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Contractual Terms, 4. FRUSTRATION, 2. MISREPRESENTATION, 3. ILLEGALITY,…

- - - - Exception to parol evidence rule:
        Elias v George Sahley & Co: Where a document signed by a party refers to some other document or transaction, parole evidence is admissible to explain the references.
        Gillespie Bros v Cheney: It is open to the parties to allege that there was, in addition to what appears in the written agreement, an antecedent express stipulation not intended by the parties to be excluded, but intended to continue in force with the express written agreement.
        Pym v Capmbell: The parol evidence rule generally prohibits the introduction of oral evidence to alter a written agreement, but allows it to prove a condition precedent, as in this case, where the written agreement was never intended to be binding until a specific condition was met.
        City and Westminster Properties v Mudd: The court allowed evidence of oral assurance to be presented as it related to a separate collateral agreement and did not contradict the lease itself.
- - - - 4. A promise (does not amount to a representation)*
        
        Kleinwort Benson Ltd. v Malaysia Mining Corporation Berhad [1989] 1 WLR 379
        Malaysia Minining Corp MMC was parent compnay of subsidiary MMC Metals - plaintiff Kleinwort Benson a merchant bank was negotiating with MMC Metals to provide a loan facility (10 million pounds) - during negotiations MMC refused to act as a gaurantor for subsidiary MMC Metals - instead MMC provided Kleinwort a "letter of comfort" stating
        "it is our policy to ensure that the business of [MMC Metals] is at all times in a position to meet its liabilities to you under the [loan facility] arrangements."
        In reliance on this letter, Kleinwort Benson granted the loan to the subsidiary co - the tin market later collapsed and MMC Metals went into liquidation, and the bank demanded payment from parent co MMC - MMC refused to pay claiming the letter was not legally binding - Kleinwort sued - CoA overturned HC decison and held that the letter of comfort did not create a binding contract
        
        comfort letters amounted merely to a moral obligation and was a statement of fact giving rise to a MORAL obligation, not a representation or promise as to future conduct
        
        A representation of law???
- - - - d. Where the contract is uberrimae fidei (of utmost good faith) -a legal doctrine requiring parties to a contract, particularly insurance agreements, to be completely honest and transparent, disclosing all material facts to one another:
        
        Bufe v Turner (1815) 6 Taunt. 338
        the insured failed to disclose that a fire had broken out on the adjacent house on the day of the insurance proposal and the non-disclosure nullified the contract
        Carter v Boehm (1766)
        Lord Mansfield articulated the principle of uberrimae fidei in insurance contracts, holding that both the insured and the insurer have a reciprocal duty to act with honesty and disclose all material facts that they know or ought to know to each other. A concealment of facts will therefore void a policy.
        
        established the duty of uberrimae fidei in insurance contracts - Carter insured a fort against being taken by a foreign enemy with an insurer Boehm - Carter knew the fort was poorly defended against foreign powers and that war was likely but did not disclose these facts - after the fort was captured, the insurer refused to pay the claim
        Court presided over by Lord Mansfield ruled in favour of Carter stating that while the duty of disclosure was crucial, the risk of war and the fort's vulnerability to an enemy was a matter of public and political knowledge that the insurer could and ought to have known.
- - - - 3. Innocent misrepresentation
        This is a false statement which the person makes honestly believing it to be true. The remedy is based in common law or statute. So a wronged party can either opt for:
        
        Rescission with an indemnity in common law, or
        
        Damages in lieu of rescission under the courts discretion under statute:
        
        Misrepresentation Act s. 3(2) (TTO)
        Section 3(2) of Trinidad and Tobago's Misrepresentation Act allows a court or arbitrator to award damages in lieu of rescission for a non-fraudulent misrepresentation if it would be equitable to do so, considering the nature of the misrepresentation and the potential losses for both parties.
        "Where a person has entered into a contract after a misrepresentation has been made to him otherwise than fraudulently, and he would be entitled, by reason of the
        misrepresentation, to rescind the contract, then, if it is claimed, in any proceedings arising out of the contract, that the contract ought to be or has been rescinded, the Court or arbitrator may declare the contract subsisting and award damages in lieu of rescission, if of opinion that it would be equitable to do so, having regard to the nature of the misrepresentation and the loss that would be caused by it if the contract were upheld, as well as to the loss that rescission would cause to the other party."
        
        This prevents disproportionately harsh outcomes where rescinding the contract would cause more harm to the defendant than the loss suffered by the misled party
    - - 1st - Knowledge of the representor
        Caparo Industries plc v Dickman
        Caparo an investor bought shares in Fidelity plc - Caparo relied on Fidelity's negligently prepared annual accounts audited by Dickman which showed a pre-tax profit when the company was actually operating at a loss - Caparo sued Dickman for negligence - The auditors owed no duty of care to individual investors or the public - insufficient proximity between auditors and potential investors like Caparo
        
        Smith v Eric S Bush [1990] 1 AC 831
        Mrs. Smith who wanted to buy a house applied for a mortgage from Abbey National Building Society - the firm of surveyers Eric S Bush was hired by the building society to perform a valuation report - Mrs. Smith paid the building society for the report - the valuation report included a disclaimer of liability to the purchaser but failed to identify structural defects (removal of chimney supports). Mrs. Smith bought the house based on this report and later the chimney collapsed -
        House of Lords held that a surveyor owed a duty of care to a homebuyer who relied on a negligent valuation report, even though there was no direct contract between them - disclaimer ineffective and surveyor liable for damages resulting from negligent valuation
        
        Esso Petroleum v Mardon [1976] QB 801 relative expertise of person making rpresentation
        Esso estimated that a new petrol station would have an annual throughput of 200,000 gallons of petrol - planning restrictions made this impossible however - esso leased the station to mardon based on this flawed estimate which was not corrected - Mardon lost significant money and Esso later sued for unpaid bills - Esso argued estimate was a mere opinion while the court found Esso liable for negligent misrepresentation - pre-contractual statements made by an expert can create a duty of care to ensure the representation is accurate (negligent misstatements causing pure economic loss)
        
        2nd - The purpose for which the statement was made
        Smith v Eric S Bush [1990] 1 AC 1831
        Mrs. Smith who wanted to buy a house applied for a mortgage from Abbey National Building Society - the firm of surveyers Eric S Bush was hired by the building society to perform a valuation report - Mrs. Smith paid the building society for the report - the valuation report included a disclaimer of liability to the purchaser but failed to identify structural defects (removal of chimney supports). Mrs. Smith bought the house based on this report and later the chimney collapsed -
        House of Lords held that a surveyor owed a duty of care to a homebuyer who relied on a negligent valuation report, even though there was no direct contract between them - disclaimer ineffective and surveyor liable for damages resulting from negligent valuation
        
        Caparo v Dickman
        Caparo an investor bought shares in Fidelity plc - Caparo relied on Fidelity's negligently prepared annual accounts audited by Dickman which showed a pre-tax profit when the company was actually operating at a loss - Caparo sued Dickman for negligence - The auditors owed no duty of care to individual investors or the public - insufficient proximity between auditors and potential investors like Caparo
        
        3rd - It must be reasonable for the representee to rely upon the representor's statement. Where the statement is made in a commercial context the courts will generally be much readier to infer that it was reasonable to rely upon the statement
        
        NEGLIGENT MISREPRESENTATION AT COMMON LAW MUST BE DISTINGUISHED FROM THE LIABILITY WHICH MAY ARISE UNDER SECTION 2(1) UK ACT / 3(1) OF THE MISREPRESENTATION ACT OF TTO
        
