Mistakes

Introduction
The passage talks about some tricky legal ideas like common mistake and frustration
in contract law. It helps explain how they are kind of similar but also different.

A common mistake happens when both people entering into a contract are wrong
about something important when they first make the deal. Like maybe they both
think the car runs well but really the engine is busted. If the mistake is serious
enough, it could lead to tossing out the whole contract and so common mistake has
to do with getting something wrong early on, before anyone signs the contract. It's
about both people not understanding something the same way when they make the
agreement.

Frustration is different. It's about stuff that happens after the contract is finished
that messes everything up. Like an event occurs that makes it impossible or illegal to
do what the contract says. Or what ends up happening turns out really different
from what the people thought they were getting into. The main idea is that
something unexpected happens which totally changes the nature of the contract and
what carrying it out means. Often this leads to canceling the whole thing.

So in summary, common mistake focuses on mutual misunderstanding ahead of time

while frustration deals with unplanned events afterwards that shake up the entire
agreement. But they both can result in the contract being dissolved.
The case of Amalgamated Investment and Property Co Ltd v John Walker & Sons Ltd
[1977] 1 WLR 164 is used to explain the intricate interplay between these
doctrines. In fact, the defendants sold the property to the claimants without
disclosing that it was a building of special historical or architectural value. When this
matter cropped up after the contract was signed, the claimants tried to nullify the
contract by raising either common mistake or frustration. Conversely, the court ruled
that as the claimants knew the risk of listing the property, they were responsible for
it. As a result, the agreement was not terminated due to the common mistake or
frustration.
This case illustrates the overarching idea of risk allocation in contractual agreements,
whereby parties are expected to endure the consequences of foreseeable risks
which they knowingly assume. It highlights the necessity of distinguishing between
error and frustration for they bear different considerations in the timing and
character of events that alter contractual performances. Besides, this case highlights
the intricacies that are involved in handling contractual disputes in relation to
unforeseen circumstances or misinterpretations, which requires a high level of
understanding of the rules governing the formation and performance of
contracts. Essentially, the article covers in detail the fundamental issues and
consequences of mistake and frustration in contract law.

>Common Mistake
This section deals with the peculiar aspects of common mistake and frustration in
contract law, explaining the subtle differences between them and how they work
together. Common error arises when both sides have a mistaken assumption at the
time of contract formation, which if it is considered a serious assumption, can make
the contract null and void. This principle relates to the circumstances or events that
are either taking place or misunderstood prior to the formation of the contract, thus
emphasizing the element of mutual misunderstanding. However, frustration
concerns events occurring after the formation of the contract, which makes
performance impossible or illegal or which the parties originally did not
envisage. This rule focuses on the unforeseen events that change the nature of the
contract performance and usually end with contracts being dissolved.
The case of Bell v Lever Brothers Ltd is used [in the discussion] as touch stone in the
matter of Common mistake. In the event where defendants Bell and Snelling signed
service agreements with the plaintiffs promising to become the chairman for one
firm and the vice-chairman for another. Signing the contract with the subsidiary
stipulated that individual workers weren't allowed to engage in any private
enterprise while employed by the organization. However, the claimants' blissful
ignorance was the circumstances giving way to the defendants' trading activities on
their own account, which rendered the agreements null and void. Instead, the
plaintiffs began to wind down their contracts because they had to reorganize their
business with the help of such defendants as they were involved in negotiating
compensation agreements with them. But, as soon as the plaintiffs paid £30,000 to
Bell, and £20,000 to Snelling, they discovered that the breaches by the defendants
took place, which would have strengthened their case for an termination of the
agreements without losing out on anything.
Eventually, the jury--which was to enlighten the court on the matter--determined
that the defendants voluntarily participated in the public safety agreements because
they did not realize how unlawful the acts were before the agreements were
signed. It was found that the basis of parties claim upon common grounds (lis
pendens) which said that the service agreements were valid and parties (mutual
mistake) were actually liable to be canceled. However, compensation is necessary
without which claims of the of the parties shall be set aside by claimants. In
accordance with it, the Lords of Parliament, although with some disagreements,
showed the majority decision of three to two on the inability of the claimants to
reclaim the money they have handed over to defendants. Lord Atkin and Lord
Thankerton point out that the error should not be consider substantial to make the
contract broken and so come up with this judgment. Against them, Lord Blanesburgh
say that claimants should not be compensated because of no common mistake
claim. The test which the majority applied appears to be just to one side of a
discussion: first, it must be relevant to the subject matter; secondly, the way in
which the majority views the reasonableness of the claimant's decision not to be as
strong is not quite clear.
Steyn J in ‘Associated Japanese Bank (International) Ltd v Crédit du Nord [1989] 1
WLR 255’ added more views on the matter and suggested that the matter is not that
grave as it appeared in the first place, since the claimants sought emergency
reorganization referring to the intention of the defendants to continue with the
provision of the service. On the other hand, the historical accuracy was also
questioned in a later investigation conducted by MacMillan (2003), which concluded
otherwise. Through an analogy she indicated that the action was lodged by the
claimants with the view legal system, as the claimants would not have made the
payments had they known the true state of affairs. Moreover, the reason behind its
rejection was caused by multi-factors such as main claim was fraud, consideration
mistake was inadequate and the mistakes done by Bell and Snelling were not
significant in comparison of what was earned by the typical claimants.
Pointing at the particular matter of law laid down by Bell vs. Lever Brothers Ltd. and
requiring a fundamental mistake to justify the discharge of a contract, we must
analyze it bearing in mind the specifics of the given case. But the text recognizes the
open-textured nature of test adopted by the majority's case, which was seen in Lord
Warrington's and Lord Hailsham's dissenting opinion cases where they argued, it's
vital that the claimants' mistake must have been sufficiently fundamental to avoid
the contract. It manifest the merits of the rules of law having a different
interpretation which requires examination of the circumstances wherein does the
court of law consider a mistake common enough to avoid a deal.
>Mistake as to the existence of the subject-matter of the contract

