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Mistake - Coggle Diagram

- - - - Cross purpose:
        
        Both parties are mistaken but they are mistaken on different points / issues
      - Common mistake:
        
        Both parties are mistaken on same points / issues
        
        Situations of mistake:
        
        Res Extincta
        
        Res Sua
        
        Possibility of Performance
        
        Mistakes as to Quality of SM
- - - - Raffles v Wichelhause (1864):
        
        Facts: C (Mr Raffles) offered to sell cotton to D (Mr Wichelhaus). The cotton was brought to Liverpool by ship from Bombay (India). Ship was named Peerless, but there 2 ships with the same name. C and D were both thinking of different Peerless ship when they agreed to make sail. One of the ships was due to leave Bombay in October which was what D thought for his cotton delivery. But C was referring to the ship that was to leave in December. When the cotton arrived at Liverpool, D refused to pay as in his mind it was months late. C sued D for breach of contract.
        
        Issue: Whether there was an enforceable contract between parties.
        
        Held: Contract between C and D not enforceable. When contract is discussed, there is ambiguity on what ship was being referred to, and no agreement made in terms of sale. There was no "consensus ad idem" / meeting of the minds for a binding contract. The test made it clear that a reasonable person won't be able to identify with certainty what ship was agreed on.
      - Scriven Brothers v Hindley (1913):
        
        Facts: C (Scriven Bros & Co) instructed an auctioneer to sell larges bales of tow and hemp on behalf of them at an auction. Bales looked similar in the way it was packaged, and the displays do potential bidders was not easily recognisable. D (Hindley & Co) believed they were bidding for 2 lots of hemp when actually one of the lots was tow. Bid was overpriced but accepted by C. When D found out that it was tow, they refused to pay and C sued them for price.
        
        Issue: Whether there was a contract between the 2 parties or if it would be void for mutual mistake as to subject matter of contract.
        
        Held: Court held that there is no contract between C and D due to faults on both sides. = NO "consensus ad idem" / meeting of the minds to make a binding contract. C had not made the hemp and tow clear enough. D did not bring the catalogue to the action and checked the samples thoroughly before bidding. D's negligence contributed to mistakes of C.
  - - - Res Extincta
        
        Mistake as to existence of subject matter
        
        There is initial impossibility - it cannot be performed from the very onset (void ab initio)
        
        If the parties contracted believing that the subject matter existed but it no longer does, then the contract will be void on the grounds of mistake
        
        e.g. (A) contracts to sell his car to (B) but unknown to both parties. The car exploded the night before the contract was entered into.
        
        A) In situations where goods once existed and then perished / ceased to exist before the contract was entered into - S6 SOGA 1979 - perishing of goods will amount to a mistake
        
        Strickland v Turner (1862):
        
        Facts: C (Strickland) entered into a contract for annuity and life insurance on the life of D (Turner) with an insurance company. But at the time contract was made, D already died. C nor the insurance company were aware of this when the contract was made and this did not have an effect on their agreement at the time of formation. It was later found that D was dead and the remedy was sought.
        
        Issue: Whether C can be given a refund on his premium due to D being already dead at the time the contract was made. Also, court must decide whether the contract between both parties is void.
        
        Held:
        
        Contract between C and the insurance company is void. Since there is lack of consideration at the time of agreement nor an inquiry on the health of D. This was classed as a common mistake to the contract and no party is at fault for it.
        
        Thus C is entitled to receive his premium due to this mistake. Also stated that the mistake to the subject matter of a contract must be fundamental and persuade both parties to enter into an agreement.
        
        Since D was dead at the time the parties made the contract, contract = void
        
        B) Situations where Subject Matter did not exist at all and neither party was aware of this mistake,
        
        Then the discussion in McRae v Commonwealth Disposal Commission (1951) HC of Australia will apply
        
        Depends on the construction of the contract
        
        Seller guaranteed that the Goods Exist
        
        The Risk was assumed by the Seller who guaranteed that the Goods Exist.
        