        Trinidad and Tobago and many other Caribbean Islands have misrepresentation acts which are based on England's Misrepresentation Act 1967.
        Remedies for a negligent misrepresentation can be found in s3(1) of TTO/ s 2(1) of UK's
        3 (1) Where a person has entered into a contract after a
        misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true.
  - - - Evidence that the untrue/ false statement of fact induced one contracting party (representee) to enter into the contract: (materiality and reliance). The requirements are that:
        
        (i) the misrepresentation must be material (had the statement not been made, you would not have entered it - materiality threshold would not be met if the representee could not have said to have "relied upon it"
        
        (Materiality)
        
        (ii) the misrepresentation must have been relied upon
        
        (Reliance)
        The second component to consider when looking at inducement relates to actual reliance. It must be shown that the representee relied on the misrepresentation. This rule will therefore not apply if:
        
        - i. the representee was unaware/never knew of the existence of the misrepresentation
        Re Northumberland & Durham District Banking Co., ex P. Biggs (1858) 28 LJ Ch 50
        The Northumberland and Durham District Banking Company was a joint-stock company - Mr. Best purchased shares in company - claimed he was induced to buy them based on fraudulent misrepresentation made in the company's prospectus or other communications - company subsequently began winding up (liquidation proceedings) - after the winding-up order was made, Mr. Best sought to have his name removed from the list of contributories i.e. persons liable to contribute to company's debts in a winding up - argued his share purchase was voidable due to the misrepresentation and he should therefore not be treated as a shareholder
        
        - ii. the representee knew that the representation was untrue
        Central Railway Co of Venezuela v Kisch (1867) LR 2 HL 99
        Mr. Kisch saw a prospectus for a new co Central Railway Co of Venezuela, which invited the public to subscribe for shares - the prospectus contained statemenets which gave an overly optimistic misleading impression of company's financial health - failed to disclose certain facts that would have shown the company in a less favourable light - based on reliance on the statements in prospectus, Kisch purchased shares - company later failed and Kisch upon discovering the misrepresentations sought to have his share subscription rescinded -
        HoL allowed Kisch to rescind share purchase - promoters and directors have a duty to state everything in a prospectus with "strict and scrupulous accuracy" when inviting public to subscribe for shares - further Kisch had no duty to embark on an independent investigation to determinb truthfulness of the prospectus
        
        - iii. the representee did not allow the representation to affect his judgement/did not rely on the misrepresentation
        
        Smith v Chadwick (1884) 9 App Cas 187
        A company issued a prospectus to attract investors for its shares - the prospectus contained statements that were false - Mr. Sith subscribed for shares - when company failed, Smith sued directors for fraudulent misrepresentation
        HoL ruled that directors not liable since the there was no evidence that false statements, particularly the one claiming a respected MP was a director of company, did not induce Smith into buying shares
        
        Attwood v. Small (1838) 3 Y&C Ex 105
        Mr. Small was selling a mine and estate to the claimant Mr. Attwood for 600,000 pounds - Small made inaccurate and inflated statements about the mine's profitability to Attwood during negotiations - Attwood being cautious did not immediately rely on statements and instead employed independent surveyors to inspect mine and verify the accounts - Attwood's surveyors incorrectly reported that Small's accounts were accurate and that the mine's profitability was as stated - Attwood relied and proceeded with purchase - after purchase Atwood discovered the truth about the lack of profitability and sought to have contract rescinded for misinterpretation - HoL held his claim failed finding that Attwood had not relied on the false statements made by Small - by commissioning his own independent investigation, he had demonstrated that he did not trust or rely on Small's representations
        
        Redgrave v Hurd (1881) 20 Ch D 1
        Mr. Redgrave a solicitor advertised for a partner to join his practice and buy his accompanying house - during negotiations with Mr. Hurd, Mr. Redgrave stated that the practice generated approximately 300 pounds per year - in reality the income was closer to 200/year - When Mr. Hurd reviewed some of the accounts, he noticed they only showed an income of 200 pounds. Redgrave then pointed to other papers claiming they proved the rest of the business and offered Hurd a chance to look at them - Hurd did not inspect and the contract was signed - if he had looked at the papers he would have seen trivial amounts of business - Hurd later discovered the truth and refused to compelte purchase Redgrave sued for specific performance -
        The court reasoned that since a material representation was made with the intent to induce a contract, it is a presumption of law that the party receiving the misrepresentation was in fact induced by it
        case is often contrasted with Attwood v Small, where the claimant did an independent investigation. In Redgrave, the claimant did not investigate, and the court held he was still entitled to rely on the representor's statement
        
        Smith v Eric S Bush [1990] 1 AC 831
        Mrs. Smith who wanted to buy a house applied for a mortgage from Abbey National Building Society - the firm of surveyers Eric S Bush was hired by the building society to perform a valuation report - Mrs. Smith paid the building society for the report - the valuation report included a disclaimer of liability to the purchaser but failed to identify structural defects (removal of chimney supports). Mrs. Smith bought the house based on this report and later the chimney collapsed -
        House of Lords held that a surveyor owed a duty of care to a homebuyer who relied on a negligent valuation report, even though there was no direct contract between them - disclaimer ineffective and surveyor liable for damages resulting from negligent valuation
        
        Peekay Intermark Ltd. v. Australia and New Zealand Banking Group Ltd. [2006] EWCA Civ 386; [2006] 2 Lloyd’s Rep 511
        Peekay Intermark Ltd invested in a russian government bond through Australia and New Zealand Banking Group (ANZ) - the bank's representative verbally misrepresented the investment as a simple bond but the final terms and conditions sent to Peekay described the product as a more complex structured deposit - Peekay's rep signed the final terms without reading them - GKOs subsequently became worthless when Russian government announced a moratorium on its bonds - Peekay lost their investment and sued ofr misrep arguing they relied on initial accurate misrepresentations
        Court held that Peekay had not relied on the initial misrepresentations bc they had the opportunity to discover the truth by reading the final contract documents - Furthermore, Peekay was deemed to have understood and accepted terms by signing
  - - - Lapse of time
        
        Thomas Witter Ltd v TBP Industries Ltd [1996] 2 All ER 573
        Thomas Witter purchased a carpet business from TBP Industries Ltd - during negotiations the sellers made a misrep regarding profitability of the business claiming the business would break even - it was actually making significant lossess - sale and purchase agreement included an "entire agreement clause" which stated that the written document constituted the entire agreement between parties and no rep outside of it were relied upon - buyers sought to rescind contract and claim damages under the Misrep Act 1967
        Court held that the entire agreement clause could not prevent the claim for misrepresentation - must be reasonable - damages in statute for negligent misrep are assessed as if the representation were fraudulent meaning that the claimant can recover all losses directly flowing from the misrep, not merely those that were foreseeable
        
        Zanzibar v British Aerospace ltd [2000] 1 WLR 2333
        the Government of zanzibar wanted to purchase an executive jet from the British Aerospace - in order to do this zanzibar entered into a lease agreement with a finance company, who subsequently bought the plane - however the plane was faulty and despite repairs continued to be defective - stopped paying their instalments for the plane as a result to finance co - arguing that representations of the plane by British Aerospace said it was without defects and being reliable and ready to use - finance company then took back plane and sold it
        complainants sought to rescind contract under misrep act 1967
        Court held that the contract could not be rescinded because of a clause int he sale agreement stating that the buyer could not rely on representations made by the seller - in addition the plane had already been sold
        Court considered the considerable lapse of time since the purchase as a factor militating against rescission
- - - - 2. The contracts can be illegal as performed: If the contract is ex facie lawful, but both parties intend to exploit it for an illegal purpose, it is illegal in its inception despite its innocuous (harmless) appearance:
        Jennings v Throgmorton Ry. & M. 251
        Throgmorton who was a prostitute rented rooms from Jennings - when the tenancy agreement was first made, Jennings was unaware that the rooms were being used for prostitution, however after 2 months Jennings became aware that they were being used for immoral purposes - despite this knowledge, he continued to let the premises to Throgmorton - Jennings later sued Throgmorton for rent owed
        Court ruled that Jennings could not recover the rent for the period after he discovered/became aware of the immoral use of the premise - court will not enforce a contract that is made for an immoral or illegal purpose
        agreement to use a flat for immoral purpose
        
