#5801 - Mistake - Irish Contract Law

Unilateral Mistake

Sowler v Potter (KB 1939)

Facts

• The defendant had been previously convicted of permitting disorderly conduct in a cafe.

• She sought to negotiate a lease of premises in the same area after changing her name.

• After negotiating the lease, the plaintiff discovered her identity and claimed that the contract was void for unilateral mistake.

Issue

• Unilateral mistake – Identity

Judgment (Tucker J)

• As the identity of the person was a vital element in the offer in this case, the mistake as to that identity rendered the contract void ab initio.

Boulton v Jones (Ex 1857)

Facts

• The defendants, used to dealing with Mr B, sent an order to him for goods.

• The plaintiffs had bought B's business and executed the order.

• The defendants claimed that the contract was void for unilateral mistake and the plaintiffs sought the price of the goods

Issue

• Unilateral Mistake – Identity

Judgment

• Pollock CB

• The question is whether the defendants intended to deal with B – they did, thus the plaintiff can not recover the price, no rights accruing to him under the contract.

• Martin B (concurring)

• Bramwell B (concurring)

• Channell B (concurring)

King's Norton Metal Company v Bridge, Merrett & Co (CA 1897)

Facts

• The plaintiffs had been asked to supply goods to a man who had fraudulently purported to be the defendants and had sold the goods to the defendants without paying the plaintiffs.

• The plaintiffs sought damages from the defendants for their taking the goods

Issue

• Unilateral Mistake – Third Party

Judgment (AL Smith LJ)

• The plaintiffs in this case had contracted with the third party and not the defendants – thus the defendants were not liable for their loss.

• Unless the contract was disaffirmed, the third party had good title to the goods.

Cundy v Lindsay (HoL 1878)

Facts

• The respondent was contacted by an Alfred Blenkarn who indicated that he wished to purchase a considerable quantity of the respondent's goods.

• He used his own address, but wrote under the name of a large respectable company which was elsewhere in the town.

• Blenkarn took the goods and supplied them to the appellants without paying the respondent.

Issue

• Unilateral Mistake – Third Party

Judgment

• Lord Cairns LC

• No contract was ever made with Blenkarn and no property in the goods ever passed to him which he could convey to the appellants.

• Thus the respondent was entitled to the value of the goods.

• Lord Hatherly (concurring)

• Lord Penzance (concurring)

• Lord Gordon (concurring)

Phillips v Brooks Ltd (KB 1919)

Facts

• The plaintiff was a jeweller who sold a ring to a man in his shop who identified himself as Sir George Bullough.

• The person then sold it to the defendants, from whom the plaintiff sought recompense.

Issue

• Unilateral Mistake – Identity – Individual present

Judgment (Horridge J)

• In this case, the seller intended to contract with the person present – the fraudulent misrepresentation was not relevant to the contract.

• Thus the person who sold to the defendants had good title.

Lake v Simmons (HoL 1927)

Facts

• A woman represented to the plaintiff that she was the wife of a certain individual and on foot of that representation the plaintiff allowed her to 'borrow' some pearls for the purposes of showing it to her husband.

• The woman disposed of them for her own benefit and when the plaintiff tried to recover on his insurance policy, the insurance company relied on a clause exempting them from liability in case of theft or dishonesty committed by any customer in respect of goods entrusted to them by the accused.

Issue

• Unilateral Mistake – Identity – Individual present

Judgment

• Viscount Haldane (concurring)

• Whether the mistake of identity nullifies the contract depends on whether the identity of the person was an element of the contract.

• This was not a case of entrusting the pearls to a customer, as the woman represented that her fictitious husband was the real customer, and her identity was essential to her being entrusted with the jewels.

• Viscount Sumner (concurring)

• If the woman had received the plaintiff's consent and then breached the conditions, the contract would have been voidable and she would be a customer – otherwise the contract was void and there was never any consent.

• On the construction of the words, the woman was never entrusted with the jewels, as the plaintiff entrusted them to someone else who was not her.

