Advanced Contract Law Lecture 6 04/11/19
Vitiating Factors: Part Two
Misrepresentation- Recap
Actionable misrep- Where the offeree has been induced into the contractual agreement by a false
statement of fact – words, conduct or exceptionally, silence or omission will amount to a false
statement of fact.
No expectation to say anything- to ‘fess up’
• Renders the contract voidable- even though we could get rid of it, it could stay
• Void is gone/ voidable we have to do something about the contract
• Misrepresentee may seek to rescind (i.e. back to the position before the contract was
formed)
• May in addition be an award of damages
• Bars to rescission e.g. affirmation, may lead to damages in lieu of rescission
‘How, and how much’, in relation to the award of damages depends on categorisation of the misrep:
- Fraudulent (damages in tort of deceit).
- Negligent (dealt with as common law damages for negligent misstatement or as negligent
misrep. under S2(1) Misrep. Act 1967- see interpretation of S2(1) by the courts and the
implication of the ‘fiction of fraud’.
Note the distinction in terms of issue of remoteness
- Innocent S2(2) Misrep. Act 1967(damages in lieu of rescission where rescission would
otherwise have been available).
o Atiyah and Treitel, ‘Misrepresentation Act (1967) 30 MLR 369
o Beale, ‘Damages in lieu of rescission for misrepresentation’ (1995) 111 LQR 60
Mistake
- What do the courts and academics mean by the terminology- might be looking at the
same thing? Common and Mutual mistake differ.
It is not always easy to navigate the sources in this area, as the terminology is not always used
uniformly eg mistake made by both parties now generally referred to as ‘common mistake’, but in
some source texts as ‘mutual mistake’, additional problem is that the ‘mutual mistake’ label is also
used in some quarters to indicate a situation where each party is making a different mistake.
Difference of opinion re legal writers:
General principles- accepted in certain way- but the courts do not like creating general principles- is
there a doctrine of mistake in English Law??
• No doctrine of mistake in English Law
OR
• English Law does have a doctrine of mistake (although narrow)
See Friedmann (2003) 119 LQR
Treitel, Mistake in Contract (1988) 104 LQR 501
, Advanced Contract Law Lecture 6 04/11/19
Agreement Mistakes
‘By agreement mistake, we mean that one or both of the parties made a fundamental mistake
relating to the terms of the contract (ie an ‘offer and acceptance’ mistake), which prevents the
formation of an agreement’
Peel, Treitel’s Law of Contract 14th ed 2015
Common Mistake (sometimes referred to as mutual mistake)
Unilateral mistake- one sided (nearly misrep)
Agreement Mistakes
May be appearance of agreement but lacks a match between offer and agreement – parties
at cross purpose- remember ‘meeting of minds’ and ‘mirror image’ concepts
Where there is a ‘fundamental’ mistake the apparent agreement may be void- something
extraordinary not just a bad deal
Only fundamental (at CL) where the mistake is such as to render the subject ‘essentially
different’ – ie v. narrow- common law positon
Agreement Mistakes- common/mutual
• Both parties make the same mistake.
• Contract may be void ab initio if unknown to the parties, and beyond their responsibility, it is
impossible to perform from the outset = initial fundamental impossibility.
• Mistakes as to quality of the subject matter will not render the contract void.
Narrowly defined: Bell v Lever Bros Ltd [1932]
o Concerned Bell and a co-defendant. Entered into a contract and Bell is chairman and friend
is Vice of subsidiary company Lever Bros- for 5 years- should not earn profit on own account
for the period you are holding office. Both did engage in their own account- did not disclose
profits. Reviewing business and reorganise company and to facilitate they terminated
contracts of Bell and Friend- both received a compensation package for terminating the
agreement- £30k large amount of money! Discovered breach after- they could have been
dismissed without compensation for the future. Sought to recover the cash. When they
entered into the termination agreement they did not think about their breach- common
mistake that both Lever Bros and Bell- they were under the view that their original contract
was still running- but they would have go the sack.
Lever Bros were not successful in recovering the cash in HoL because it was NOT
‘fundamental’ 3-2
o The mistake in question considered not so ‘fundamental’ as to render the contract void.
o See Lord Atkins (common mistake referred to as mutual mistake here) – basically considers
common mistake re existence or ownership counts, but common mistake re quality will
rarely count.
o Lord Atkin considered alternative approach being an implied term of the contract that the
subject matter exists.
o Policy perspective, some anxiety not to expand range of common mistakes, concern of
undermining certainty
o In relation to common mistake it must relate to something that both parties relate to
essential subject matter- Quote
Vitiating Factors: Part Two
Misrepresentation- Recap
Actionable misrep- Where the offeree has been induced into the contractual agreement by a false
statement of fact – words, conduct or exceptionally, silence or omission will amount to a false
statement of fact.
