intending to bid for the hemp alone.

• At the auction, when the tow was put up for sale, McGregor, believing it to be hemp, made a bid which was reasonable for hemp but excessive for tow.

• The auctioneer accepted the bid, not realising McGregor’s mistake.

• H later refused to pay for the tow.

• The court dismissed S’s action for the price.

In Scriven, the mistake made by McGregor arose because (i) hemp and tow were not normally sold under the same shipping mark, (ii) McGregor had been shown a sample of the hemp which bore the shipping mark, and (iii) the catalogue did not disclose the different nature of the two lots. Again, applying Blackburn J’s statement, it may be said that Hindley was not precluded from denying that McGregor had agreed to the seller’s terms, because McGregor’s mistake was induced by the auctioneer.

A is mistaken as to a term of the contract and B is aware of A’s mistake

Hartog v Colin & Shields [1939] 3 All ER 566

C & S offered to sell H 30,000 Argentine hare skins, mistakenly quoting prices per pound rather than per piece as was customary in the trade. Previous negotiations. The value of a piece was much lower than the value per pound, making C & S’s quotation around one-third of the amount that C& S had intended. H accepted the offer. When C & S refused to sell, H claimed damages for breach of contract. The Court held that there was no contract based on prices per pound as H had realised that C & S had made a mistake as to the price.

In the Hartog case, the price at which the skins were being sold was clearly a term of the contract, a fundamental aspect of the transaction. Further it was clear that the seller had made a mistake as to the price, and hence a mistake as to a term of the contract. Further the judge found that the buyer must have known of the seller’s mistake. Hence where A is mistaken as to a term of the contract (such as the price) and B knows that A is mistaken, then B cannot enforce the contract with that term.

The point in Hartog was established in the famous, and complicated, case of Smith v Hughes.

Smith v Hughes (1871) LR 6 QB 597

S, a farmer, had a quantity of oats to sell.

He sent a sample to H, a racehorse owner and trainer.

The following day, H said he would take the oats at a particular price.

S sent the oats to H but H refused to accept delivery, saying that the oats were new oats and he thought he was buying old oats.

Smith brought an action for the price and for damages.
In his evidence, H said that he had told S that he only wanted old oats, and that S had said the oats were old oats.

In his evidence, S denied that any reference had been made to the oats being old or new.

In his summing up the judge said the first question for the jury was whether the word old had been used by S or H in making the contract.

If they found that the word old had been used, the judge told the jury, they should find for H.

If they thought the word old had not been used, the second question was whether S knew that H thought that he, H, was contracting for the purchase of old oats. If so, they should find for H.

The jury found for H but without indicating on which ground they had based their decision.

The Court of Queen’s Bench ordered that a new trial be held.

Blackburn J doubted ‘whether the direction would bring to the minds of the jury the distinction between agreeing to take the oats under the belief that they were old, and agreeing to take the oats under the belief that the plaintiff contracted that they were old’. (Smith v Hughes (1871) LR 6 QB 597, 608.)

In other words, what the judge had failed to make clear to the jury was the need to resolve the ambiguity in the buyer’s assertion that he believed he was buying old oats. Did the buyer think that the seller was promising that the oats were old oats or did the buyer think that the seller was merely promising to sell oats (which the buyer thought were old)? If the former, and if the seller know the buyer thought this, the buyer would win the case: the seller could not enforce the contract. If the latter, the seller could enforce the contract. By promising that the oats were old, the seller would be assuming the risk that that they were not. By not securing such a promise from the seller, the buyer would be assuming the risk.

The principle established in Smith v Hughes, and applied in Hartog v Shields, represents an exception to the objective approach to the intentions of the parties. Under the principle in Smith v Hughes the court takes account of what the parties actually thought. In practice, the principle in Smith v Hughes is rarely invoked because of the requirement that the mistake be as to a term of the contract: in practice the mistake is much more likely to be as to some background fact.

What if B should have realised that A was mistaken?

In Hartog, the judge found that the buyer knew that the seller had made a mistake as to the price. What would have been the position if the buyer should have realised, but did not in fact realise, that the buyer was mistaken? Ellenbogen J directly addressed the point in obiter dicta in the Longley case.