• Lord Atkinson (concurring on different grounds)

• Lord Wrenbury (concurring)

• Lord Blanesburgh (concurring – agreed with Viscount Sumner)

Ingram v Little (CA 1960)

Facts

• The plaintiffs were selling a car and an individual offered to buy it.

• They initially refused to accept a cheque, but when he represented himself to be a certain reputable businessman and accepted his cheque.

• The individual sold the car to the defendant who was sued for the return of the car or its value by the plaintiffs.

Issue

• Unilateral Mistake - Identity – Individual present

Judgment

• Sellers LJ (concurring)

• There is a difference between the cases where A believes that B is somebody else, and A believes that B is a specific individual other than B.

• In the former case, B does in fact receive an offer, whereas in the latter, only X receives an offer and B cannot accept it.

• Where a person physically present and negotiating to buy a chattel assumed the identity of an existing third person, the test to determine to whom the offer was addressed was how ought the promisee interpret the promise.

• In this case, the offer was made solely to the third person and the individual present was incapable of accepting it – hence there was no contract.

• Pearce LJ (concurring)

• The use of words can serve the same function as a physical disguise.

• Devlin LJ (dissenting)

• In cases dealing with the intentions of the parties, the law uses presumptions – in this case a fair presumption would be that an individual intends to contract with whomever he is dealing with.

• One cannot rebut the presumption by adducing evidence to the effect that one would never have contracted with the individual if one had known him to be a rogue – thus there was a valid offer and acceptance.

• In this case the plaintiffs were concerned about the individual's creditworthiness, which is not a basic fact and a mistake in regard to it does not vitiate the contract.

Lewis v Avery (CA 1971)

Facts

• The plaintiff was involved in negotiations with an individual, with a view to selling his car to him.

• The individual held himself out to be involved in the film industry, connected with a well-known film and tv star and an employee of a studio, all of which was false.

• The plaintiff asked for verification of this, in response to which the individual showed him an id card.

• The defendant gave the plaintiff a stolen cheque for the car and later sold the car to the defendant, pretending to the plaintiff.

Issue

• Unilateral Mistake – Identity – Individual present

Judgment

• Lord Denning MR (concurring)

• There was nothing to displace the presumption that when the plaintiff accepted the cheque and handed over the car and logbook, he intended to deal with the person physically present.

• Under that contract, the individual acquired the proprietary interest in the vehicle and the subsequent purchaser gained that property.

• A mistake by one party as to the identity or attributes of the person with whom he is contracting does not make render the contract void ab initio, though the contract may be avoided before a third party has acquired rights under it – King's Norton Metal Company states the principle correctly.

• Phillimore LJ (concurring)

• Megaw LJ (concurring)

• The principle in Ingram which looks to the state of mind of the rogue, is suspect.

• Even though a contract may be voidable by reason of a unilateral mistake as to the identity of the opposite party, nothing in the evidence supports a finding that the plaintiff viewed the man's identity as a matter of fundamental importance

Shogun Finance Ltd v Hudson (HoL 2003)

Facts

• The plaintiff company erroneously believed they were dealing with a Mr Patel, whose credit history etc they had vetted, in arranging a hire-purchase agreement for a car.

• The individual then sold the car to the defendants who were sued by the finance company.

Issue

• Unilateral Mistake – Identity

Judgment

• Lord Nicholls of Birkenhead (dissenting)

• Where a person is persuaded by false representations as to the quality of the subject matter (e.g. creditworthiness) to enter into a contract, there is a meeting of minds, but the fraud gives him a right to repudiate the contract.

• The Customer Credit Act provides that a bona fide purchaser of a car from someone who has the car under a hire-purchase agreement, but without proper title, will attain the title.

• Where there are face to face dealings and the seller contracts with the buyer erroneously believing that he is a certain person, then the contract is voidable – the same applies to dealings by correspondence, the question is not why but whether an agreement was concluded.

• The risk is better borne by the person who sells goods without getting payment – decision for the appellants.

• Lord Hobhouse of Woodborough (concurring)

• The application form makes it clear than the document is to be considered an offer from the person whose name is on the document – unless the person making the offer was the person whose name was on the contract there was no consensus ad idem.

• The identity of the consumer...