        3. If the contract is in contraventon of public policy:
        e.g. those in restraint of trade. The contract may not be entirely void but void in so far as it contravenes public policy.
      - Remedies
        
        The general rule is that the courts will not permit the recovery of benefits conferred under an illegal contract (Holman v Johnson)
        Recovery of money or property
        Holman v Johnson (1775) 1 Cowp 341
        Holman sold tea to Johnson knowing it was intended to be smuggled into England, but did not participate in the smuggling itself - he sued Johnson for payment of the tea - Johnson argued that the contract was unenforceable bc it was connected to an illegal purpose (smuggling) - the court led by Lord Mansfield held that Holman could not have the contract enforced because the claimant was aware of its illegal purpose - a party aware of illegal purpose of a contract cannot use the courts to enforce the contract - ex turpi causa non oritur actio (no action can arise from a disgraceful cause/illegal act)
        
        Parkinson v College of Ambulance Ltd & Harrison [1925] 2 KB 1
        Charitable donation on promise would receive a knighthood - Colonel Parkinson was told by the secretary of the College of Ambulance that he would get a knighthood if he made a charitable donation - he then donated 3000 pounds and never got the knighthood - sued to recover money - it was held that his action would fail because a contract for the purchase of a title was illegal
        Taylor v Bhail [1996] CLC 377, 380
        A school had been damaged by gales (strong winds) & an insurance compnay was to cover to repair costs - The building contractor agreed with the headmaster od the school to submit an estimate inflated by 1000 pounds for the repair work which the contractor would then pay back to the headmaster - this arrange was intended to defraud the insurance company - The contractor sued for money he was owed for the work done - The CoA ruled contract was unenforceable on the principle ex dolo malo non oritur actio "no action arises from wrongdoing" - a party who willingly participates in a fraud (contractor) cannot expect the court to assist them in enforcing the contract - court rejected the contractors claim for quantum merit (payment for work done) as illegality of the underlying contract barred any claims in restitution
        Mohamed v. Alaga & Co (a firm) [2000] 1 WLR 1815
        Mr. Mohamed assisted Somali refugees with their asylum applications - he entered into an oral agreement with Alaga & Co a firm of solicitors - the terms were that he would introduce clients to them and assist them in preparing asylum applications of clients and in return receive a "commission" equivalent to half of the fees received by the solicitors - Mohamed introduced numerous clients to firm and although he received some payments he claimed that a substantial amount of commission remained outstanding - the solicitors denied the existence of the oral agreement and in any event argued it was illegal and unenforceable
        CoA confirmed the oral agreement was illegal and unenforceable because it contravened professional rules which prohibit fee-sharing with non-solicitors - but allowed Mohamed's quantum merit (payment for work done) claim for services rendered
        
        There are however 3 exceptions (instances in which a party can recover benefits conferred under an illegal contract):
        
        Where the parties are not in pari delicto, not equally at fault: divided into categories a and b
        
        a) The claimant was under a mistake of fact which rendered him unaware of the illegal nature of the contract (there may be remedy available to him)
        Oom v Bruce (1810)
        Oom took out an insurance policy on goods being shipped from a city in Russia to London - however the ship sailed after a British order in council had already made trade with that city in Russia illegal - both parties unaware of the illegality when they entered into the insurance contract - Oom sought to recover an insurance premium from Bruce arguing the insurance contract was void from the beginning
        Court allowed for the recovery of the premium - the contract was based on a mutual mistake and both parties were unaware of the illegality and as such the insurance policy had been void from the start - departure from the strict application of where the parties are equally guilty, D is in the stronger position - where parties are equally innocent of the illegality, equity may provide a remedy
        Whether a party is innocent or guilty in this respect depends upon whether 'he is himself implicated in the illegality' or more precisely whether he has participated in the furtherance of the illegal intention.
        
        b) Recovery if not in pari dilecto - if the parties are not eqaully at fault, then money paid by the wholly innocent party can be recovered so if the parties to an illegal contract are not in pari delicto (not equally culpable/guilty), the court in certain circumstances will allow the less blameworthy party to recover what he may have transferred to the other.
        This relief is granted to the plaintiff upon proof that: he has been the victim of fraud, duress or oppression at the hands of the defendant or that the latter used a fiduciary position towards him and abused it.
        
        Kiriri Cotton Co. Ltd. v Dewani Ltd.
        Kiriri Cotton Co agreed to grant Dewani a sub-lease of a flat but demanded a premium of 10,000 shillings which was paid - this payment for premum for residential accommodation was prohibited by the local Rent Restriction Ordinance - the tenant later sought to recover the premium he paid arguing the contract was illegal - landlord argued the tenant was in pari delicto/equally at fault and not entitled to recover the money
        Court ruled the tenant could recover the premium - The court held that the parties were not equally at fault and the Ordinance was passed to protect tenants from exploitation by landlords - law was intended to protect Dewani
        
        Repentance before partial peformance
        
        The payer has a locus poenitentiae - A space of time/room for repentance - he may withdraw from the illegal contract and may recover his payment during this time
        
        A claimant is entitled to recover benefit conferred under an illegal contract if he repudiates the illegal purpose in time
        
        The justification for this exception is that the parties to an illegal contract should be provided with an incentive to refrain from performing an illegal contract.
        
        The scope of the exception is however the subject of some uncertainty, for example, it's not clear whether the claimant was genuinely repent
        Lord Millet in Tribe v Tribe [1996] is helpful
        The withdrawal does not need to be with geuine regret or sorry, the fact that one party has withdrew will suffice
        Mr. Tribe ran a clothing company and leased a no of shops for business - he received demands for repairs from landlords - fearing he would be financially ruined by these claims and that his creditors would seize his assets, the father transferred his remaining shares in the company to his son which was made for a nominal sum which was never intended to be paid with the understanding that the son would hold the shares on trust for his father - the father eventually resolved the dilapidation claims making it unncessary to use the illegal scheme to deceive his creditors - he asked son to transfer shares back however the son refused arguing the transfer was a gift and that the father could not rely on his own illegal purpose to recover the shares
        The father was entitled to withdraw from the illegal transaction and recover the shares because the illegal purpose had never actually been carried out - he was therefore not relying on an illegal act to claim the property back i.e. claim not founded on illegality
        
        Kearley v Thomson (1890 24 QBD 742
        Taylor v Bowers (1876) 1 QBC 291
        
        Recovery if no reliance on the illegal contract
        
        A claimant may be able to recover money paid or property transferred under an illegal contract if he can establish his right to the money or property without relying on the legal nature of the contract.
        Bowmakers Ltd v Barnet Instruments Ltd [1945]
        Bowmakers hired (gave) several machine tools to barnet Instruments under three hire-purchase agreements - these agreements violated a statutory order as Bowmakers did not hold the license necessary and the price was not fixed according to the regulations - Barnet defaulted on payments and sold most of the machines and refused to return the rest - Bowmakers Ltd sued to recover the machines basing claims on their property rights and NOT on the illegal hire-purchase contracts
        Court held Bowmakers was entitled to recover the machines - a claim to recover property is not defeated by an illegal transaction if the claimant does not need to rely on the illegal contract to establish their claim
        
        Murphy v Quigg [1966]
        Murphy was to hold shares on trust for Quigg and others - the arrangement involved certain illegalities surrounding the transfer of shares and was challenged by Murphy who later refused to transfer the shares to Quigg and others as directed, arguing that the trust deed was illegal and void
        Eastern Caribbean Supreme Court ruled Quigg and others claim was enforceable notwithstanding any illegality surrounding the original trust agreement - the plaintiffs did not need to rely on any illegality to establish their claim to the beneficial/equitable interest in the shares
        A plaintiff's claim is enforceable if it is based on a legal or equitable title on facts which generate such a title and if the plaintiff can sustain the claim solely by reference to that title or to those facts without the need to disclose, evoke or rely on illegality.
        Followed in Bobb Persaud v Warren Headley-Hall the benificial interest of the defendant is enforceable not withstanding any illegality surrounding the trust.
        Bowe v Mitchell???
        