Longley v PPB Entertainment Ltd [2022] EWHC 977 (QB)

L spoke to one of the D’s call operators in order to place a bet on a horse. L said that he wanted to place a £1,300 each way bet (meaning a total stake of £2,600). The operator said that she would have to gain approval from a trader and asked L to stay on the line. Shortly after, the operator came back on to the line and told L that the bet had been cleared with the trader and that £26,000 would be taken from L’s account. Asked if that was correct, L replied that it was. After the call ended, L checked and saw that £26,000 had been taken from his account. The horse won and L’s account was initially credited with the sum of £286,000. Having discovered from the recording of the phone call that L had requested a £1,300 bet, the sum of £286,000 was removed from L’s account and replaced with the sum of £28,600. L brought a claim for the difference. Ellenbogen J dismissed the claim. On a proper construction of the telephone exchange which took place between L and the operator, there was no contract for a £13,000 each way bet. Alternatively, on the basis that there was such a contract, it was not enforceable by L because, to L’s actual knowledge, D had not intended to offer or accept a bet other than a £1,300 each way bet. In the further alternative, had there been an enforceable contract for an each way bet of £13,000, the defendant would not have been liable to pay L his winnings because the defendant could have relied on one of its standard terms (to the effect that the defendant would not be liable for winnings incorrectly awarded as a result of human error) such term not being unfair under s 62 of the Consumer Rights Act 2015.

In the Longley case, Ellenbogen J said, obiter, that ‘constructive knowledge [ie where the person should have known, but did not know] on the part of a non-mistaken party will not suffice to establish the defence of unilateral mistake’ (at [104.3]). As such, ‘actual knowledge by [A] of [B]’s relevant mistake is required’ (at [94.10]).

A is mistaken as to B's identity and B is aware of A’s mistake

It may help to explain the significance and scope of this category of mistake case with an example.

Suppose that S wants to sell his car. He places an advert online giving the car’s details and stating a price of £10,000 or nearest offer. A few days later, an elderly and very tall man with long grey hair, calls at S’s house. The man introduces himself as Father Brown, a retired vicar who lives nearby. The man says he is prepared to pay £10,000 for the car. However, he can only pay £100 now. He tells S that he will come back at the weekend with the balance of £9,900 as he will have received his monthly pension by then. Thinking that he must be able to trust a vicar, S agrees. S takes the £100. The man drives the car away saying he will see S again at the weekend. S never sees the man again. However, a month later, S sees a young woman, T, getting out of the car at a local supermarket carpark. T tells S that she bought the car almost a month ago for £5,000 in cash from an elderly and very tall man with long grey hair, calling himself Dr Green. What can S do?

In principle, S has three possible claims.

First, he could bring an action against Father Brown for breach of contract, seeking payment of the outstanding £9,900 as an agreed sum. But in practice such a claim is worthless: S is unlikely to be able to track down Father Brown/Dr Green and so there is little point in suing him.

Second, S might bring a claim in misrepresentation. As we will see below, Father Brown induced S to enter the contract by a fraudulent misrepresentation. In principle, a misrepresentation gives the innocent party the right to rescind the contract. Because of Father Brown’s misrepresentation, the contract between S and Father Brown was liable to be rescinded – it was voidable. But at the time when Father Brown contracted with T, S had not rescinded, or avoided, his contract with Father Brown. This means that, provided T bought from Father Brown in good faith, she will have acquired title to the car – ownership of the car will pass to her – see Sale of Goods Act 1979, s 23. Because, by the time S discovers the fraud, Father Brown has already sold the car to a bona fide third party, T, S will be unable to rescind the contract. While S could claim damages for misrepresentation, there is little point since, as with a breach of contract claim, S would first of all have to track Father Brown down.

The third possibility relies on the doctrine of mistake. If S can show that he entered in the contract because he made a mistake as to the man’s identity, the contract will be void. If the contract is void, that would mean that the woman to whom the man sold the car would have to give up the car to S as S has a better claim to it than she does.

In summary, S’s hope of a adequate remedy depends on being able to demonstrate that his contract with Father Brown was void due to a mistake as to identity.