The doctrine that represents the fundamental principle that an error may lead to the
termination of a contract is embodied in Galloway v Galloway (1914) 30 TLR 531. In
such case the presumed defendant by accident that his wife died and then married
the plaintiff. Further down the road, the court found out that first wife was alive and
the separation between defendant and plaintiff has no legal effect because of the
erroneous belief that the parties were legally married.
Moreover, as to the sales deals of non-existing goods, Section 6 of the Sale of Goods
Act 1979 makes a sound legal base. This rule means if intentional goods are declared
damaged or destroyed before the contract is concluded without the knowledge of
the seller, the contract is considered void. This rule is grounded on precedent from
Couturier v Hastie (1856) 5 HLC 673 in which a sale of corn agent that was ruined
before the contract was signed was not valid.
The divergency of Couturier case interpretation among legal scholars and courts is
obvious to all. The first opinion claims that a wrongful belief about the nature of the
subject matter leads to the contractual non-existence, which is clearly stated in
section 6, the law section. The contemplation by Denning LJ in Solle v Butcher [1950]
1 KB 671 that the contract is void because of an implied condition precedent,
meaning that before the contract becomes valid, it must be in a state that makes the
performance of the contract possible, is another perspective.
The last one is the interpretation based on the McRae v Commonwealth Disposals
Commission (1951) 84 CLR 377 which takes a look at the specific part of the
issue. Litigants in this situation qua non tanker will be found guilty of a breach of
promise. On the basis of this interpretation the fact that the contract has been made
void or not depends on the way in which the contract has been made/interpreted.
Although the response of McRae was just, one of the greatest difficulties in
drawing parallels with Section 6 comes with the section’s wording itself. It has
been suggested that distinctions belong to those cases similar to the wording in
the Sect. 6 but these appearances are still deemed inelegant. Moreover, the same
reason makes alternative legal lanes through collateral contracts hardly possible as
they face legal complexities and due to the precedent of the surrounding legal
environment.
In the final analysis, the complicated nature and difficulties in handling Section 6 of
the Sale of Goods Act 1979 as typified by cases like that of McRae, point out to
need for reform in this act Such a reform may complicate the access for the
litigation of section 6 and it may create an involved legal system dealing with the
contracts of non-existent goods.
>Mistake as to identity of the subject-matter
A mistake as to the identity of the subject-matter of the contract may be suffciently
fundamental to avoid a contract if both parties thought that they were dealing with
one thing when in fact they were dealing with another. There is no English case on
this point (but see the discussion in the Canadian case of Diamond v British Columbia
Thoroughbred Breeders’ Society (1966) 52 DLR (2d) 146).