        Striking out the objectionable part as it stands & Severance (Severance must not alter the original covenant).
        Atwood v Lamont [1920] 3 KB 571
        Atwoof ran an outfitting business in Kidderminster with separate departments for tailoring, dressmaking and other trades - Lamont was a tailor's cutter who had worked for Atwood - his employment contract included a restrictive covenant that, upon leaving, prevented him from carrying on or being "in any way directly or indirectly concerned in" a long list of trades including tailoring dressmaking within a 10 mile radius of Kidderminster - after his employment ended Lamont started his own tailoring business outside the restricted area but still attracted former customers from within the 10 mile radius - Atwood sued to enforce covenant
        Court ruled that the covenant was void because it was an unreasonable restraint of trade - also held the covenant could NOT BE SEVERED - applied a strict test for severance, called "the blue pencil test" - held that severance was only possible if the covenant was in effect a series of separate distinct covenants. In this case, the promise was a single, composite one designed to protect the employer's business
        
        Severance refers to the removal of an unenforceable or illegal provision while allowing a contract to remain valid
        Blue pencil test: allows a court to strike out unenforceable or illegal parts of a contract while keeping the remaining enforceable parts intact
    - - First National Credit Union Co-Operative Society Limited v Trinidad And Tobago Housing
        Development Corporation And Doc’s Homes Ltd Claim No. CV 2006 – 02682: Paras. [63]-
        [77]
        
        Goldfinger & Another v. Luxembourg (2002) 61 WIR 226: (PC): Whether agreement void for
        illegality
        
        Holt v. Endless Summer Charters Limited VG 1999 HC 8
        
        Ambrose v Boston (1993) 55 WIR 184: Contract - Illegality - Contracts prohibited by statute.
        
        Weekes v Gibbon (1993) 45 WIR 142: Illegality – Contracts prohibited by statute – Purpose
        of prohibition Matters contrary to morality or public policy – Illegality of contract – Refusal
        of court to enforce contract.
        
        Contracts prejudicial to the administration of justice
        R v Andrews [1973] QB 422.
        
        b) - It involves the commission of a legal wrong
        A contract is tainted by illegality if it involves the commission of a legal wrong, so a contract to commit a tortious act like a contract to publish slander/libel will be illegal.
        e.g. Contract to defraud the Revenue Authority
        Miller v Karlinski (1945) 62 TLR 85 - to commit a tort, e.g. libel
        
        Bigos v Bousted [1951] 1 All ER 92
        Bousted wanted to send his daughter to Italy for her health but was prevented by exchange control regulations from taking sufficient money out of the country - he entered an illegal agreement w/ Bigos who agreed to make italian $ available to the daughter in exchange for the English equivalent and a deposit of share certificates as security - when Bigos failed to provide the Italian currency, Bousted sought the return of his share certificates
        Court denied Bousted's claim - while there is an exception to in pari delicto rule (both parties equally at fault) for a person who "repents" and withdraws from illegal purpose, court found that Bousted's action was not genuine repentance - the court refused to assist a party who was complicit in the illegal transaction
        
        Alexander v Rayson [1936] 1 KB 169
        Alexender rented a flat to Mrs Rayson, however in order to lower the rateable value of the flat, Alexander gave her 2 separate agreements:
        1-A lease of the flat for 450 pounds
        2- A contract for services for 750 pounds
        After a disgareement, Alexander sued for money owed under the agreement - it was held that the agreement constituted a fraud upon the Revenue Authority and that Alexander could not recover under either agreement
        Beresford v Royal Insurance [1938] AC 586
        A man took out several life insurance policies with Royal Insurance Co each with a clause stating that the policy would be void if he committed suicide within one year - he killed himself while sane - Beresford his executor sued the insurance co for the payout - they argued that because suicide occurred after the 1 year exclusion period, the policy should be honored - suicide was a crime at time of death - court held that as a matter of public policy no one should be allowed to profit from their own criminal or unlawful act - granting benefit derived from a crime
        Even though the policy's clause only covered 1st year, the court ruled that an implied term existed based on the public policy against benefitting from a crime
        
        Parkinson v. College of Ambulance Ltd & Harrison [1925] 2 KB 1
        Charitable donation on promise would receive a knighthood - Colonel Parkinson was told by the secretary of the College of Ambulance that he would get a knighthood if he made a charitable donation - he then donated 3000 pounds and never got the knighthood - sued to recover money - it was held that his action would fail because a contract for the purchase of a title was illegal
        
        Azucena v de Molina (1991 Belize) 50 WIR 85
        ollowing an agreement to sell certain land for $200,000, false prices of $100,000 and $55,000 were inserted in the contract of sale and the deed of transfer respectively, in order to reduce the amount of stamp duty payable on the transaction
        It was held that the contract and the transfer were tainted with illegality by reason of the fraud on the revenue, and in such circumstances public policy precluded the court from giving effect to the agreement; additionally, the transaction was rendered void by section 36 of the Stamp Duty Ordinance, Ch 51, which provided that, ‘if, with intent to evade the payment of duty'
        plaintiff hoped to defraud the local council by convincing them that the rateable value of the premises was lower than it actually was. Therefore, the agreement should be void as it was contrary to public policy.
        Held: The Court of Appeal allowed the appeal and found for the defendant. It was obvious that the plaintiff intended to commit fraud against the council. The attempt only failed because the defendant disclosed the matter. The court held that where a contract was intended to be used for an unlawful purpose courts will not enforce it
        
        A contract to commit a tort, e.g. to publish a libel, is illegal
        Clay v Yates (1856) H&N 73
        Involved a contract for a printer to print a book containing a dedication - the printer subsequently found out that the dedication was libelous and proceeded to print the book without the dedication - he then claimed the cost of printing the book - D argued that the printer C was not entitled to any payment as he had only given part performance - the court held that it was implied in the agreement an undertaking to pay "for so much of the work as is lawful" and D was therefore liable for the book just as published
        If one party is aware that performance of the contract will amount to the commission of a civil wrong, the innocent party may be able to enforce the contract
        
        Napier v. National Business Agency [1951] W.N. 392
        Napier was employed by National Business Agency and was paid a weekly salary of 13 pounds and 6 pounds for "expenses" which were in excess of his actual expenses - figure was inflated so as to avoid paying tax -this was an illegal scheme designed to defraud the Revenue Authority - Napier was dismissed and sued for breach of contract claiming the money owed under the agreement - court ruled contract illegal and unenforceable - based on principle ex turpi causa no oritur actio - court could not lend its aid to a claimant who relied on an immoral or illegal act to establish case
        
        Alexander v Rayson [1936] 1 KB 169
        Alexender rented a flat to Mrs Rayson, however in order to lower the rateable value of the flat, Alexander gave her 2 separate agreements:
        1-A lease of the flat for 450 pounds
        2- A contract for services for 750 pounds
        After a disgareement, Alexander sued for money owed under the agreement - it was held that the agreement constituted a fraud upon the Revenue Authority and that Alexander could not recover under either agreement
        
        Azucena v de Molina (1991 Belize) 50 WIR 85
        
        c) - It goes contrary to public policy
        There are five circumstances that the court will consider to give rise to illegality when the contracts are entered into against public policy:
        -Sexual immoral element
        -Marriage
        -Corruption in public life
        -Against the interest of the State
        -Restraint of trade e.g.
        
