UNIVERSITY OF THE WEST INDIES, MONA

FACULTY OF LAW

CONTRACT II
LAW 2110
ACADEMIC YEAR 2022/2023

WORKSHEET 1 – THE LAW OF MISTAKE

Learning objectives: The student should be able to:

 classify and recognise the types of mistake

 explain the legal principles governing the law of mistake
and suggest bases of distinctions for cases where
relevant
 explain the legal effect of mistake
 apply the legal principles learned to hypothetical fact
situations
 explain the theoretical underpinnings of the doctrine of
mistake
 discuss reasons for the apparent restrictive application
of the doctrine

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Read: Clacken v Causwell (Jamaica)Supreme Court no. 2008 HCV 01834, delivered 12 Nov 2010,
paras. 151-157 (made available on ourVLE) for a concise statement on the law of mistake.

COMMON MISTAKE – both parties make the same mistake. In law, a common mistake will only
affect the validity of a contract if it is fundamental. In such a case, it will nullify the contract.
Classic examples of this are res extincta cases. [Care! Some judgments have used the term mutual
mistake to refer to situations which are essentially cases of common mistakes.]

Couturier v Hastie (1856) 5 H L Cas 673

(Ja) Sale of Goods Act, s.7

Note that cases of res sua may be considered as being similar to res extincta cases: Cooper v
Phibbs (1867) L R 2 HL 149.

McRae v Commonwealth Disposals Commission (1951) 84 C L R 377

Sheik Bros v Ochsner [1957] A C 136.

Bell v Lever Bros Ltd [1932] A C 161

Associated Japanese Bank (International) Ltd v Credit du Nord [1989] 1 W L R 255

Think: Is Bell v Lever Bros reconcilable with Associated Japanese Bank?

Great Peace Shipping v Tsavliris Salvage Ltd [2002] 4 All E R 689

See esp Lord Phillip’s judgment in Great Peace in which he identifies five elements which
must be present for a common mistake to be operative. Apply these to the facts of
Associated Japanese Bank. What outcome did your application yield?

Graves v Graves [2007] EWCA Civ 660

Kyle Bay v Underwriters Subscribing [2007] EWCA Civ 57

Triple Seven v Azman Air Services Ltd [2018] EWHC 1348 (Comm)

Sagicor Bank v Lakeland Farms Ltd [2017] JMCC Comm 34, paras. 38-42

Additional Reading: D Capper, ‘Common Mistakes in Contract Law’ (2009) Singapore Journal of
Legal Studies 457, esp 457-463. (In JSTOR database)

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Mistake in equity? The notion of an equitable doctrine of mistake took root in Solle v Butcher
[1949] 2 All E R 1007. BUT the concept of mistake in equity is now dubious having regard to the
judgment in Great Peace Shipping (supra) which has discredited the doctrine. Is there a separate
and distinct test which gives rise to an equitable jurisdiction to rescind contracts which are not
void at law?

Read: M Pawlowski, ‘Common mistake: law vs equity’ 152 N L J 132.

Some limited application of the notion whereby the court will grant equitable remedies, eg.
rectification, on the basis of mistake in certain circumstances: Swainland Builders Limited v
Freehold Properties Limited [2002] EWCA Civ 560.

MUTUAL MISTAKE – both parties are at cross-purposes – thinking different things. Thus consent
is negatived and, technically, no contract comes into existence.

Raffles v Wichelhaus (The Peerless) 159 E R 375

Scriven Bros v Hindley [1913] 3 K B 564

cf Smith v Hughes (1871) L R 6 Q B 597

UNILATERAL MISTAKE – one party is mistaken and usually the other party is aware of this.

a) Identity cases
Many cases involving unilateral mistake have arisen in respect of personal identity.
Many of them also raise the issue of misrepresentation. Note, however, that the legal
effect of mistake is different from the legal effect of misrepresentation.

