Chapter 16-18

1. Chapter 16-18 Mistake Duress Undue Influence

2. MISTAKE Chapter 16

3. So what about mistake? • Generally, mistake taken to void contracts…means they never came into existence… • Debate over whether equity has some role to play by making some contracts voidable and liable to set aside on terms as the court sees just.

4. Types of Mistake • We both make the same mistake – Common Mistake • We both think goods exist, they don’t • We are at cross purposes – we both make a different mistake – Mutual Mistake • We agree I will sell you a car. I think I’m to sell you a Fiesta, you think I’m selling you an Escort • One makes a mistake and the other party knows or should know I am making a mistake – Unilateral mistake (if no such kn = MM)

5. Fact not Law • Mistake needs be one of fact not law – seems to be rule of law (O’Loghlen v O’Callaghan – mistake about law and rent here not operative) • Distinction gone in the UK with Kleinsworth Benson v Lincoln City Council • But – if mistake is about some aspect of law not generally known etc – equity may offer relief • Cooper v Phibbs (pre Great Peace) • K to sell fishery, both assume A owned it but private act of Parl had made B tenant for life! B could rescind • Logic – mistake owed to not knowing law, but lead to simultaneous mistake of fact re ownership

6. Common Mistake • What are we talking about? • We make the same mistake • We both think A owed the fishery • We both think the cargo actually exists • We both think Lansdowne Road is still open • We both think the car is a Mercedes

7. Sometimes understood by cateogories • Res extincta – where subject matter no longer exists • Res sua – where performance is impossible because of some legal of physical impossibility • Common mistake as to quality (i.e. parties believed that the “thing” had a quality without which the “thing” is radically different”)

8. Examiner • Examiner has shown interest in understanding common mistake in a categorical basis • Oct 2007, Q7 • Discuss, with reference to English and Irish caselaw. The categories of common mistake at common law.

9. Existence of Subject Matter • CL will void a contract where CM relates to very existence of SM of the K (sometimes called res extincta) • Couturier v Hastie • K related to cargo of corn in transit to UK but had already perished – HL held that parties must have contemplated a SM to the K capable of being sold – without it, no contract to be concluded

10. Reasonably settled principle • Strickland v Turner – life annuity calculated by reference to life of another sold both parties didn’t know the “life” was dead • Galloway v Galloway – Separation agreement but in fact the marriage was a nullity – contract was therefore void – SM never existed (i.e. the marriage)

11. McRae v Commonwealth Disposals Commission • D sold salvage rights to a tanker on a particular reef • P found out no such tanker, no such reef • P sued for D – D said K void for CM • HC of Auz rejected • Implied warranty theory – IW that the subject matter did exist • K was not simply to sell the wreck but to guarantee the existence of the wreck • One factor – D was clearly in better position to verify its existence or not

12. Res Sua • By reason of mistake of parties, contract is physically or legally incapable of performance • Sheikh Bros Ltd v Ochsner [1957] AC 136 • K for exploitation of sisal on land belonging to A with B to cut and process it delivering 50 tons per month to A • Land not capable of producing 50 tons per month, so contract void because this was contrary to the parties shared belief. • Legal impossibility – cannot acquire land you already own! Cooper v Phibbs would be an example

13. Wider Role – Fundamental Mistake Underlying Contract? • Bell v Lever Bros • Director agreed compensation to leave post • Both sides thought this was only way to get rid of him – had in fact breached several duties • D claims CM voided K • HL said no…not sufficiently “fundamental” to make K void…held that part of the $$ was to reward for previous service not just to buy him out • Did hold that a false and fundamental assumption underlying the K without which the parties would not have entered K will make a K void

14. Solle v Butcher (will return to this) • Rent agreed on CM that flat not rent restricted • Tenant wanted overpayments back • CA held CM here was not enough to make K void (even if it was a mistake in fact) • Leaf v International Galleries • Both thought it was a Constable – was not • Went to heart of K – but not enough to make K void

15. Associated Japanese Bank v Credit du Nord • P & D victims of financial fraud – • P advanced $$ on foot of sale and lease back, • D guaranteed fraudster – all about certain machines which didn’t exist – banks assumed they existed • Obiter of Steyn J seemed to accept CM operated: • Contract will be void ab initio for common mistake if a mistake by both parties to the contract renders the subject matter of the contract essentially and radically different from that which both parties believed to exist at the time the contract was executed. • However, the party seeking to rely on the mistake must have had reasonable grounds for entertaining the belief on which the mistake was based.