        a) Contracts with a sexually immoral element
        
        Pearce v Brooks (1866) LR 1 Ex 213
        A man supplied a coach to a prostitute knowing that she was a prostitute and that it would be used for her to attract clients. She hired the coach on hire purchase terms to be paid for in instalments. She did not pay the 2nd instalment on the carriage and returned it in a damaged condition, in breach of the agreement. The coachbuilder sued for non-payment and for the damage.
        Bramwell J - a contract to supply a prost with a carriage to attract clients is different from one to supply her a pair of shoes. The court ruled that the supplier could not sue for the unpaid installments or damages, applying the principle 'ex turpi causa non oritur actio' (no action can arise from an illegal act) - here, an immoral purpose is the same as an illegal one - he supplied the carriage with knowledge that it would be used for the immoral purpose of attracting customers, so could not recover
        Franco v Bolton (1797)
        Tinsley v Milligan
        the parties were a couple who had bought a house to run as a join lodging house business - the property was registered in Tinsley's name so that Milligan could fraudulently claim housing benefits with Tinsley's full knowledge and consent - When the relationship came to an end, Tinsley sough to evict Milligan who claimed she was a beneficial co-owner of the property - HoL ruled in favor of Milligan holding that her claim was not reliant on illegality but on her contribution to the purchase price - established that the property was held on a presumed resulting trust for both parties
        The test is whether the person needed to rely on illegality in order to support their claim
        
        Appleton v Campbell (1826) 2 C & P 347
        A contract to let a room to a prostitute who used the lodging for purposes of prostitution to the knowledge of the plaintiff -
        Abbott CJ — If a person lets a lodging to a woman, to enable her to consort with the other sex, and for the purposes of prostitution, he cannot recover for the lodging so supplied. But if the defendant had her lodgings there, and received her visitors elsewhere, the plaintiff may recover, although she be a woman of the town, because persons of that description must have a place to lay their heads; but if this place was used for immoral purposes, the plaintiff cannot recover.
        
        Hutley v Hutley (1873) LR 8 QB 112
        
        b) Contracts concerning marriage
        The status of a marriage is a matter of public interest in all civilized countries and it is important that nothing should be allowed to impair the sanctity of its solemn obligations or to weaken the law that one spouse owes to another (Cheshire)
        
        Lowe v Peers (1768) 4 Burr 2225
        Peers made a written promise under seal to marry no one but Lowe with the condition that if he married anyone else, he would have to pay her 1000 pounds - Court found agreement void because it was a restriction on marriage, not a promise to marry and was therefore contrary to public policy and the public good - interfered with liberty to marry - Contract that imposes liability on a person if he/she marries is unenforceable
        Herman v Charlesworth [1905] 2 KB 123
        Gibson v Dickie (1815) 3 M & S 463
        Spiers v Hunt [1908] 1 KB 720
        The defendant a married man promised the plaintiff a woman that he would marry her once his wife died - the plaintiff was aware that he was married when he made the promise - defendan't wife was ill and he believed she would die soon however she survived for some years and after her death, the defendant refused to marry the plaintiff - she sued him for breach of promise to marry - the court decided that the promise to marry was illegal and unenforceable on the ground of being contrary to public policy
        Brodie v Brodie [1917] P. 271
        
        1 more item...
- - - - Common mistake: both parties make the same mistake.
        
        Bell v Lever Bros (1932) Lever Brothers paid significant compensation to two former directors, Bell and Snelling, but later discovered they had been involved in misconduct that could have led to their summary dismissal without compensation. However, the mistake was about the quality of the service contracts (that they had been performed without misconduct), not their existence or identity, so the compensation agreement was upheld as valid
        → Lord Atkin said that a common mistake as to quality had to be “the mistake of both parties” and a mistake about the “existence of some quality” which made the contract different to the one intended.
        
        Shared misconception or misunderstanding
        
        May occur in relation to the existence of the subject matter (no pen), ownership of goods (who owns the pen) or nature of the good.
        
        e.g. Couturier v Hastie - cargo of corn in transit from mediterranean to england - owner of cargo sold corn to buyer in London - cargo had perished and been disposed of b4 contract was made -seller sought to enforce payment for the goods on the grounds that the purchaser had attained title to the goods and therefore bore the risk of the goods being damaged, lost or stolen - held: the contract was void bc the subject matter of the contract did not exist at the time the contract was made
        
        Mistaken about some underlying fundamental fact.
        
        Must be in a state of shared misconception or ignorance.
        
        Must be in a fundamental character so as to make the contract impossible to perform
        
        Strickland v Turner (annuitant): Strickland entered into contract to purchase annuity on turner's life - void bc turner, unknown to both the purchaser and the seller (insurance co) was already dead at the time the contract was made: res extincta (destruction of subject matter) -
        
        this considered a common mistake because the subject matter (the living annuitant) no longer existed at the time of the agreement
        
        Galloway v Galloway: both parties under assumption that they were married to each other, made a separation agreement - later discovered that the current marriage was invalid because against all odds, the husband's former wife was still alive.
        
        Held: In this case a separation agreement was void because it was entered in the mistaken belief that the parties were married to each other and therefore needed a formal separation. However, it transpired that the husband's previous spouse was still alive
        
        Elements of common mistake:
        
        There must be a common assumption as to the existence of a state of affairs
        
        There must be no warranty by either party to that the state of affairs exists
        
        Nonexistence of state of affairs must not be attributable to either party/fault of either party
        
        Nonexistence of the state of affairs must render the elements of a contract impossible
        
        State of affairs may be the existence or a vital attribute or the consideration to be provided or circumsatnce which must subsist if performance of the contract is to exist
        
        (Lord Phillips, Master of the Rolls) - page 703 Great Peace Shipping
        Lord Alverstone CJ in Hobson v Pattenden (1903) 19 TLR 186
        
        Categories of common mistake
        
        Res sua: mistake as to tit/eownership: occurs mainly in contracts of sale - "his own thing"
        
        Abraham v Chief Oluwa
        Plaintiff purchased land from a third party, under the impression it was defendant's - Abraham later learned the land was actually his own and sought a refund of the purchase price - The sale was void because both parties were mistaken about the title (ownership) of the land
        Cooper v Phibbs - fishery
        a man, Cooper, leased a salmon fishery from his cousins, unaware that he already owned a life tenancy of the fishery, having inherited it after his uncle’s death. The House of Lords ruled that the contract was voidable since Cooper already had a right to the fishery and it was legally impossible for Phibbs to grant a lease to Cooper - could not buy something already his
        
        Clacken et al v Causwell
        The Clackens and Causwells shareholders in a family company Equipment Maintenance Limited (EML) -
        following a breakdown in their relatinonship, the Clackens petitioned to have the company wound up - the dispute was settled by a consent order from the court in which the Causwells agreed to buy the Clackens shares - order included a provision for a valuation of shares - when the accountants attempted the valuation, they discovered the company's financial records were incomplete and inaccurate prevent them from conducting proper valuation - the Clackens argued that the contract was frustrated by this delay and that the common mistake about the records made the contract void - Causwells argued the contract could still be performed - The court ruled that since the financial records were so innacurate and incomplete, the shares were in effect a different kind of subject matter than what the parties believed they were bargaining for - the shares were not the same "thing" as the properly documented, reliabily valued shares the parties intended to sell and buy - the shares parties intended to sell and buy did not "exist"
        
        Res extincta: mistake as to existence of subject matter - "extinct thing"
        
        Couturier v Hastie - corn
        cargo of corn in transit from mediterranean to england - owner of cargo sold corn to buyer in London - cargo had perished and been disposed of b4 contract was made -seller sought to enforce payment for the goods on the grounds that the purchaser had attained title to the goods and therefore bore the risk of the goods being damaged, lost or stolen - held: the contract was void bc the subject matter of the contract did not exist at the time the contract was made
        