The fourth category of unilateral mistake which negatives consent is where one party is mistaken as to the identity of the other party.* Now the identity of the parties negotiating a contract is often irrelevant: if I order a coffee in a coffee shop, the shop owner will not be concerned about my identity: I don’t have to produce my driving licence or a recent utility bill showing my name and address.

*Arguably, these cases also involve a mistake as to the terms of the contract: as will be seen, such a mistake will only operate to negative consent where the identity of one party is particularly important to the other, mistaken, party. It may be said that in such a situation, it is a term of the contract that the first party is who they appear to be.

But sometimes we do want to know who we are dealing with. For example, a particular characteristic or attribute, such as age, may important. This is so where a person is seeking to purchase alcohol or cigarettes.

Probably the attribute to which we most commonly attach importance is financial standing or creditworthiness. Where payment in full is not to be made immediately, I will want to know with whom I’m dealing: I want to know that I can trust them to pay when the time comes.

Mistakes as to identity generally arise in the context of fraud. One party, A, falsely (and usually fraudulently) represents that he is someone else, X. What is the position when B enters into a contract with A relying on A’s fraudulent assertion that he is X?

As the law currently stands, it seems that we need to distinguish between contracts, the terms of which are set out exclusively in writing and contracts which are made face-to-face.

This is not exhaustive. A contract made by made other than face-to-face but which is not set out exclusively in writing, eg, a contract made over the phone?

Written contracts

Cundy v Lindsay (1878) 3 App Cas 459

The claimants received an order for 250 dozen linen handkerchiefs from Blenkarn, who gave his address as 37, Wood Street, Cheapside.

Blenkarn imitated the signature of a respectable firm, Blenkiron & Co, of whose reputation the claimants were aware, and who carried on business at 123, Wood Street, Cheapside.

The claimants sent the goods to Blenkiron & Co at 37 Wood Street (ie, Blenkarn’s address).

Blenkarn sold the goods to the defendants.

Blenkarn never paid the claimants.

The House of Lords held that there was no contract between the claimants and Blenkarn and that, therefore, the defendants were liable to pay the claimants the value of the handkerchiefs.

‘. . . how is it possible to imagine that in that state of things any contract could have arisen between the [claimants] and Blenkarn, the dishonest man? Of him they knew nothing, and of him they never thought. With him they never intended to deal. Their minds never, even for an instant of time, rested upon him, and as between him and them there was no consensus of mind which could lead to any agreement or any contract whatever. As between him and them there was merely the one side to a contract, where, in order to produce a contract, two sides would be required. With the firm of Blenkiron & Co of course there was no contract, for as to them the matter was entirely unknown, and therefore the pretence of a contract was a failure.

The result, therefore, my Lords, is this, that your Lordships have not here to deal with one of those cases in which there is de facto a contract made which may afterwards be impeached and set aside, on the ground of fraud; but you have to deal with a case which ranges itself under a completely different chapter of law, the case namely in which the contract never comes into existence. My Lords, that being so, it is idle to talk of the property passing. The property remained, as it originally had been, the property of the [claimants], and the title which was attempted to be given to the [defendants] was a title which could not be given to them.’

Lord Cairns at 465-6.

In the Cundy case, the court had, in effect, to decide which of two innocent parties should bear the consequences of Blenkarn’s fraud. The situation is not unusual as the following cases demonstrate. The owner has been deceived into parting with his goods before receiving payment. The fraudster then immediately ‘sells’ the goods on to a buyer who knows nothing of the preceding transaction. The owner discovers the fraud and manages to trace his goods into the buyer’s hands. Should the owner be able to recover ‘his’ goods, leaving the buyer to attempt to track down the fraudster? Or do the goods now belong to the buyer? After all he has paid for them in good faith. The effect of the decision in Cundy is to place the risk of fraud on the innocent third-party buyer. The approach in Cundy was approved in Shogun:

Shogun Finance Ltd v Hudson [2003] UKHL 62

A fraudster, F, went to a motor dealer in Leicester and introduced himself as Durlabh Patel.

F agreed to buy a Mitsubishi Shogun car for £22,250 subject to obtaining hire-purchase finance. F completed Shogun’s standard form hire purchase agreement. F forged Patel’s signature so as to make it appear the same as that on Patel’s driving licence which F had improperly obtained and produced to the dealer.