No expectation to say anything- to ‘fess up’
• Renders the contract voidable- even though we could get rid of it, it could stay
• Void is gone/ voidable we have to do something about the contract
• Misrepresentee may seek to rescind (i.e. back to the position before the contract was
formed)
• May in addition be an award of damages
• Bars to rescission e.g. affirmation, may lead to damages in lieu of rescission
‘How, and how much’, in relation to the award of damages depends on categorisation of the misrep:
- Fraudulent (damages in tort of deceit).
- Negligent (dealt with as common law damages for negligent misstatement or as negligent
misrep. under S2(1) Misrep. Act 1967- see interpretation of S2(1) by the courts and the
implication of the ‘fiction of fraud’.
Note the distinction in terms of issue of remoteness
- Innocent S2(2) Misrep. Act 1967(damages in lieu of rescission where rescission would
otherwise have been available).
o Atiyah and Treitel, ‘Misrepresentation Act (1967) 30 MLR 369
o Beale, ‘Damages in lieu of rescission for misrepresentation’ (1995) 111 LQR 60
Mistake
- What do the courts and academics mean by the terminology- might be looking at the
same thing? Common and Mutual mistake differ.
It is not always easy to navigate the sources in this area, as the terminology is not always used
uniformly eg mistake made by both parties now generally referred to as ‘common mistake’, but in
some source texts as ‘mutual mistake’, additional problem is that the ‘mutual mistake’ label is also
used in some quarters to indicate a situation where each party is making a different mistake.
Difference of opinion re legal writers:
General principles- accepted in certain way- but the courts do not like creating general principles- is
there a doctrine of mistake in English Law??
• No doctrine of mistake in English Law
OR
• English Law does have a doctrine of mistake (although narrow)
See Friedmann (2003) 119 LQR
Treitel, Mistake in Contract (1988) 104 LQR 501
, Advanced Contract Law Lecture 6 04/11/19
Agreement Mistakes
‘By agreement mistake, we mean that one or both of the parties made a fundamental mistake
relating to the terms of the contract (ie an ‘offer and acceptance’ mistake), which prevents the
formation of an agreement’
Peel, Treitel’s Law of Contract 14th ed 2015
Common Mistake (sometimes referred to as mutual mistake)
Unilateral mistake- one sided (nearly misrep)
Agreement Mistakes
May be appearance of agreement but lacks a match between offer and agreement – parties
at cross purpose- remember ‘meeting of minds’ and ‘mirror image’ concepts
Where there is a ‘fundamental’ mistake the apparent agreement may be void- something
extraordinary not just a bad deal
Only fundamental (at CL) where the mistake is such as to render the subject ‘essentially
different’ – ie v. narrow- common law positon
Agreement Mistakes- common/mutual
• Both parties make the same mistake.
• Contract may be void ab initio if unknown to the parties, and beyond their responsibility, it is
impossible to perform from the outset = initial fundamental impossibility.
• Mistakes as to quality of the subject matter will not render the contract void.
Narrowly defined: Bell v Lever Bros Ltd [1932]
o Concerned Bell and a co-defendant. Entered into a contract and Bell is chairman and friend
is Vice of subsidiary company Lever Bros- for 5 years- should not earn profit on own account
for the period you are holding office. Both did engage in their own account- did not disclose
profits. Reviewing business and reorganise company and to facilitate they terminated
contracts of Bell and Friend- both received a compensation package for terminating the
agreement- £30k large amount of money! Discovered breach after- they could have been
dismissed without compensation for the future. Sought to recover the cash. When they
entered into the termination agreement they did not think about their breach- common
mistake that both Lever Bros and Bell- they were under the view that their original contract
was still running- but they would have go the sack.
Lever Bros were not successful in recovering the cash in HoL because it was NOT
‘fundamental’ 3-2
o The mistake in question considered not so ‘fundamental’ as to render the contract void.
o See Lord Atkins (common mistake referred to as mutual mistake here) – basically considers
common mistake re existence or ownership counts, but common mistake re quality will
rarely count.
o Lord Atkin considered alternative approach being an implied term of the contract that the
subject matter exists.
o Policy perspective, some anxiety not to expand range of common mistakes, concern of
undermining certainty
o In relation to common mistake it must relate to something that both parties relate to
essential subject matter- Quote
