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Unilateral Mistake
One Party has made a Mistake
In this case only one of the parties is mistaken. One party knows, or must be presumed to know, of the other party’s mistake, e.g., Arefa agrees to buy a painting from Tasneem that she believes is by Pablo Picasso. In fact, the painting was by Jasmine Picasso.
· If Tasneem is ignorant of Arefa's mistaken belief, the case is one of either mutual mistake because she may thinks they are talking of the same painter.
· If Tasneem knows that Arefa is under a mistaken belief the case is one of unilateral mistake.
One can immediately spot that there is an element of misrepresentation present here that should be borne in mind when answering problem questions. One can suspect fraud.
It is clear that if one party to the knowledge of the other is mistaken as to the fundamental character – if he did not intend, as the other well knew, to make the apparent contract – the apparent contract is a nullity and there is no need for any equitable relief. Equity just follows common law, though it will formally refuse specific performance or set the contract aside.
We have seen in Hartog v Colin & Shields [1939] a clear example of unilateral mistake because P knew that D had made a mistake. This was known because whether it was a “pound” or a “piece” was not a question of choice because expert opinion proved the existence of a trade custom.
Mistaken Identity
The majority of cases involving unilateral mistake are cases of mistaken identity. Mistakes regarding the identity of a party can lead people to make contracts that they would not otherwise have made. The issue of identity is usually decided by whether the person is present or not – inter praesentes or non inter praesentres, respectively. If you have somebody in front of you and you contract with him or her, is it significant what they call themselves? It is argued that the distinguishing feature is when you discovered their identity:
· If you were told that they were somebody whom you would trust before you accepted their offer, you stand a better chance of the contract being annulled
· If you were given this identity after you had made the contract you would stand little chance of the contract being annulled
It is for the party who is the victim of the mistake to prove that the mistake is significant. You must prove that the other party’s identity is important. To rebut this assumption that they intended to contract the unhappy party must prove:
1. That she intended to deal with somebody other than the person with whom she has apparently made a contract.
2. That the other party was aware of this intention.
3. That at the time of negotiation the identity of the other party was a matter of crucial importance.
4. That the deceived party took reasonable steps to verify the identity of the other party.
Mistake as to Identity: Parties Inter Praesentes
When the parties are face-to-face the courts will assume that there is a contract. The crucial issue is when identity was the issue: before or after the contract?
Phillips v Brooks [1919]
A man named North went into the P’s jewellers and selected some jewellery with a total value of £3,000. He wrote a cheque and said ‘You see who I am. I am Sir George Bullough’. This was a person known to the P by reputation. P allowed him to take a ring valued at £450. When the cheque was laughed at as it bounced around the bank, the plaintiff wanted the ring back. But time had moved on and the ring had been sold on to a third party, Brooks. To get the ring back from Brooks depended on whether there was a contract between P and North.
· If there was a contract then the subsequent contract between North and Brooks was good. If it was good then P was not entitled to the ring back – he would have to pursue North for his consideration.
· On the other hand, if the contract was bad and mistaken, the P could have the ring back – the D would have to pursue North.
This came down to whether P intended to contract with the person in front of him or Sir George Bullough. Held: P lost because the contract had been made before the identity was mentioned. This is to be compared with the following.
Lake v Simmonds [1927]
The appellant was a jeweller who had made a number of small sales to a woman, who described herself as the wife of a wealthy customer. He permitted her to take away some jewels ‘on approval’. The reality was she was the mistress not the wife and promptly vanished. The respondent’s were an insurance company who disputed whether the jewels were stolen. Their logic was that he did have a valid contract with the woman. Given that the contract was face-to-face it did look promising for the insurance company. Held: P won because HL decided that identity was crucial and that the contract would not have occurred but for this mistake as to identity.
Ingram v Little [1961]
Appellants were three elderly ladies who advertised their car for sale. A big bad wolf came to the door and agreed to buy the car for £717 but wanted to pay by cheque. They were reluctant but after making checks in the telephone directory and finding a corresponding name they accepted the cheque. He drove off and the cheque did its bounce around the bank. They wanted the car back and pursued the innocent sap that had bought it off the rogue.
Held: Plaintiffs won – contract void. The ration concentrated upon the fact that they had made “great efforts”(!) to be sure of the identity – it was crucial in allowing the rogue the credit of paying by cheque.