        Seller CAN be sued for BoC, BoC Seller cannot plead for Mistake
        
        The Seller DID NOT Guarantee the existence of the goods
        
        Seller CANNOT be sued for
      - Res Sua
        
        Mistake as to the Ownership of Property
        
        There is an initial responsibility - it cannot be performed from the very onset (void ab initio)
        
        This is a situation where the buyer in the contract already owns the property that he was contracting to buy
        
        Cooper v Phibbs (1967):
        
        Facts: C (Mr Cooper) is the nephew of the owner of the salmon fishery in somewhere in Ireland. C leased the salmon fishery to his Uncle. When uncle died the lease came up for the time of renewal. C renewed the lease for the fishery with his Aunt. But it was later found in the Uncle's will that C would get full life tenancy of the fishery. This means that was no need to lease the existed between him and the Aunt. The dispute rose when the next payment was due.
        
        Issue: Whether Mr Cooper is the owner of the Salmon fishery and whether the lease would be void
        
        Held:
        
        The contract and lease that existed between C and D was voidable rather than void (voidable is more flexible than void itself). This is due to the claim being in equity, where C had beneficial ownership of the fishery but not legal ownership. This case concerns 'res sua' - mistake as to title of property.
        
        C was already the beneficial owner of the fishery and there could not be a list. Thus this type of agreement will be set aside due to common mistake on both parties.
        
        Case uses equity = more flexible
      - Mistake as to the Possibility of Performance
        
        This is where there's a mistake that the perfomrnace was possible when in fact it is NOT. Prof Treitel divided it into following categories:
        
        a) Physical Impossibility:
        
        Sheikh Brothers v Oschsner (1957)
        
        b) Legal Impossibility:
        
        Cooper v Phibbs (1867)
      - Mistake as the Quality of Subject Matter
        
        Refers to where both parties believe the subject matter is of a certain quality / have a certain quality, whereas in reality it does not
        
        We have to consider a mistake at:
        
        Common Law
        
        Contract is VOID
        
        Per Lord Atkin in Bell v Lever: A mistake as to quality refers to a mistake of "some quality that makes the thing essentially different from what it's believed to be"
        
        e.g. A contract for a particular artist's work, turns out not to be by that artist
        
        Doctrine of common mistake as to quality at common law operates very narrowly (high threshold)
        
        1 more item...
        
        Equity
        
        Contract is VOIDABLE
        
        This is a more flexible doctrine of mistake to mitigate harshness of common law
        
        So, if there is situations with a common mistake, but not one with sufficient importance to render the contract void at law, courts can use equity to hold the contract voidable
        
        In the case of Solle v Butcher, CA stated that the HoL in Belle v Lever addressed only the mistake at law but NOT equity
        
        The equitable doctrine was exercised by the courts of the power of being able to set aside a contract in substantial justice between the parties by imposing conditions when exercising the power
        
        2 more items...
- - - - Smith v Hughes (1871):
        
        Facts: C sold D (buyer) oats after showing him a sample of the oats (new oats). D mistakenly thought he was buying old oats where it was actually new oats. C did nothing wrong to induce the mistake and was unaware of it. D refused to accept the oats and pay for it and C sued for the purchase price.
        
        Held:
        
        Court held that for a mistaken assumption of one party to be enough to vitiate a contract (make it void), the mistake must be known to the other party and it must be a mistake as to what is promised The contract is valid
        
        Hence, the contract would've been void if 2 factors were present:
        
        1) D (buyer) must've mistaken the promise made to him by C. In this case the promise would've been the age of the oats. = Mistake as to the terms of the offer
        
        2) C knew about D's mistake on the nature of the promise made to him by C
        
        If the Buyer correctly understood that the seller was selling oats, but he thinks that it's old oats, Buyer is bound by the contract / bad bargain that he has entered into. There's responsibility on the Seller to correct the Buyer and inform that he's mistaken
        
        Courts use the Objective Approach in deciding this - what is in the minds of reasonable parties in this circumstances
      - Snapping Up an Offer
        
        In situations where one party 'snaps' at the obviously mistaken offer of another, then the contract can be set aside on grounds of Mistake.
        