>Mistake as to the possibility of performing the contract

The result of a fundamental mistake in contract law is commonly the nullity of the
contract specially under the conditions that both parties had been under the
presumption that the contract is capable of being performed but either or both
parties were under circumstances without which it is impossible to fulfill the
fulfilment. Treitel (2020) adds myriad of values by dividing the cases into three
different types of instances.
The second category of example includes the one that shows physical impossibility
as in the Sheikh Brothers vs Ochsners [1957] AC 136 case. The appellants granted
permission to the respondents to harvest around 50 tons of sisal per month from
their land, assuming the respondents would deliver this amount to them. But
unbeknownst to both of them, the land did not have capacity to continue providing
such crops constantly from it. On its ruling, Privy Council found the contract void
because the mistake about the land's productivity was deemed a fundamental or
innate component of the agreement, and no assumption of risk was placed by the
parties.
While the second example of legal impossibility is presented in the case of Cooper v
Phibbs (1867) LR 2 HL 149. Here, the petitioner consented to rent a whole salmon
fishery owned by both parties, and the respondents believe it to be
theirs. Moreover, it disclosed the appellant was the owner of the fishery. Although
the factors which would make the House of Lords invalidate the deal are not that
easily assessable, the appellant's claim might be based on the principle that the
initial ownership of the fishing grounds prevents the contract from being
enforceable.
The third type includes the justification of commercial impossibility which was stated
in the case, Griffth v Brymer (1903) 19 TLR 434. In this instance, the contracting
parties were the ones who opted to hire a room to witness the coronation
procession of King Edward VII. Nevertheless, it was called off as Edward VII's illness
roamed unnoticed, and that occurred at the unaware moment of contracting. Albeit
the contract still existed in the sense of physical and legal terms, the an eradication
of the procession compromised its key commercial reasons. As a result, the reason
for the misunderstanding of the procession resulted in jurisdiction.
Such cases are very informative and shed light on how a critical error, be it physical,
legal, or commercial, would result in voiding of a contract if these circumstances
prevailed and underlined essential constituents of the agreement.
>Mistake as to quality
We see in the field of contract law that the impact of a misconception about the
condition of the subject matter offers serious consequences, which sometimes make
the contract void. Consequently, courts do not favor such kind of mistake in judging
a contract void only on the basis of a mistake regarding quality of things, which is
illustrated in the aforementioned case of Bell v Lever Brothers Ltd as (Section
14.2). Regarding this fact we can say that the most difficult labor of reconciliation is
in the face of such complex cases that lead to very different outcomes. In this section
let’s examine in details these cases to obtain a complete perspective.
In the Leaf v International Galleries [1950] 2 KB 86 case, the court of appeal laid
down a principle that the purchaser cannot withdraw from a sale of painting
contract even if both parties mistakenly believe that work to be the famous artist
Constable’s. On the other hand, same as in Harrison and Jones v Burton and
Lancaster [1953] 1 QB 646 case, the court reaffirmed the contract for kapok with an
inferior material of brush cotton. The same principle was applied in Oscar Chess Ltd v
Williams [1957] 1 WLR 370 by the court. A car selling contract was made upheld by
the seller's misunderstanding which was the model year.
Alternatively, in the case of Solle v Butcher [1950] 1 KB 671, the landlord sought to
void the agreement for rent control laws after the revelation had already been made
to the parties of the contract and it was too late to rescind. Different judges in the
Court of Appeal came to a different interpretation of the matter, and therefore, their
views were contradictory. The lease contractually wasn't void as per the legal
obligations, but deemed voidable in equity, a statement of confusion over the
application of law to such contrary scenarios.
On January 31, 1992, a case Great Peace Shipping Ltd v. Tsavliris Salvage
(International) Ltd. was heard before the Court of Appeal, with the central issue
being the fact that the salvage contract was signed as a result of a mistake regarding
the vessel’s location. Nevertheless, the distance between the two ships was great
enough that the contract passed the necessity test, such that the delay in
performance was not deemed so extraordinary that it should forfeit the contract or
leave it null.
Even with the intermittent difficulties of building a coherent stance about errors in
contracts’ validity and their impact on the contracts that do not allow such mistakes,
certain cases show how fundamental them could be treated as the basis for
contracts’ termination. As an instance, the contract for sale of a life assurance policy
has been taken off the market on the ascertained death of the assured has not
increased until now the contractual value greatly. Another instance is the Smith-
Marriott and Nixolson case of 1947 (Nicholson and Venn v Smith-Marriott (1947) 177
LT 189) when contract avoidance commenced as napkins that were misrepresented
the table.
Attempting to solve these cases making use of Lord Thankerton's test from Bell v
Lever Brothers states that the mistake should be of a nature of an essential element