The dealer phoned Shogun’s support centre and then sent by fax a copy of the agreement form and the driving licence.

Shogun carried out a credit check on Patel, compared the signature on the form with that on the licence, and then phoned the dealer to say that the proposal was accepted.

F paid a 10% deposit, partly in cash, partly by cheque, the cheque subsequently being dishonoured. The dealer then handed over the car to F complete with the relevant documentation.

F then sold the car to Hudson, a private purchaser acting in good faith, for £17,000. F vanished and made no payments under the hire-purchase agreement.

Shogun then claimed the car or its value form Hudson. Hudson claimed he had good title to the vehicle by virtue of s 27 of the Hire Purchase Act 1964.

The House of Lords held, by a bare majority, that title had never passed to Hudson and that, as such, he was liable to pay damages for conversion to Shogun.

The position with written contracts is perhaps not as clear as the Cundy and Shogun cases might suggest. In Cundy, the sellers had intended to deal with Blenkiron & Co, a firm which did in fact exist. In Shogun, the finance company intended to deal with Patel who, again, did in fact exist. The decision in the King’s Norton Metal case suggests a different outcome may be reached where the person with whom the victim intends to deal does not actually exist.

King’s Norton Metal Co Ltd v Edridge Merrett & Co Ltd (1897) 14 TLR 98

The claimant received a letter from ‘Hallam & Co’ requesting a quotation for some goods. The letter heading represented that Hallam & Co was a substantial entity with a large factory and several depots and agencies. The claimant replied and Hallam & Co placed an order for a ton of brass rivet wire. Hallam & Co was a fraud operated by Wallis. Wallis sold the goods to the defendant but never paid the claimant. The Court of Appeal held that the contract between the claimant and Wallis was not void for mistake (although it had been voidable for fraudulent misrepresentation when made).

‘The question was, With whom, upon this evidence, which was all one way, did the plaintiffs contract to sell the goods? Clearly with the writer of the letters. If it could have been shown that there was a separate entity called Hallam and Co and another entity called Wallis then the case might have come within the decision in Cundy v Lindsay. In his opinion there was a contract by the plaintiffs with the person who wrote the letters, by which the property passed to him. There was only one entity, trading it might be under an alias, and there was a contract by which the property passed to him’.

Report of the judgment of AL Smith LJ at 99.

In the Shogun case, Lord Phillips clearly did not view the King’s Norton case as being inconsistent with Cundy:

‘[King’s Norton] demonstrates that, if a person describes himself by a false name in contractual dealings, this will not, of itself, prevent the conclusion of a contract by a person who deals with him in that name . . . The plaintiffs intended to deal with whoever was using the name of Hallam & Co. Extrinsic evidence was needed to identify who that was but, once Wallis was identified as the user of that name, the party with whom the plaintiffs had contracted was established. They could not demonstrate that their acceptance of the offer was intended for anyone other than Wallis.’

Lord Phillips in Shogun at [135].

The answer depends on the application of the principle nemo dat quod non habet: no-one can give what he does not have. So where a thief steals goods from an owner, the thief acquires no title.

That is not strictly true: the thief will acquire a possessory title. This means he has a better claim to the goods than anyone apart from the true owner. See, eg, Armory v Delamirie (1722) 1 Stra 505 and Costello v Chief Constable of Derbyshire Constabulary [2001] 1 WLR 1437.

The thief therefore has no title to pass onto any buyer and the owner can recover the goods from any one to whom the thief does sell them.

See s 21(1), Sale of Goods Act 1979: ‘Subject to this Act, where goods are sold by a person who is not their owner, and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell.’

Similarly, in principle, where X offers to sell goods to Y and Y alone, Z will not acquire title to the goods by purporting to accept the offer, as there will be no contract between X and Z. And where Y offers to buy goods from X, Y will not get good title if X directs his acceptance to Z.

Face-to-face dealings

Phillips v Brooks [1919] 2 KB 243

A fraudster, North, entered the C’s jewellery shop in Oxford Street, London and selected some pearls, priced at £2,550 and a ring priced at £450.

North and wrote out a cheque for £3,000 saying “I am Sir George Bullough” and gave an address in St James’ Square. The claimant knew of Sir George Bullough and checked the address given in a directory before allowing North to take the items away.