16. Different Irish Standards? • Western Potato Co-Op v Durnan • Parties K on basis that seed potatoes were sound – were not – CC held K was void were assumption was proved wrong

17. Equity’s Role • Common law (in England) set high standards • Equity, however, had a role • Contract may be voidable • Very hard to understand…very difficult to see why.

18. Solle v Butcher • Tenant trying to void K for lease • Ct says no, but equity may make K voidable – i.e. liable to be set aside by equity – • Held ct had discretion to set aside on terms – here being that tenant pay the full rent which would have been claimed under rent control leg

19. Grist v Bailey • CM that sitting tenant had particular rights and value of house reflected this • TJ held K should be set aside but on basis that Vr enter a new K to sell the house on a value reflecting vacant possession

20. Great Peace Shipping v Tsavliris Salvage • D offered services to assist stricken vessel via tug • Interim measures involved attempting to charter nearest ship – third party said the Great Peace was nearest; 35 miles…actually 410 miles • D did not cancel immediately – checked to see if ships were nearer – found one, then claimed mistake with P

21. CA held no operative mistake – not sufficiently fundamental – D received, so said the ct, what he contracted for • Noted no immediate attempt to cancel • Ct noted law was confusing…from now on it said • No jurisdiction to grant recission on basis of common mistake where K is valid and enforceable on ordinary principles of K law (i.e. no equity) • Relevance for Ireland? Unsure…see para 7-212 for H.Delany comment

22. Kyle Bay Ltd (A Nightclub) v Underwriters (etc) (2006) • Intrum Justitia BV v Legal and Trade Financial Services Ltd (2005) – O’Sullivan J

23. Mutual Mistake and Unilateral Mistake • No meeting of the minds here at all • Can be analysed in term of offer and acceptance – i.e. no real meeting of O&A • V has two 2 Porsches – intends to sell the 1980 • P believes he is getting the 1990 • Bargaining at cross purposes? • Rule is that parties are held to their apparent agreements…

24. Mutual Mistake • On one level, since parties at cross-purposes, there is (subjectively speaking) never a K • But contract law tends to view intention and mental states in a more objective sense – i.e. what a reasonable observer would infer from conduct and words used

25. So, if both parties are at X purposes but a reasonable observer would suppose a K was concluded…it is binding even if parties are mistaken • Wood v Scarth • Letting of pub at X purposes – P thought was letting without paying £500 up front, D thought P knew he was to pay up front (as D’s clerk was supposed to tell him) • Notwithstanding the mistake – K was binding • It was only a mistake because of uncommunicated intention.

26. Clayton Love v B&I Steampacket • Offer by D intended to convey that scampi be loaded at certain temperature • P took it to mean would be loaded refridgerated • SC took view that term meant what P thought it to mean • So, if internal mistake of A of which B knows nothing and B accepts an offer made where that mistake is operative, K has been concluded (save where knowledge comes in – unilateral mistake)

27. Raffles v Wichelhaus • A agreed to buy from B cargo of cotton ex Peerless from Bombay – two ships of that name sailed in Oct and Dec • Parties were at X purposes as to which ship the K applied to • Objectively, the ct said – the words used and conduct of the parties could have applied to either of the ships – and thus no objective observer could say clearly that a K had been formed

28. Scriven v Hindley • Auction catalogue did not properly distinguish between lot of hemp and lot of tow. D thought both were hemp lots and paid a price reflecting this for the tow (i.e. paid more for tow than he should have) • (Mistake arose from the fact that both lots contained the same shipping mark, "SL", and witnesses stated that in their experience hemp and tow were never landed from the same ship under the same shipping mark. The defendants' manager had been shown bales of hemp as "samples of the 'SL' goods".)

29. Auctioneer unaware of the mistake at time • Ct said circumstances were like that in Raffles, an observer could not conclude firmly from the objective facts that a contract had been entered into for a particular subject matter. • No contract entered into

30. Mespil v Capaldi • “Full and final settlement of all disputes between the parties” • A intended it to refer to all outstanding disputes, include ones not yet issued • B believed it referred to all those in court • SC held K void – held they circumstances were such that no one objective meaning existed to which both parties could be held

31. Unilateral Mistake • Knowledge is key here • Webster v Cecil • D refused to sell land to P for 2000 • D offered to sell then for 1250 – meant 2250 • D immediately told P of mistake – P purported to accept • No room for objective approach where one party knows that other is mistaken