        So if a non-mistaken party who 'snaps' at the mistaken offer of another, won't have reasonably thought the mistaken offer is a real one
        
        What needs to be satisfied:
        
        B is aware of A's mistake and
        
        B's conduct is such that its unconscionable / inequitable for him to hold A to contract
        
        Hartog v Colin & Shields (1939):
        
        Facts: D (Colin & Shields) are hide merchants in London. D entered into an oral agreement with C to sell him hare skins for 10d per pound. But D made a mistake on their written agreement that said they will set C at 10d per pound. This means that the price difference is 1/3 cheaper for C than previously agreed. C accepted the offer but D refused to fulfil the contract.
        
        C argued he suffered loss of profit and claimed damages when D didn't honour the contract. D argued that C would've known that this was a mistake to the price of hare skin and that he fraudulently accepted the offer.
        
        Issue: Whether the contract is rescinded for the mistake to the price of hare skin.
        
        Held:
        
        There was no contract between C and D. Any contract would be void by mistake of the hare skin price, C would've known that it was normally sold per piece and not by pound.
        
        Court said that there is a duty to correct a mistake that is not the real intention of the person making it. You cannot simply take advantage and 'snap up' the offer
    - - The most common form of unilateral mistake that is actually actionable, where there is a mistake of identity.
        
        e.g. A sells some goods to B. A is mistaken as to the identity of B, who is actually a fraud. A transfers property of goods to B before receiving anything in return. B then sells goods to C, and B disappears.
        
        Mistake as to identity arises as the result of fraudulent actions of a wrongdoer, aka the "Rogue"
        
        A typical situation of Mistake happens when:
        
        a rogue presents himself to an innocent vendor and offers to purchase goods. Rogue deceives the vendor to his identity. Vendor sells goods to the rogue and leaves with the goods.
        
        Rogue usually gives the Vendor a cheque that is not honoured. When Vendor seeks the return of goods from the Rogue, he finds that
        
        (a) the rogue for what he is
        
        (b) the rogue has vanished
        
        (c) the rogue has sold the goods to an innocent 3rd party
        
        Courts must now face with litigation between the (deceived and mistaken) vendor as C and the (innocent) 3rd party as D, where C wants his goods back.
        
        The court must decide which of these 2 'victims' will bear the cost of the rogue's deception
        
        If the contract between the rogue and the vendor is:
        
        Valid:
        
        Cost will be borne by vendor because by this contract, the rogue acquired good title to the goods and can sell them to the 3rd party
        
        TP Is SAFE
        
        Void:
        
        Cost will be borne by 3rd party, as the rogue never acquired title to the goods. The vendor must recover his goods from the 3rd party
      - The Law on Mistake as to Identity - Cundy v Lindsay (1878)
        
        A) IN WRITING (Inter Absentes):
        
        MISTAKE AS TO IDENTITY
        
        Where the Rogue impersonates a REAL person, a legitimate person / firm
        
        The Innocent party (vendor) is familiar or has heard of this legitimate firm and intends to contract with the identifiable person that knew / heard of
        
        Cundy v Lindsay (1878):
        
        Facts: Rogue called Blenkarn, gave address as 37 Woos Street Cheapside. Ordered handkerchiefs from C. Signed deceitfully as "Blenkiron & Co". He impersonated a legitimate respectable firm that carried out their business on 123 Woodstreet. Firm was known by reputation to C.
        
        The innocent party thought they were dealing with a legitimate firm and shipped the goods to the rogue. Rogue didn't pay and sold the goods to D. C sought to recover the goods from D on grounds that the contract with Rogue was void for mistake
        
        Held:
        
        Contract void, because there was a lack of consensus (mistake)
        
        C did not intend to deal with Blenkarn but Blenkiron - a firm that they knew
        
        The order form was signed "Blenkiron"
        
        Therefore:
        
        If Vendor thinks he agreed with C (legitimate firm) as he believed (Rogue), with whom he was negotiating, is C and if B is aware that Vendor did not intend to make an agreement with him
        
        and if Vendor established that the identity of C was very important, then the contract with the Vendor and B (Rogue) will be void
        
        MISTAKE AS TO ATTRIBUTES
        
        Where Rogue pretends to be another person - A fictitious person (non-existent person)
        
        He convinces the Vendor that he's able to make payment (creditworthy) for the items that he purchased.
        The Vendor heard of the person the Rogue is claiming to be, but he believes his believes his creditworthiness and enters into a contract with the Rogue
        
        King's Norton Metal Co v Edridge Merett (1897):
        
        Facts: Rogue pretends to be Hallam & Co that is purported to be a large wealthy firm with many offices. Rogue was actually Wallis and there's no such firm/office in existence.
        