North, using the name Firth, then pledged the ring [items] to the defendant, a pawnbroker.

North’s cheque was dishonoured, and he was subsequently convicted of obtaining the ring by false pretences.

C brought an action against D for the return of a ring, or its value, together with damages for detaining the same.

Horridge J gave judgment for D holding that although C would not have entered into the contract with North but for the latter’s fraudulent misrepresentation, property in the ring had passed to North. As such, North had been able to give good title to the ring to a bona fide purchaser for valuer without notice of the fraud.

Horridge J held that C had intended to contract with the person present and that therefore there had been no error as to the person with whom he contracted, notwithstanding that he would not have made the contract in the absence of a fraudulent misrepresentation.

‘I have carefully considered the evidence of the plaintiff, and have come to the conclusion that, although he believed the person to whom he was handing the ring was Sir George Bullough, he in fact contracted to sell and deliver it to the person who came into his shop, and who was not Sir George Bullough, but a man of the name of North, who obtained the sale and delivery by means of the false pretence that he was Sir George Bullough. It is quite true the plaintiff in re-examination said he had no intention of making any contract with any other person than Sir George Bullough; but I think I have myself to decide what is the proper inference to draw where a verbal contact is made and an article delivered to an individual describing himself as somebody else.’

Horridge J at 246.

Ingram v Little [1961] 1 QB 31

Three elderly ladies, Elsie and Hilda Ingram and Mrs Badger, wanted to sell their car.

A fraudster, calling himself Hutchinson, offered to buy it. A price was agreed whereupon Hutchinson took out his cheque book.

Elsie Ingram told him that a cheque was not acceptable. Hutchinson then said that he was P G M Hutchinson, a reputable man with business interests in Guildford, who lived at Stanstead House, Stanstead Road, Caterham, Surrey.

Hilda Ingram went to the local post office and was able to confirm from consulting the telephone directory that there was an individual of that name living at that address.

The ladies then let Hutchinson take away the car in exchange for his cheque.

Hutchinson then sold the car to the defendant who bought it in good faith.

The ladies then discovered that Hutchinson’s cheque had been dishonoured. They claimed the car back from the defendant.

A majority of the Court of Appeal, Devlin LJ dissenting, upheld Slade J’s judgment for the elderly ladies: the contract between the three ladies and the rogue was void for mistake.

‘If Miss Ingram had been asked whether she intended to contract with the man in the room or with P G M Hutchinson, the question could have no meaning for her, since she believed them both to be one and the same. The reasonable man of the law—if he stood in Miss Ingram’s shoes—could not give any better answer. . .


. . . the presumption that a person is intending to contract with the person to whom he is actually addressing the words of contract seems to me to be a simple and sensible one.’

Devlin LJ (dissenting) at 65-66).

The decision of the majority in Ingram v Little seems hard to reconcile with the approach previously adopted in Phillips v Brooks. The subsequent decision in Lewis v Averay suggests that Phillips is the stronger authority.

Lewis v Averay [1972] 1 QB 198

A rogue posing as Richard Greene, a then well-known actor playing the role of Robin Hood in a television series, agreed to buy the claimant’s car and wrote out a cheque, signing it R.A. Green. The claimant was reluctant to let Green take the car away and so Green produced an identity card from Pinewood Studios bearing the name Richard A. Green and bearing his photograph. The claimant let Green take the car away. Green sold the car to the defendant. His cheque was dishonoured. Held: the contract was not void for mistake but voidable for fraud.

‘When two parties have come to a contract – or rather what appears, on the face of it, to be a contract – the fact that one party is mistaken as to the identity of the other does not mean that there is no contract, or that the contract is a nullity and void from the beginning. It only means that the contract is voidable, that is, liable to be set aside at the instance of the mistaken person, so long as he does so before third parties have in good faith acquired rights under it . . .