Cundy v Lindsay (1878) 3 App Cas 459

King’s Norton Metal Co v Edridge, Merrett & Co (1897) 14 T L R 98

Phillips v Brooks [1919] 2 K B 243

Ingram v Little [1960] 3 All E R 332

Lewis v Averay [1972] 1 Q B 198

Shogun Finance Ltd v Hudson [2004] 1 A C 919

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 b) Documents mistakenly signed – The general principle is that a person is bound to the
terms of a contract he has signed. However, pleas of non est factum (this is not my
deed) are likely to succeed if it is shown that the document signed was fundamentally
different from what the signatory believed it to be, provided he was not careless
about signing it.

Saunders v Anglia Building Society (Gallie v Lee) [1971] A C 1004

Campbell v Consolidated Caribbean Investments [2016] JMSC Civ 100, paras. 1-27

Williams-Phillips v University Hospital Board of Management [2018] JMSC Civ 15

Lloyds Bank plc v Waterhouse [1990] Fam Law 23

Note court’s reluctance to vitiate contracts on the basis of other types of unilateral mistake:
Statoil v Louis Dreyfus Energy Services [2008] EWHC 2257 (Comm).

MISTAKES OF LAW.

Up until 1999, mistakes of law could not have the effect of invalidating a contract. But see:

Kleinwort Benson v Lincoln County Council [1999] 2 A C 349 which abolished the rule and held
that monies paid under a mistake of law were recoverable.

Is there an attempt to limit the scope of the Kleinwort Benson v LCC principle? See:

Brennan v Bolt Burdon [2004] EWCA Civ 1017. In Deutsche Morgan Grenfell Group v Inland
Revenue [2006] UKHL 49 at para 27, it was stated, referencing Bolt Burdon: “[T]he circumstances
in which a payment is made may show that the person who made the payment took the risk that,
if the question was fully litigated, it might turn out that he did not owe the money. Payment
under a compromise is an obvious example”.

Consider: How akin is this statement to the rule in McRae (supra)?

NB. LEGAL EFFECT OF MISTAKE: Where mistake operates, it makes a contract void. Cf cases
involving misrepresentation (Worksheet 2).

Reading: Stone, Modern Law of Contract (13th ed) Ch 9, pp 313-342

Kodilinye, Commonwealth Caribbean Contract Law, Ch 8

Cheshire, Fifoot & Furmston, Law of Contract (17th ed) Ch 8 pp 295-340

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 Smith & Thomas, A Casebook on Contract (12th ed) Ch 23 pp 669-699

cb
FOL

Tutorial Questions
1. Jeff enters into a contract with Eddy to sell Eddy his, Jeff's, 1945 Ford ZX car for $100,000
and his broodmare (a horse he keeps for breeding), Anna, for $80,000. Unknown to both
Jeff and Eddy, Lesley, Jeff's daughter, writes off the car two days before the contract was
made.

Also, three weeks prior to the contract between Jeff and Eddy, Anna, the broodmare, falls
and becomes barren. Anna is now worth only $10,000. Neither Jeff nor Eddy, who is
purchasing Anna for breeding purposes, knows of this at the time of the contract.

Advise Eddy.

2. There are few situations in which the doctrine of mistake has any practical role to play.
Discuss.

3. SD Ltd, hardware distributors, is in financial distress and is downsizing its operations. Its
inventory records show that it has lumber worth $400m at a storage facility located at 53
Bracket Avenue. SD Ltd contracts with Hammer Ltd for the sale of all the lumber at 53
Bracket Avenue. Subsequently, Hammer Ltd which has had to hire various heavy duty
equipment to remove the lumber, dispatches its agents to 53 Bracket Avenue to load and
transport the lumber. To their surprise, there is no lumber at the location, and they soon
learn that there was never a lumber storage facility there. Hammer Ltd sues for breach
of contract. SD Ltd, whose inventory records were completely erroneous, pleads mistake
in its defence.

Advise SD Ltd on whether its defence is likely to succeed.