        Dammer v Wallace
        Aappellant sold interest in land to second respondent - appellant did not acquire any right or interest in any property and could not have sold anything - promise incapable of performance in fact or in law @ time when it was made - contract void - rescission of contract - purchase price returned to 2nd respondent
        Galloway v Galloway - separation agreement
        both parties under assumption that they were married to each other - made a separation agreement - later discovered that the current marriage was invalid bc against all odds, the husband's former wife was still alive -Held: a separation agreement was void bc it was entered into the mistaken belief that the parties were married to each other and therefore needed a formal separation, however, it transpired that the husband's previous spouse was still alive - the subject matter (the valid marriage itself) did not exist - this was essential for the separation agreement to have legal effect
        
        Dextra Bank & Trust Co Ltd v Bank of Jamaica
        bank of jamaica purchased foreign currency in open market through authorized agents - dextra bank engaged in a transaction w/ customer where they believed they were facilitating the purchaseof foreign $ - however, customer's actions involving fraudulent misrepresentation, led to the issuance of a cheque for funds that were intended for a different purpose
        
        dextra issued cheque in favour of bank of jamaica - dextra believed it was extending a short-term loan to boj, to be secured by a promissory note - boj however believed it was purchasing US currency with local currency. a grp of intermediaries acting w/o authority orchestrated the misunderstanding and diverted boj's local currency payments to themselves - boj received the cheque, endorsed it to its commercial banker and the cheque was duly honoured by dextras bank - discovering the fraud, dextra sued for conversion of the cheque and restitution of the proceeds as money paid by mistake held: an erroneous forecast about the future legal character of a transaction is not a "mistake of fact" for restitutionary purposes, a misprediction about the nature of the transaction was not a mistake of fact, but rather a misjudgement about the underlying circumstances
      - Mutual mistake: both parties misunderstand each other and are at cross-purposes - one party seeking X and other seeking y
        
        Where A and B are talking about 2 different things
        
        Party claims he never meant to enter that contract
        
        No genuine agreement as to offer and acceptance
        
        No consensus ad idem - not thinking of same thing e.g. Nissan diesel being sold - buyer thinks its hybrid
        
        Smith v Hughes
        Raffles v Wichelhaus
        Emmanuel Yao Voado v Chun-Hung Kuo distinguished
        There was a contract for the sale of land - the actual land advertised as Parcel 810 and sold did not actually belong to the vendor - The buyer claimed for rescission on ground of invalidity of contract due to mistake - the court ruled that the contract was valid but unenforceable - ordered for rescission of the contract - purchaser entitled to the return of purchase price
        "There was consensus ad idem as to the sale and purchase of the advertised vacant Lot (though wrongly described as Parcel 810). That is a valid contract. However, it can only be set aside for failure of some condition on which the existence of the contract depends, or for fraud..."
        
        Judge at page 35 - Mistake was so fundamental that there was a total failure of consideration – rendered contract voidable – although not void, equity will supplant law
        Seller breached warranty that he would give good title – had to pay full purchase price
        
        Dammer v Wallace
        deceased died intestate leaving a widow (testatrix) and 10 children - testatrix took out letters of administration to the estate under which the real property devolved on her - after administration, the real property wld belong to the deceased's heirs, subject to the widow's right to dower (a life interest in one-third of the real property) - testatrix took not steps to administer the estate of deceased and died - under her will she purported to make three devises of real property in respect of which the deceased had died intestate - one of the testatrix's children entered into agreement with her brother whereby she sold all her interest and share in the will of her mother - subsequently, letters of administration to the estate of the deceased were taken out by the respondents - they sold all the real property comprised in the deceased's estate and realised a substantial sum of $ which they distributed in equal sums between the deceased's children other than the daughter - she instituted proceedings against the first respondents to claim 1/10 share of his money - purchaser brother died and by his will he appointed the 2nd respondent as his executor
        appellant sold interest in land to second respondent - appellant did not acquire any right or interest in any property and could not have sold anything - promise incapable of performance in fact or in law @ time when it was made - contract void - rescission of contract - purchase price returned to 2nd respondent
      - Unilateral mistake: only one of the parties makes a mistake and the other party knows of his mistake.
        
        HSAC
        -Looked at obejctively
        -Real motive of parties not relevant/coming into play
        -Commercial certainty
        
        e.g. timothy and david enter in contract for t to remodel d kitchen. t accepts knowing there's a good chance that he would not have the supplies to complete it - attempting to complete anyway - t fails to do so - contract voidable to d due to t's unilateral mistake
        
        Hartog v Colin and Shields - argentine hare skin
        contract law does not usually intervene in circumstances where 1 party is more knowledgeable than the other, but did in this case - the parties negotiating for the sale of Argentine hare skin which was to be bought by P - D when quoting price, instead of quoting price per skin, he quoted price per pound and as a result the price was a third cheaper than what it would really be - previous negotiations between the parties had proceeded on the basis that the price to be assessed at so much per piece as was usual in the trade - p purported to accept offer and sued for damages for non-delivery - held: plaintiffs must have known that the offer did not express the true intention of the defendants and that contract therefore void.
        Smith v Hughes - old oats
        racehorse trainer obligated to pay for oats he bought even tho he believed they were old oats suitable for his horses, but they were in fact new oats - refused to pay asserting he had been mistaken about the type of oats - court held: despite his unilateral mistake regarding the oat's quality, his subjective belief was irrelevant - the seller who had provided a sample and did not misrepresent oats/said nothing to induce the mistake, had fulfilled contract by supplying the oats that were shown - caveat emptor (buyer beware - responsible for inspecting sample and making his own judgement) - emphasizes importance of the objective test - reasonable person would understand that the sale was for the oats shown in the sample and buyer's own misperception did not invalidate contract
        Aircool Awning Co Ltd v Walter Silvera - awnings
        P entered into contract for the supply of awnings for a verandah and carport under a fundamental mistake as to the size of the awnings and the mistake was known to D, that was sufficient to entitle the plaintiff to avoid the contract
        Chwee Kin Keong v Digilandmall.com Pte Ltd - printer
        Digilandmall.com an online retailer posted a printer for sale on its website but listed it for the wrong price 66 vs 3854 - several ppl placed ordered for the printer @ the mistaken low price - when Digilandmall discovered the mistake it informed the purchasers that it would not honor the orders - unilateral mistake - one party (buyers) aware of the mistake - court found the contracts void - buyers had constructive knowledge of the mistake - the price was so low it was obvious (to a reasonable person) that it was an error
  - - - The Courts of Common Law (Operative Mistakes at Common Law - Contract void)
        The following types of mistakes will render a contract void once it can be shown that the mistake actually induced the contract:
        
        a. Mistake as to the existence of the subejct matter
        
        b. Mistake as to the possibility of performing the contract
        c. Mistake as to the identity of the subject matter
        d. Mistake as to the identity of the other party
        e. Mistake as to the terms of the contract of which the other party is aware
        f. Mistake as to quality:
        Bell v Lever Brothers
        
        lever bros appointed the 2 defendants to run a second company, Niger - their employment contracts were said to last 5 years - niger company not doing well - lever bros decided to merge niger w/ another company making the defedants redundant - lever bros created a contract which would mean each defendant got a sum of money 50,000 pounds if they agreed to end their contract - accepted - later discovered the defendants made a serious breach of duty when wokring @ niger where their contracts could have been ended w/o compensation - lever bros claimed there was a mistake as there was no legal obligation for them to pay compensation to the defendants so the contract of 50,000 pounds should be void
        held: Lord Atkin said that it had to be "the mistake of both parties" and a mistake about the "existence of some quality" which made the contract different to the one intended. Therefore, there is no operative mistake bc lever bros got exactly what they wanted (i.e. the defendants ending the contract) & the fact this could have been done w/o lever bros paying compensation to the defs does not matter.
        