In this case Mr Lewis made a contract of sale with the very man, the rogue, who came to the flat. I say that he ‘made a contract’ because in this regard we do not look into his intentions, or into his mind to know what he was thinking or into the mind of the rogue. We look to the outward appearances. On the face of the dealing, Mr Lewis made a contract under which he sold the car to the rogue, delivered the car and the logbook to him, and took a cheque in return. The contract is evidenced by the receipts which were signed. It was, of course, induced by fraud. The rogue made false representations as to his identity. But it was still a contract, though voidable for fraud. It was a contract under which this property passed to the rogue, and in due course passed from the rogue to Mr Averay, before the contract was avoided.’

Lord Denning MR at 207.

‘. . . this case really is on all fours with Phillips v Brooks which has been good law for over 50 years.’

Phillimore LJ at 208.

 

‘. . . [it] was simply a mistake as to the creditworthiness of the man who was there present and who described himself as Mr Green.’ 

Megaw LJ at 209.

Unilateral mistake and relief in equity

The principal remedy for a breach of contract is an award of compensation in the form of damages. A less common, but perhaps more obvious, remedy is specific performance where the court orders the defaulting party to carry out the contract. So, where V agrees to sell property to P but then changes his mind, P can either seek damages or specific performance. With the first P is compensated for loss caused by V’s failure to convey the property. With the second, the court orders V to convey the property to P. With the first remedy, P ends up with compensation instead of the property; with the second, he gets the property. Specific performance is an equitable and, hence discretionary, remedy: a claimant is not entitled to an order of specific performance, rather it lies in the discretion of the court. In some of the unilateral mistake cases, the courts have refused an order of specific performance against the mistaken party, leaving the other party to claim damages for the mistaken party’s refusal to perform.

There is no distinct equitable doctrine of unilateral mistake: the court has no jurisdiction in equity to say that a contract, which is valid at common law despite the mistake of one party, is nevertheless invalid. However, the court may, in its discretion, decline to award specific performance of the contract, leaving the other party to seek his remedy at common law (that is, an award of damages).

For cases where the court has refused specific performance, see the following:

Denny v Hancock (1870) LR 6 Ch App 1

The defendant went to inspect a property which was being offered for sale. He took with him a plan prepared on the sellers’ behalf. On the western side of the property was a belt of shrubs and 3 magnificent elm trees bounded by an iron fence. The defendant assumed that the fence marked the boundary of the property. Having successfully bid for the property, the defendant then discovered that the actual boundary on the western side was marked by some stumps, which were partially blocked from view by the shrubs, and that the elm trees were not part of the land being sold. The sellers claimed specific performance of the sale and purchase agreement. The Court of Appeal in Chancery held that specific performance could not be decreed against the defendant.

The CA held that a prospective purchaser inspecting the property with the prepared plan would naturally conclude, as the defendant had done, that the iron fence marked the boundary and that the trees were included in the sale. While the trees were not shown on the plan, the Court held that the plan as drawn would lead a reasonable buyer to suppose that the iron fence marked the boundary.

Webster v Cecil (1861) 30 Beav 62

Having previously declined to sell certain property to the P for £2,000, D wrote to P offering to sell for £1,250. This was a mistake on D’s part: he meant to write £2,250. P accepted the offer. P’s bill for specific performance was dismissed by Sir John Romilly MR, leaving P to such action, if any, he might have at common law.

Malins v Freeman (1837) 2 Keen 25

D made the highest bid for a lot being mistaken as to the identity of the lot. The auctioneer accepted D’s bid. P’s bill for specific performance dismissed.

‘the question here is not, as it has been put, whether the alleged mistake, if true, is one in respect of which the Court will relieve, for the Court is not here called upon to relieve the Defendant from his legal liability, but whether, if the mistake be proved, the Court will enforce a specific performance, leaving the Defendant to his legal liability. And I think that, if such a mistake as is here alleged to have happened be made out, a specific performance ought not to be decreed; and after giving to the evidence the best consideration in my power, I am of opinion that the Defendant never did intend to bid for this estate. He was hurried and inconsiderate, and, when his error was pointed out to him, he was not so prompt as he ought to have been in declaring it. It is probable that by his conduct he occasioned some loss to the Plaintiff; for that he is answerable, if the contract was valid, and will be left so, notwithstanding the decision to be now made. But I think that he never meant to enter into this contract, and that it would not be equitable to compel him to perform it, whatever may be the responsibility to which he is left liable at law.’

Lord Langdale MR at 34-35.

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