of the things that contract is about. As per the view of Treitel (2020) para 8-020),
there could also be a test wherein the parties' immediate understanding after the
contract formation is determined. These methods, however, are somehow not
capable of making the discrepancies between all the cases but really good in
identifying a situation when a mistake involves a vital part of the contract's subject
matter.
>Drawing the threads together
The Court of Appeal’s decision in Great Peace outlines the current legal operations,
which are still based within strict legal lines. undefined
First of all, that both the parties must agree on whether or not one particular state of
affairs exists. Under the second rule, no party could have granted a warranty or
adopted liability regarding facts as they happened at the time. Furthermore, the
existence of this untruthful situation is not the result of either party's
guilt. Furthermore, the non-existence or any other assumption, makes the execution
of the contract impossible. Lastly, consideration or party required for contract to be
formulated should not be detached from the assumed state of affairs.
And even while the subsequent court decisions have been in general in compliance
with these criteria, the second and fourth elements provoked intended soft
challenges.
The last aspect is similar to this which John Lobb SAS vs John Lobb Ltd. [2022] EWHC
2306 (Ch) has a ruling for that there is no requirement that the warranty should be
formal. Rather than they check, whether anyone is estimating the trend, they go up
to see the general influence being exerted. The agreement usually puts on one side
the risk of the misleading suppositions and the existence of the common mistake
doctrine is bypassed..
Common mistake for failure to perform the contract should also be considered as
subject in the fourth element. On one side of the debate, hardliners uphold this strict
interpretation; but as acceptance of the doctrine that covers instances that might
have caused performance to greatly shift from the parties' initial intentions
increases, the stringent interpretation may gradually weaken. In this way, storyline
of the doctrine of mistake brings it closer to the doctrine of frustration.
In conclusion, the common mistake principle nonetheless remains too confined
when it comes to areas where the performance of the contract has gone somewhat
off the parties' initial plan.
>Mistake in equity
The decision made by the House of Lords in the case of Bell v Lever Brothers Ltd
[1932] AC 161 was a really important moment in how the common mistake rule
developed in English law. This ruling gave a narrow interpretation of common
mistake, which stuck around for quite a while. But alongside this strict view, there
was another way of looking at mistakes in equity, thanks to the Court of Appeal's
ruling in Solle v Butcher [1950] 1 KB 671. Solle v Butcher mattered because it said
Bell v Lever Brothers' ideas only applied to common law, which meant a broader
understanding of mistakes was allowed in equity.
Mistakes in equity were different from common law mistakes in a few big ways.
Firstly, they covered more situations, needing the mistake to be really fundamental
and not the fault of the party trying to cancel the contract. This wider view meant
contracts could be cancelled in more cases where mistakes happened. Secondly,
while legal mistakes made contracts void from the beginning, mistakes in equity
made them voidable, which protected innocent third parties who had relied on the
contract. Thirdly, courts in equity had more leeway in what they could do to fix
things, like setting aside contracts with conditions attached, rather than just saying
they were void.
However, the broad doctrine of legal errors was met with complaints and
controversy. Some argued that it undermined the credibility of Bell v. Lever Bros. . in
1999 and provided the parties with a way out of harmful contracts This complaint
culminated in a landmark decision in Great Peace, where the Court of Appeals
refused to follow the examples of Soley v. United States .The importance of butcher f
was emphasized, and the more cautious and thin definition laid down by Bell v. .
Lever Bros.
The Court of Appeal appointed in Great Peace succeeded in reversing the broad
doctrine of equitable wrongdoing, returning the law to its pre-Sole v Butcher level
This decision is regarded as criminal the fact they succeeded, but additionally
stimulated discussions on the need for legal reform Is comparable
Essentially the goal of the Great Peace was to establish a one-way rule of error,
balancing the requirements of fairness and flexibility necessary for reality Some
lamented the loss of flexibility, while others considered it an important piece of
evidence to resolve the consistency of the tort system governing defects in
contracts.

1. What is contractual mistake?

2. What are the effects of mistake compared with the effects of misrepresentation?
3. What is the difference between bilateral and unilateral mistake?
4. What relief will a court provide for an operative mistake in law and in equity?
5. What are the limits of the doctrine of mistake?
6. What is meant by an agreement mistake?
7. What are the circumstances in which an agreement mistake will operate?
8. What is a mutual or common mistake?
9. In what circumstances have courts found a mutual or common mistake to be operative?
10. What is the basis for finding a contract void where a mutual or common mistake operates?
11. What is a sufficiently fundamental mistake as to a quality of the subject matter?
12. In what circumstances will courts find that a contract is void where the mistake is a unilateral mistake?
13. What, if any, is the effect of a mistake as to identity?
14. In what circumstances will courts find a mistake as to identity is operative?