        Sollle v Butcher
        
        butcher agreed to lease a flat to solle - contract created for 7 yrs and rent was 250 pounds/year - both parties, through a mistake of the contract, were not subject to rent review. Solle sued to try and get the difference - butcher counter claimed saying the contract should be rescinded
        Held: Court of A held that the landlord could set the contract aside, but the ratio is quite unclear. Denning said in equity, this should be an actionable mistake - Denning argued for there to be equitable relief, the mistake must be "fundamental" and the innocent part must not be "at fault"
        
        Great Peace Shipping Ltd v Tsavliris
        
        a shipping company tsavliris, chartered the GP to provide salvage services to a damaged vessel - Tsavliris believed GP was 35 miles away but in fact it was 410 miles away - after learning of the true distance, tsavliris hired a different, nearer vessel - cancelled the gp charter but refused to pay the contracted cancellation fee - contract void at common law for common mistake? - contract voidable in equity due to common mistake?
        Held: CA held contract not void for common mistake bc the mistake regarding the distance was not so fundamental as to make the performance of the contract impossible - court also rejected the equitable doctrine of mistake laid down in Solle v Butcher, finding that the test for common mistake in equity was the same as the common law test
        
        Types of mistakes at common law EPIITQ
        1. Mistake as to existence of subject matter -
        
        usually associated with common mistakes (same mistake made by both parties)
        
        CGDD
        Couturier v Hastie
        cargo of corn in transit from mediterranean to england - owner of cargo sold corn to buyer in London - cargo had perished and been disposed of b4 contract was made -seller sought to enforce payment for the goods on the grounds that the purchaser had attained title to the goods and therefore bore the risk of the goods being damaged, lost or stolen - held: the contract was void bc the subject matter of the contract did not exist at the time the contract was made
        
        Galloway v Galloway
        both parties under assumption that they were married to each other - made a separation agreement - later discovered that the current marriage was invalid because the husband's former wife was still alive - bigamous (one partner legally married to someone else) - separation agreement was held to be void bc it was entered in the mistaken belief that the parties were married and therefore needed formal separation
        
        Dammer v Wallace
        A man Thomas Webster died intestate (without a valid will) in Anguilla, leaving behind a wife and ten children - one being the appellant Geneva Dammer - under the law Thomas' real property devolved to his personal representative who was his wife Zellie - she was responsible for adminstering the estate (managing deceased's financial affairs) but never did so before her death - Geneva Dammer and her brother entered a contract wherein Dammer sold her interest and share 'in the Will of Zellie' to her brother for $1000 - both parties mistakenly believed Geneva had a legal interest in land to sell which she had inherited from her mother - court held contract to be void because there was no interest to sell in the first place as Geneva had never acquired any leagl right or interest in the land
        Dextra Bank & Trust Co Ltd v Bank of Jamaica
        Dextra bank an off shore bank issued a cheque for USD in favour of the BOJ - Dextra believed it was extending a loan to BOJ but BOJ beleievd it was purchasing US currency with local currency - a group of intermediaries unauthorized orchestrated the misunderstanding and diverted the BOJ's local currency payments to themselves - BOJ received the US cheque and it was duly honored - Dextra discovered the fraud and sued the BOJ to recover the sum paid under its cheque, contending that the BOJ had converted the cheque or alternatively that it (Dextra) was entitled to recover the proceeds of the cheque as money paid under a mistake of fact.
        American International Bank (In Receivership) v Landmark Limited (whether money paid under a mistake is recoverable)
        ???
        
        2. Mistake as to the possibility of performing the contract
        
        Promise becomes impossible to perform after agreement
        
        PSLC
        Physical impossibility
        Sheikh Brothers v Ochsner - sisal
        Therein, Sheikh Brothers licensed Ochsner to cut, process and manufacture sisal from land. Ochsner undertook to deliver a minimum of 50 tons of sisal fibre per month for sale. However, it was found that the land could not physically produce the amount of fibre contracted for. Accordingly, the agreement between the two parties was rendered void ab initio since the performance of the contract was physically impossible.
        
        Legal impossibility
        
        The contract provides for something to be done which cannot, as a matter of law, be done:
        
        Cooper v Phibbs
        a man, Cooper, leased a salmon fishery from his cousins, unaware that he already owned a life tenancy of the fishery, having inherited it after his uncle’s death. The House of Lords ruled that the contract was voidable since Cooper already had a right to the fishery and it was legally impossible for Phibbs to grant a lease to Cooper.
        Great Peace Shipping Ltd v Tsavliris Salvage Ltd
        
        a shipping company tsavliris, chartered the GP to provide salvage services to a damaged vessel - Tsavliris believed GP was 35 miles away but in fact it was 410 miles away - after learning of the true distance, tsavliris hired a different, nearer vessel - cancelled the gp charter but refused to pay the contracted cancellation fee
        
        Commercial impossibility
        Griffith v Brymer - coronation room
        court ruled that a contract to rent a room for viewing a coronation procession was void due to a common mistake as to the fundamental existence of the procession itself which had been cancelled. Since the subject matter of the contract, the procession, had ceased to exist, performance became commercially impossible, and the contract was therefore rendered void ab initio
        Smith v Hughes
        racehorse trainer obligated to pay for oats he bought even tho he believed they were old oats suitable for his horses, but they were in fact new oats - refused to pay asserting he had been mistaken about the type of oats - court held: despite his unilateral mistake regarding the oat's quality, his subjective belief was irrelevant - the seller who had provided a sample and did not misrepresent oats/said nothing to induce the mistake, had fulfilled contract by supplying the oats that were shown - caveat emptor (buyer beware - responsible for inspecting sample and making his own judgement) - emphasizes importance of the objective test - reasonable person would understand that the sale was for the oats shown in the sample and buyer's own misperception did not invalidate contract
        
        Hartog v Colin and Shields - argentine hare skin
        contract law does not usually intervene in circumstances where 1 party is more knowledgeable than the other, but did in this case - the parties negotiating for the sale of Argentine hare skin which was to be bought by P - D when quoting price, instead of quoting price per skin, he quoted price per pound and as a result the price was a third cheaper than what it would really be - previous negotiations between the parties had proceeded on the basis that the price to be assessed at so much per piece as was usual in the trade - p purported to accept offer and sued for damages for non-delivery - held: plaintiffs must have known that the offer did not express the true intention of the defendants and that contract therefore void.
        
        3. Mistake as to the identity of the subject matter'
        Raffles v Wichelhaus (1864) - Peerless cotton
        one party thought they were buying cotton shipped on one ship called “Peerless,” while the other meant a different “Peerless.” The parties were at cross-purposes and mistaken as to the identity of the subject matter, which was the ship on which the cotton would arrive.
        Smith v Hughes (1871) - oats
        Hughes mistakenly believed that he was buying old oats based on a sample but was actually sold new oats. The court in this case distinguished mistake as to identity of subject matter and mistake as to quality of subject matter. It held that this instance was a mistake as to the quality of the goods because the parties had simply agreed to a contract for “oats”, so there was no mistake as to their identity as oats but rather their quality or age.
        