It is interesting that the court said that the sale by cheque was effectively a ‘loan’ because the cheque would take time to clear. As credit the identity of the recipient is obviously crucial. This is considered a controversial case.
Yet if one believes that the courts are beacons of consistency – a naïve idea – one would be confounded by the following case. It could be argued that the courts often argue ‘backwards’, i.e., decide what they think is a correct judgment and then try to distinguish it from precedents that look remarkably compelling.
Lewis v Avery [1972]
P advertised his car for sale. A rogue offered to buy it claiming he was a famous English actor (sic), ‘Richard Greene’, alias ‘Robin Hood’. Identity was ‘proved’ by his possession of an admission pass to Pinewood studios. This persuaded P to accept a rubber cheque from this convincing poseur who drove off. The cheque was disappointing, so he sued D (who had bought the car in good faith) claiming the contract was void due to mistake.
Held: P lost because it was felt that he intended to deal with the person in front of him - contract had been concluded before identity became an issue.
Mistake as to Identity: Parties Non Inter Praesentes
This allows more scope for an innocent party because they are responding to a particular identity. Therefore, that identity is crucial to the decision to contract. The identity is known before the contract, ceteris paribus.
Cundy v Lindsay [1878]
A fraud named Blenkarn, writing from “37 Wood Street, Cheapside”, offered to buy goods from P’s. He signed his letter in such a way that his name appeared to be “Blenkiron and Company”. The latter were a respectable firm operating out of “123 Wood Street”, and were known to P’s. Blenkarn said that he lived at 37 Wood Street but the entrance was from a different street. You can see that this was a reasonable scam with sufficient proximity to the respectable firm as to catch out the unwary. They bit and accepted an order, which was delivered to “Messrs Blenkiron & Co, 37 Wood St.”. Upon delivery Blenkarn immediately sold to D’s who were in good faith. P still sued D’s. Held: P won. The ratio was that Blenkarn was not the man with whom “intended to deal”. If Blenkarn had been an honest man then the contract would have stood. The fact was that the contract turned on identity.
See also Sowler v Potter [1940] & King’s Norton v Edridge, Merrett [1897]
Dennant v Skinner [1948]
Several cars were sold to a bidder who gave a false identity. This identity was believed so he was allowed to take the cars in exchange for a cheque that was worthless. P, who owned the cars, was annoyed and tried to void contract. Held: P lost. The identity of a bidder at an auction is generally irrelevant. To void the contract for mistake as to identity as to identity the matter must be material to the contract. In short, he trusted a bidder who had secured the cars in a bid and then gave a phoney name.
What about Documents Mistakenly Signed?
A person may sign a document and may well not intend the terms contained therein. The Parol Evidence Rule and l’Estrange seem to place such a party in a difficult position. Clearly if they had known of the real state of affairs they would have not signed. In short, they have made a mistake and the other party knows this and even intends this. But the other party’s identity is known and may even be crucial and explanatory of the bizarre mistake. It is a unilateral mistake but caveat emptor looms and a bad deal is not grounds for letting the gullible off the hook of a contract. Common law is unforgiving here but Equity may offer them a way out by allowing them to claim non est factum – not my deed. We have come across this problem in Gallie v Lee also known as Saunders v Anglia Building Society [1971] where the courts decided that a 78 year old had not made a radical enough mistake.
Lewis v Clay [1897]
A third party presented D with some documents entirely covered with blotting paper except for four blank spaces that had been cut out. The party explained – falsely, of course – that the hidden document concerned a private family matter and that he only required a witness signature. The say a sucker is born every minute. Well the clock struck and the D signed. He was surprised to discover that the documents were promissory notes – ‘IOU’s – to the value of £11,113 in favour of P. On the strength of these notes and the signature contained therein the P advanced said money to the third party who not surprisingly defaulted and disappeared. P wanted his money back.
Held: P lost. The problem with this type of case is that the courts do not wish to penalise the innocent party, in this case the P. They only will do this if the document was radically different from what the D thought it to be.
The only people who can claim non est factum would normally have to be illiterate or incapable of understanding the document for some reason, often of disability. Mere ignorant is not enough (Gilman v Gilman, 1946). The party claiming non est factum must demonstrate:
· He acted with reasonable care. Carelessness on the part of the person signing the document would preclude him from later pleading non est factum on the principle that no man may take advantage of his own wrong.
· There must be a radical and fundamental distinction between what was allegedly intended and the content.