32. Hartog v Colin & Shields • D contracted to sell to the plaintiff 30,000 hare skins, • But offered the goods at certain prices per pound instead of at those prices per piece. The value of a pound was approximately one-third that of a piece. • In verbal and written negotiations which took place prior to the sale, reference had always been made to the price per piece and never to the price per pound, and expert evidence was given that hare skins were generally sold at prices per piece. • Held that buyer either knew or ought to have known of mistake • Crucial rule – if ought to know that other party made a mistake, cannot insist on K

33. Nolan v Graves (1946) • Vendor and Purchaser disagreed over what agreed price was • Price was included in contract as £4,550 • Written documents suggested it was intended to be £5,550 • Ct accepted that a mistake was made – i.e. P knew Vr was making a mistake with £4,550.

34. Must also show that mistake relates to terms of the K not just motive (para 16-08) • K to sell Land - Vr thinks gold is on it, Pr knows it isn’t and knows of Vr’s belief • If the gold is not a term of the K – then there is no problem as it just an element of the motive of Pr • Smith v Hughes • Reen v BOI (pages 239-240)

35. Mistaken Identity Cases • A pretends to be B and gets goods from C and sells them to D etc. C does not get paid, D gets goods… • Who should bear the loss? • All depends on whether K between A & C is void or voidable – if void, A never got title to goods to pass to D • If voidable – D can say should not be set aside if a bona fide purchaser for full value • So, C wants to say K is void in such cases…(no title would have passed to D)

36. How to achieve this? • Claim mistake in CL – i.e mistake had effect of rendering C’s deal with A (pretending to be B) void • Won’t it always be unilateral mistake? • But can it work? Contradicting case-law

37. Cundy v Lindsay • Fraudster ordered goods in name of Blenkarn & Co from 123 Wood Street…firm of Blenkiron & Co operated on the same street • Vr believed dealing with the real one, dispatched goods • K void for UM – Vr intended to deal with real company, was making mistake, the other party to the K knew all about it.

38. Contract with fraudster who defrauds on identity • Cundy v Lindsay: K = void (no 3rd party defence)

39. Phillips v Brooks • F pretends to be Sir George Bullough

41. And induces jeweller to part with goods- wanted to take a ring to his wife – cheque bounced • Ct held here K was not void (i.e. no mistake in CL) but only voidable (the catch-all equity) • Ct held jeweller meant to contract with the person in the shop and although mistaken as to who he was, did not matter for CL mistake

42. Contract with fraudster who defrauds on identity • Cundy v Lindsay: K = void (no 3rd party defence) – (i.e. you intend to contract with the identity presented to you) • Phillips v Brooks: K = voidable (3rd party defence) - (i.e. you intend to contract with the person presented to you)

43. Ingram v Little • Seller of car only accepted cheque when F pretended to be a particular person • Majority view – offer to sell was directed to that person, not the Fraudster • Devlin LJ in dissent echoed Phillips • Case of little old ladies and a rogue…

44. Contract with fraudster who defrauds on identity • Cundy v Lindsay: K = void (no 3rd party defence) – (i.e. you intend to contract with the identity presented to you) • Phillips v Brooks: K = voidable (3rd party defence) - (i.e. you intend to contract with the person presented to you) • Ingram v Little as per Cundy

45. Lewis v Avery • Fraudster got car by pretending to be well known actor – Richard Green – had fake ID • Lord Denning in CA – voidable not void • Presumption where you deal with person face to face that you intend to deal with that person, irrespective of mistake as to ID

46. Contract with fraudster who defrauds on identity • Cundy v Lindsay: K = void (no 3rd party defence) – (i.e. you intend to contract with the identity presented to you) • Phillips v Brooks: K = voidable (3rd party defence) - (i.e. you intend to contract with the person presented to you) • Ingram v Little as per Cundy! • Lewis v Avery as per Phillips!

47. Shogun Finance v Hudson (2004) • F got D. licence and forged signature to obtain car from dealer – offer to sell was made to holder of licence (Patel) • F sold on the car to BF purchaser for value • Remember the principles – nemo dat quod non habet

48. Lord Hobhouse • Focussed on written agreement • K named Patel, therefore offer was made to Patel

49. Lord Philips and Walker • In face to face dealings you intend to deal with the person physically present • Lord Walker said phone could count • Ingram v Little seems wrongly decided in light of this… • But presumption did not apply to written contracts – turned purely on terms (like Hobhouse said)

50. Lord Nicholls and Millet (Dissent) • General proposition – person is presumed to intend to contract with the person with whom he is actually dealing