        Diamond v British Columbia Thoroughbred Breeders' Society (1966) 52 DLR (2d) 146 - horse
        a buyer of a horse at auction mistakenly believed they were purchasing one horse but received a different horse of different lineage - court ruled this was not a fundamental mistake that could void the contract, but rather a mistake as to quality (not as to its identity or existence - contract remained valid as court found the mistake not fundamental enough
        
        4. Mistake as to the identity of the other party CLS
        Cundy v Lindsay blenkiron
        Lindsay & Co. believed they were selling goods to a legitimate company Blenkiron & Company; however, a fraudulent buyer Blenkarn was the actual recipient of the goods pretending to be Blenkiron & Company. The House of Lords ruled that this unilateral mistake as to identity of the other party rendered the contract void ab initio.
        contrasted with
        Lewis v Averay - actor
        a seller Lewis sold his car to a fraudster impersonating a famous actor - imposter paid Lewis with a cheque - as Lewis believed he was dealing with the actor he allowed imposter to take the car - the cheque bounced and the man was in fact not the famous actor - fraudster then sold the car to Mr. Averay an innocent purhcaser - Lewis sued Averay to recover the car, arguing that his mistake about the buyer's identity rendered the contract void.
        Averay was allowed to keep car because he purchased it in good faith before Lewis could void the contract (meant that contract was voidable) - in face to face transactions, it is presumed that you intend to contract with the other party - any mistake about identity as such is a matter of voidability, not voidness
        
        Shogun Finance v Hudson patel
        A fraudster posed as a reputable individual Mr. Patel to acquire a car on hire-purchase terms - the fraudster presented the stolen drivers license of Mr.Patel to the car dealer and Shogun Finance conducted a credit check using the details of Patel - Shogun approved the hire-purchase agreement, believing they were contracting with Patel - fraudster paid deposit and took possession of the vehicle - then sold vehicle to Mr. Hudson, an innocent purchase with no knowledge of the fraud - when the fraudster's cheque bounced, Shogun Finance sued Hudson for the return of the car - HoL held that the contract between Shogun and the fraudster was void for unilateral mistake because the agreement was in writing and Shogun Finance had Patel in mind so there was no meeting of the minds with the fraudster - furthermore fraudster could not have acquired title to the vehicle and therefore had no title to pass to Hudson
        
        5. Mistake as to the terms of the contract of which the other party is aware
        
        Essentially, if one party makes an error in the contractual terms and the other party knows of it but tries to take advantage, no valid contract is formed
        
        Hartog v Colin & Shields (1939)
        the contract for hare skins was declared void for mistake because the seller had mistakenly offered the skins at a price per pound instead of per piece, making the price dramatically lower than usual. The court agreed that the contract was invalid for mistake and the buyer must have realized the mistake and therefore could not take advantage of the mistake.
        Chwee Kin Keong v Digilandmall.com Pte Ltd
        Digilandmall.com an online retailer posted a printer for sale on its website but listed it for the wrong price 66 vs 3854 - several ppl placed ordered for the printer @ the mistaken low price - when Digilandmall discovered the mistake it informed the purchasers that it would not honor the orders - unilateral mistake - one party (buyers) aware of the mistake - court found the contracts void - buyers had constructive knowledge of the mistake - the price was so low it was obvious (to a reasonable person) that it was an error
        
        1 more item...
      - The Courts of Equity
        
        There are 2 equitable remedies available:
        
        1- Rescission: restoring parties to position that they were in at the time of entering the contract
        
        Grist v Bailey [1967]
        The plaintiff buyer agreed to purchase freehold property from the defendant seller for 850 pounds with the understanding that it was "subject to the existing tenancy"
        Unknown to both parties, the protected tenancy that both belived existed had actually ended, as the sitting tenant and wife had died - the property's value with vacant possession was worth much more - the seller discovered the mistake and refused to complete the sale @ the original price - buyer sued for specific performance
        The court ruled that while the mistake was not fundamental enough to make the control void at common law, it was still a fundamental error that justified intervention in equity - as such the court granted the equitable remedy of rescission on terms i.e. it ordered that the contract be rescinded unless the buyer agreed to purchase the property @ the price reflecting its true value.
        
        Emannuel Yao Voado v Chun-Hung Kuo - 810
        There was a contract for the sale of land - the actual land advertised as Parcel 810 and sold did not actually belong to the vendor - The buyer claimed for rescission on ground of invalidity of contract due to mistake - the court ruled that the contract was valid but unenforceable - ordered for rescission of the contract - purchaser entitled to the return of purchase price and costs of development -
        "There was consensus ad idem as to the sale and purchase of the advertised vacant Lot (though wrongly described as Parcel 810). That is a valid contract. However, it can only be set aside for failure of some condition on which the existence of the contract depends, or for fraud..."
        
        2- Rectification: fixing an error on a contract
        
        Rectification in the context of a contract occurs when a court orders a change in a written contract to reflect what it ought to have been in the first place.
        
        The rule was summarized in
        
        Fowler v. Fowler (1859) 4 Deg & J. 250
        There was a request to rectify a deed to correct a mistake in its description of a mortgaged property - the application for rectification was made to reflect the true intention of the parties - it was refused as there is a high bar for the remedy of rectification -
        
        Liddie et al v. St Kitts Nevis Anguilla National Bank Limited KN 2003 HC
        Mr and Mrs Liddie claimed they were misled about the repayment schedule of a loan over 60 months from the defendant bank - near the end of the 60-month term, the bank informed the Liddies that a calculation error had been made and that the actual repayment term was longer (66 mths) - the bank refused to release the liddies certificate of title until their paid the additional 6 months of installments - the HC ruled against Liddies finding the mistaken calculation was a common mistake and ordered the loan letter to be "corrected" to reflect the 66-month term0
        The court of appeal later declared that the liddies had fully repaid their loan and ordered the bank to return their certificate of title - rectification of the loan period by 6 months was sought by the bank arguing the 60-month term was a mathematical error, but it was denied
        Hotel de Health (Caribbean) Inc. et al v. Webster et al AI 2005 CA 1
        Hotel De Health agreed to buy land from the Websters for a set price of 1.09 m but the Websters later sued for rectification seekig the total amount to be much more (3.3. m), arguing it was the intended price including interest - the court of appeal ruled that the written agreement with the original purchase price of 1.09 m was the valid and binding contract
        
        Von Levern v. Clashing AG 2005 CA 1
        Mrs. Von Levern agreed to sell a property to Mr. Clashing. Differences arose about the transaction and Clashing sued for specific performance of the agreement, compelling Mrs. Von Levern to complete the sale
        
        Liddie v. St. Kitts & Nevis Anguilla National Bank Ltd. Civil Appeal No. 10 of 2003
        Mr and Mrs Liddie claimed they were misled about the repayment schedule of a loan over 60 months from the defendant bank - near the end of the 60-month term, the bank informed the Liddies that a calculation error had been made and that the actual repayment term was longer (66 mths) - the bank refused to release the liddies certificate of title until their paid the additional 6 months of installments - The court of appeal declared that the liddies had fully repaid their loan and ordered the bank to return their certificate of title - rectification of the loan period by 6 months was sought by the bank arguing the 60-month term was a mathematical error, but it was denied
        
        Cupid v. Harry VC 1992 HC 15
        Cupid purchased property from the defendant Harry - The property had two buildings - the plaintiff Cupid asserted she bought the entire property including both but Harry maintained he had only sold Cupid one building and one lot of land - Harry claimed that the deed of conveyance was executed under a "mistake of fact" and asked the court to rectify the deed to reflect the sale of only one lot and one building
        
        Commission for the New Towns v Cooper (Great Britain) Ltd [1995] Ch 259, [1995] 2 All ER 929
        The Commission and Cooper were negotiating a property lease, they met and reached an oral agreement on the lease's terms - there was a mistake about a break clause - Cooper knowing of the mistake made misleading statements to prevent the Commission discovering it - when Cooper later tried to terminate the lease using the break clause as a mistake, the Commission sued to prevent them from the inaccurately drafted lease - The CoA ruled in favor of the Commission and ordered rectification for unilateral mistake finding that Cooper's behavior making misleading statements while knowing of the mistake was unconscionable
        3 - Specific performance???