        Ordered goods from the metal manufacturer, the innocent party shipped the goods to the Rogue. Rogue did not pay and sold the goods to D. C sought to recover the goods from D on grounds that the contract with Rogue was void for mistake
        
        Held:
        
        Contract was not void as C wanted to contract with Hallam.
        
        They were just mistaken as to attributes (like creditworthiness) of the Rogue. It will generally be insufficient to render the contract void.
        
        The contract was voidable for misrepresentation but that would stop title passing to the rogue and D therefore acquired good title to the goods
        
        B) Contract Face to Face (Inter Praesentes):
        
        Vendor meets the Rogue face-to-face and contracts with him.
        
        Courts frequently said that the Rogue is identified by 'sight and hearing'
        
        PRESUMPTION:
        
        There's Presumption that where parties are dealing Face to Face (parties are before each other), its the intention that the mistaken/deceived party intended the contract with the person standing before him
        
        Thus, a valid contract has risen
        
        Lewis v Averay (1972):
        
        Facts: Rogue called himself Richard Greene, offered to buy C's car where he signed a cheque. C did not take the car away until the cheque was cleared.
        
        The Rogue produced an admission pass to Pinewood Studios bearing the name Richard A Greene, his address and photograph and an official stamp.
        
        C allowed the Rogue to take the car in exchange for the cheque. Cheque was dishonoured where Rogue sold the car to D. C sought recovery from D
        
        Held:
        
        Contract was voidable. The presumption applied, the Vendor intended to deal with the person before him.
        
        Nothing to displace the presumption that C intended to deal with the party in front of him
        
        REBUTTAL:
        
        This presumption can however be rebutted if there is clear evidence that the Vendor did not have the intention to contract
        
        Ingram v Little (1961):
        
        Rogue visited 2 sisters to buy their car where he wanted to pay by cheque. C said that they would not accept it. He then said that he was P.G.M Hutchinson of Stanstead House, Caterham.
        
        Neither of C's had heard of this person. One of them went to the Post Office, checked in the telephone directory and confirmed that there was such a person.
        
        They believed that Rogue was P.G.M Hutchinson and allowed him to pay by cheque and take the car. Cheque was dishonoured, Rogue sold the car to D and C sought recovery of car from D
        
        Held:
        
        Contract between C and Rogue was VOID because of Mistake as to Identity.
        The presumption was displaced on the facts of the case. It has been suggested that courts were more lenient in Ingram v Little due to sisters being elderly women, they did their due diligence (they checked the identity) thus were protected for policy reasons
        
        Shogun Finance v Hudson (2003):
        
        Facts: Fraud (A) visited a motor dealer (B) and expressed interest in purchasing a car. During negotiations, (A) used a stolen driver's licence as proof of identity, name and address. (B) was happy with this and both agreed for the price of the car. Shogun Finance (C) was contacted and they agreed to finance the hire purchase of the car.
        
        Document was signed for the finance agreement used the stolen driver's identity but (A) signed himself with a forged signature. (C) did the required credit checks on the identity of the stolen driving licence and approved the finance.
        
        (A) took the car and sold it to an innocent 3rd party (D) and disappeared.
        
        Held:
        
        Contract was void for mistake as to identity. Due to forged contract, (C) believed they were entering into a contract with the owner of the stolen licence, in reality it was fraud. The courts favoured the (C)
        
        Therefore:
        
        Courts will favour the company depending on the level of activity of the vendor. More activity the vendor, more favour to the company by courts